\ THE EFFECT 
 
 ^Restrictive Legislation 
 
 UPON THK 
 
 Railways of ^^^iseonsin 
 
 Matei\ial Interests of the State, 
 
 UIS(JU8:^KD BY 
 
 J. W. MIDGLEY 
 
 ("IirCAGO : 
 CuLVKH, Pagk, Hoyxe & Co., Printers. 
 
THE EFFECT 
 
 ^Restrictive Legislation 
 
 UPON THE 
 
 Rail^vays of Wisconsin 
 
 AND THE 
 
 Matei\ial Interests of the State, 
 
 DISCUSSED BY 
 
 J. W. MIDGLEY. 
 
 CHICAGO : 
 
 Culver, Page, Hoyne & Co., Printers 
 
 1876. 
 

>^c^ 
 
 PREFACE. 
 
 To THE Public : 
 
 The actual effect of the recent legislation in regard to railways being 
 but indifferently understood by the community at large, the under- 
 signed requested Mr. John W. Midgley, of Chicago, who has given 
 much study to the question of transportation, to investigate the opera- 
 tions of the Potter law and kindred acts, and submit for publication 
 the result of his observations. The following reply is remarkably 
 pertinent to the present state of the controversy, and will throw much 
 light upon the entire question. It is deserving of the most careful con- 
 sideration, both of those who enact our laws and of the people whose 
 interests are affected thereby. 
 
 ALEX. MITCHELL, 
 
 President Chicago, Milwaukee & St. Paul Ry. Co. 
 
 ALBERT KEEP, 
 President Chicago & North- Western Ry. Co. 
 
 Milwaukee, January 5, 1876. 
 
 !)89878 
 
Digitized by tlie Internet Archive 
 
 in 2007 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/effectofrestrictOOniidgrich 
 
Discussioisr 
 
 OF THE EFFECT OF 
 
 RESTRICTIVE RAILWAY LEGISLATION 
 
 A candid view of the relations sustained by the people and the rail- 
 ways discovers this cardinal point of agreement : Whoever renders 
 a desired service is entitled to just compensation. It is a natural right, 
 an inviolate truth. " The laborer is worthy of his hire." 
 
 This principle being established, it becomes necessary to consider 
 
 WHAT IS A REASONABLE RATE. 
 
 Were it agreed upon, this controversy would cease. But men differ, 
 hence adjudications are required. The Legislature may declare that 
 the rates shall be reasonable : whether they are or not, is a matter for 
 the courts to decide. 
 
 Such question is new to our tribunals. Familiar though complaints 
 of extortion have become, no issue has been made to determine 
 the measure of reasonableness. One case, however, is reported, where- 
 in the court said : " It is agreed by all the books that, while the carrier 
 enjoys the privilege of a common carrier, it is a duty he cannot escape 
 in any form to receive goods, if he has room to carry them, for a rea- 
 sonable reward ; and the reasonable reward may he set down as the 
 accustomed reward for like services. ''"^ 
 
 Kent also defines it to be a " reasonable or customary price, "f 
 
 This corresponds with the English rule, which is stated thus : " It 
 is to be supposed that a common carrier can afford to carry at much 
 the same rate of hire as that which is exacted universally hy carriers 
 similarly situated, and which, if it has been found to remunerate them, 
 may, upon the best grounds, be called reasonable. The word reason- 
 
 * Cole V. Goodwin, 19 Wendell [N. Y.], 261. t 2 Kent's Commentaries, 599. 
 
able, therefore, is to be the criterion of the price which a common car- 
 rier has a right to demand."* 
 
 Nor will this construction be denied. It conforms to the judgment 
 of reasonable men. Therefore it is claimed there is no disposition in 
 Wisconsin to deny the railway companies just compensation for their 
 services. This profession has been repeatedly made. It was an- 
 noji'Rced in the appellate court, has been echoed through the press and 
 On' the platform^. Speaking for the people, their representatives said: 
 " Show us that the rates fixed by law are not reasonable and we will 
 make them just." 
 
 Relying upon that assurance, and inviting attention to the method, 
 I purpose to demonstrate the unreasonableness of the rates now im- 
 posed on Wisconsin railways and establish their claim to immediate 
 relief. 
 
 The rule, as already stated, has been prescribed. Taking the 
 standard given, a difficulty arises in the varying circumstances of 
 roads. No two are alike. Still, many are sufficiently so to admit of 
 tolerably fair comparison. The oft-recurring phrase " like circum- 
 stances" has been authoritatively construed. It is decided that " things 
 are conveyed under ' like circumstances ' where the labor and expense 
 are, in the opinion of the jury, the same."t 
 
 AN IMPORTANT CONSIDERATION. 
 
 The need of an undertaking being admitted, the next consideration 
 is, its cost. In the matter of transportation, this consideration is para- 
 mount. If compelled to do business below cost, bankruptcy is merely 
 a question of time. A knowledge of the cost is, therefore, absolutely 
 NECESSARY in order to fix reasonable rates. A tariff that would be 
 extortionate, if charged upon the New York Central, might be no 
 more than reasonable on the Colorado Central, where business is light 
 and expenses are heavy. Granting this, were it shown that, in a region 
 where construction cost largely and expenses are heavy, while traffic is 
 light, the rates imposed are lower than the average of those found in 
 any other State, would it not be manifest that injustice is being done ? 
 
 It is not presumed that an accurate computation of the cost of moving 
 a ton of freight one mile can be made ; nor that, if approximated, it 
 would be reliable ; for, as observed by the Massachusetts Commission- 
 
 * Browne on the, Law of Carriers, p. 82. 
 
 t Great Western Railway Company v. Sutton, H. of Lords, 38 L. J., Exch., 184. 
 
ers, " the cost of moving freight varies, under given circumstances, at 
 least as much as the cost of raising crops."* 
 
 In like manner, a committee of New England Railway Superintend- 
 ents reported that " there were no reliable data on which the exact 
 cost of transporting a ton of freight one mile could be based, "f Nor 
 will the precise cost be known until a railroad is built and operated 
 exclusively for freight. 
 
 ELEMENTS OF COST. 
 
 But there are certain elements of cost contingent upon locality that 
 are quite evident. When it is shown that, upon the lines operated 
 by the Chicago & North-Western and Milwaukee & St. Paul Com- 
 panies, an annual outlay of nearly two million dollars is required for 
 fuel for locomotives, and that medium coal averages $4 per ton in Wis- 
 consin, while the Pennsylvania RailroadJ pay only $2 for the best qual- 
 ity, it is manifest that, in one important respect, the cost of transpor- 
 tation must be one hundred per cent, higher in Wisconsin than in 
 Pennsylvania. This comparison extends to Illinois, Indiana and Ohio 
 roads that traverse coal districts, some of which average $1.40 § per 
 ton. Perhaps it becomes still more apparent in view of the fact that 
 of the sixty odd per cent, which the operating expenses of the North- 
 Western and St. Paul railways bear to their earnings, the item of 
 fuel constitutes twelve per cent. 
 
 In the same connection, expenditures for track repairs and renewals 
 should be considered. Thei/ are the leading items of expense. Sup- 
 plies are largely drawn from the East. Western roads must, therefore, 
 pay in excess of Eastern roads the cost of carriage to the West. To 
 that extent, therefore, their current expenses are larger. 
 
 Another element of increased cost is climatic. The Vice President 
 of the Chesapeake & Ohio Railroad told Senator Windom's committee || 
 that they never had to stop their trains on account of snow, and it was 
 very rarely that a rail broke on their road. How different the experience 
 of Wisconsin railroads ! During a " severe spell " they are blocked for 
 d.iys, traffic is suspended, and great losses are incurred. Steel tires 
 fresh from the works and rails newly laid break like glass, which 
 disasters no human foresight or ingenuity can prevent. 
 
 * Third Ann. Report R. R. Comrs., p. 167. 
 
 t Sixth Ann. Report R R. Comrs., Mass., p. 7!). 
 
 X Testimony of A. J. Cassatt, Transpn. Routes to Seaboanl,Vol. II, p. 51. 
 
 g Testimony of John Newell, Transpn. Routes to Seaboard, Vol. II, p. 85. 
 
 I Transpn. Routes to Seaboard, Vol. II, p. 439. 
 
As it does not appear that in any of the remaining items of ex- 
 pense the Wisconsin companies can effect a reduction compared with 
 other roads, it is clear that the cost of railroad operations in that State 
 largely exceeds that of roads more fortunately located. 
 
 INCOMPARABLY LOW RATES. 
 
 On what principle, then (conceding the power), should they be re- 
 stricted to lower rates of fare and freight ? That they are can be 
 plainly shown. In order to anticipate any question that may arise as 
 to the accuracy of the statements and comparisons made, the sources 
 whence they are obtained are carefully noted. 
 
 The average rate on the several classes named in the present law is, 
 for 150 miles, 2y|-Q- cents per ton per mile. The rate for 150 miles is 
 taken because that is the average distance that each ton of freight is 
 hauled upon the leading railways of the State. But the showing is more 
 favorable to Wisconsin than the distribution of traffic justifies. The 
 average stated would be realized were an equal quantity of each class 
 of freight carried. Such, however, is not the case. The lower 
 classes predominate. Lumber is the main article of shipment. For 
 150 miles it is taken at li^ cents per ton per mile, and for 250 miles 
 at less than IJ cents per ton per mile. This being the traffic upon 
 which the companies mainly rely, it is evident they are compelled to do 
 the major portion of their local business at less than one cent and a 
 half per ton per mile ! 
 
 No local rates so low and unreasonable prevail in any other State or 
 country. 
 
 The railroads of Connecticut* average, on all freight, 6J cents per 
 ton per mile ; Maine,t 4J cents ; Massachusetts, J 4J cents ; seven 
 Pennsylvania! roads, 5 cents ; twenty-three Ohio|| railroads, 6| cents, 
 and the railroads of New York,*|[ including the New York Central, 3J 
 cents per ton per mile. 
 
 Turning to Europe,** the average rates per ton per mile are, in 
 Belgium (where transportation is notoriously cheap), 2J cents ; in 
 France, 3 cents ; in England, 3} cents, and in Germany, 4 cents. 
 
 * Rep. R. R. Conirs. Conn., 1875. P Ohio Railway Rep., 1874. 
 
 t Rep. R. R. Comrs. Maine, 1874. % State Engineer's Rep., 1874. 
 
 + Rep. R. R. Comrs. Mass., 1875, ** Royal Commission on Rys., pp. 71 and 72 
 
 g Auditor Gen'l's Report, Penn., 1874. 
 
HOW THE POTTER LAW OPERATES. 
 
 Startling as these contrasts may seem, the fifth section of the 
 Potter law makes them yet more striking. It treats the several roads 
 as though they constituted one line. Consequently, the road on which 
 the shipment originates has the heavy end of the rate. Lumber comes 
 from northern lines on to the St. Paul and North-Western roads. The 
 result may be stated thus: A car load of lumber is shipped at Junc- 
 tion City, destined to Madison. The distance is 152 miles — 53 on the 
 Wisconsin Valley, 25 on the West Wisconsin, and 74 on the North- 
 Western Railway. 
 
 Junction 0ity,O 
 
 O Wis. Val. Junc. 
 
 Elboy. 
 
 O Madison. 
 
 The car load rate for the distance is $23. If divided among the 
 three roads in the order named in section four of the law, the 
 
 Wisconsin Valley would receive for hauling it 53 miles, $14.50 
 West Wisconsin " " " " 25 " 2.50 
 
 Chicago & North-Western '' " " 74 " 6.00 
 
 Were this rate divided on a strictly pro rata basis — i. e., in propor- 
 tion to the distance hauled on each line — the 
 
 Wisconsin Valley Railroad would receive - - - $ 8.00 
 West Wisconsin " " '<> . . . 3.80 
 
 Chicago & North-Western " " . . - . 11.20 
 
The results would be still different were these roads allowed the 
 local rates named in the Potter law. Then the 
 
 Wisconsin Valley Railroad would receive - - - $14.50 
 West Wisconsin " u c. ... 8.00 
 
 Chicago & North- Western '' '' ... 16.00 
 
 Obviously, the law abounds in inconsistencies. Dealers at Wisconsin 
 Valley Junction would be charged $14.50 for a car load of lumber 
 from Junction City, whereas, if the car were destined beyond, the 
 total rate as f;ir as Elroy — twenty-five miles further — would not reach 
 $12.00. Why such discrimination against local sliippers? Could 
 there be anything more unjust ? In one case the Wisconsin Valley 
 Railroad would receive $14.50 for hauling a car fifty-three miles ; in 
 the other — for the same service — the rond would get only $8.00. In 
 either event, the West Wisconsin, for hauling this car from the Junc- 
 tion to Elroy, Avould not receive half the sum allowed the former road ; 
 while, if the Wisconsin A^ alley claimed the full amount prescribed by 
 law — $14.50 — the West Wisconsin would receive only $2.50 for the 
 same service which, if the shipment began at the Junction and termi- 
 nated at Elroy, would give the road $8.00. Such inequalities, if per- 
 petrated by a railway company, would not be tolerated. 
 
 Compared with other States, the lumber rate is unreasonably low. 
 For 150 miles the car load rate is barely one cent and a half 
 per ton per mile. In New England, where population is dense an<l traffic 
 large, the published rate of the Vermont Central for lumber, 200 miles, 
 is 3 cents per ton per mile, and the Boston & Albany, 3J cents per ton 
 per mile ; while in the West, where lumber is largely consumed, on 
 leading Indiana, Illinois and Missouri roads, the average rate for 150 
 miles exceeds 3 cents per ton per mile. In other communities, there- 
 fore, under better conditions, the accustomed rates for lumber are 100 
 per cent, higher than the maxinmm rates "allowed by law in this State. 
 
 This adverse comparison extends to grain and flour. While the 
 rates current throughout the West average 3J cents for 150 miles, 
 Wisconsin roads are limited to 2^ cents per ton per mile. 
 
 THE COMPARISON OF PASSENGER RATES 
 
 is not any more favorable. The railroads of Connecticut* average 4J 
 cents per mile; in Mainef they vary from 4 cents to 5 cents; fourteen 
 
 * Rep. R. R. Comi-8. (^oiiu., 1875. f li*"P- K- K- Comrs. Maine, 1874. 
 
Pennsylvania* roads average 8 J cents; Michiganf averages 8 J cents ; 
 Illinois, 4 cents; Minnesota, 4 to 5 cents; while in the Upper Pen 
 insula the rate is 5 cents, and in Colorado 10 cents per mile. 
 
 In Europe, passenger rates are invariably higher. Throughout 
 England, they average 4 cents per mile ; | while upon the best traveled 
 routes § — as from London to Brighton and London to Dover — the 
 throiufli rate exceeds 5 cents and 6 cents per mile. 
 
 On the Continent, rates average : in France, 4 J to 5 cents, and in 
 Austria, 4 cents. 
 
 Could it be shown that, at the rates now imposed, the Wisconsin 
 railways were enabled to earn fair returns, some justification for their 
 continuance might be claimed. But the depressing fact is, that no 
 railroad in the State is in position to earn a dividend ; while two only 
 from their earnings meet current expenses and the interest on their 
 indebtedness. Nor would they be in this exceptional position were it 
 not for their operations in other States. This being the case, were it 
 brought to the notice of the people of Wisconsin, it is believed they 
 would not continue to accept 
 
 CHEAP TRANSPORTATION AT THE EXPENSE OF OTHERS. 
 
 Such, however, is the result. Apply the average Potter law rates 
 to the business of either company for their last fiscal years, and the 
 fact becomes apparent. That average is shown not to exceed \\ cents 
 or 1| cents per ton per mile. Take the latter rate and apply it to the 
 total number of tons moved one mile over the whole road of the 
 Chicago & North-Western Railway for the last fiscal year — i54,546,- 
 408 tons— and it would yield $7,954,563.10, which is $1,594,- 
 866.70 less than the company did earn on account of the higher 
 rates received in other States. After paying operating expenses 
 and interest on bonds, but no dividends, the company had a surplus of 
 $518,266.38. Deduct this amount from the deficiency above stated, 
 and it is seen that, had the Potter law rates been applied to the 
 entire business, the company would have closed the year Avith a deficit 
 of $1,076,600.32 ! 
 
 A like result would have attended the Milwaukee & St. Paul Com- 
 pany had the average Potter law rates been applied to their business 
 for the same year. Their entire movement of freight was 259,168,248 
 tons one mile, which, at If cents per ton, would yield $1,601,707.50 
 
 * Auditor Gen'1'8 Rop., 1874. % London Ry. News, Feb. 6, '75, p. 187. 
 
 t Rep. R. R. Comr. Mich., 1875. g Transpu. Routes to Seaboard, Vol. I, p. 222. 
 
8 - 
 
 less than the better rates obtained did produce. As the company, after 
 paying operating expenses, interest on bonds, etc., had a net income 
 of $119,107.87, it is evident that, had they been reduced wholly to 
 Potter law rates, they would have had a deficiency of $1,482,599.63 
 as the result of one year's operations ! 
 
 Nor does it appear that the companies with whose rates comparisons 
 have been made are excessively remunerative. Massachusetts — where 
 the highest rates of freight prevail — and Pennsylvania fall below five 
 per cent. ; Maine and Connecticut average 3J each ; while in the 
 West, Ohio does not reach 3 per cent., and only two roads in Indiana, 
 four in Illinois, and four (leased) in Iowa pay any dividends whatever. 
 Of the remainder, the majority are in the hands of receivers, directed 
 by the Federal Courts. 
 
 To the reflective mind the situation is suggestive. In compliance 
 with popular demand, a crushing blow has been struck. Beneath it a 
 mighty industry lies prostrate. Provocation there may have been, 
 complaints there doubtless were, yet' they arose mainly from miscon- 
 ception. So rapidly had railroads grown, so far-reaching were their 
 influence, and so little understood their operations, that apparent in- 
 equalities were magnified into grievous wrongs. 
 
 DISCRIMINATIONS 
 
 were made, but not all of them were unjust. Had the distinction 
 been drawn, much trouble might have been avoided. 
 
 It is not strange that people wondered why freight should be carried 
 past their doors cheaper than theirs Avas taken a less distance. Ship- 
 pers at Eau Claire, for instance, saw no reason why they should pay 
 as much to Chicago or Milwaukee .as did the citizen of St. Paul. 
 They did not consider that the Mississippi formed a natural highway 
 between St. Louis and St. Paul, over which steamboats and barges 
 plied freely, else would they have known that the railways from Chicago 
 and Milwaukee must carry freight to St. Paul as cheaply as the boats 
 would from St. Louis, or lose the business. Nor would the mere fact 
 of St. Paul receiving lower rates necessarily work injustice to Eau 
 Claire. It was an advantage the former had before the railway was 
 built. Then, freight was carried to the nearest accessible point, and 
 carted thence to Eau Claire. Had the railway from St. Paul termi- 
 nated at Eau Claire, no complaint would have been made. Willingly 
 would the citizens have paid the additional rate from St. Paul, because 
 
9 
 
 they derived the benefit of the difference between the cost of having 
 their freight carried by rail or teaming it from the river. But the 
 road was extended through to the lake, whereupon the intermediate 
 shippers demand that they be given advantages over those who al- 
 ways had an outlet ; that is, the companies having spent millions of 
 dollars in providing the interior places with a highway out of the 
 wilderness, must also give them preference over those which the 
 Almighty preferred when He established the water courses. 
 
 A POPULAR ERROR. 
 
 Moreover, the complaint is based on the mistaken belief that it 
 always costs less to carry freight a short than a longer distance. This 
 fallacy has repeatedly been exposed. "Distance," says the Massa- 
 chusetts Commissioners, " has little to do with the cost of carriage ;" 
 and they add, " so obvious is this fact that corporations earn large net 
 profits on their long business at one-third or one-quarter of that rate 
 per mile which is barely remunerative on short business. The simple 
 and obvious fact that wheels earn money only when they are in motion, 
 and that they earn it as long as they are in motion, has constantly 
 ■-been disregarded by those seeking to frame laws regulating fares and 
 freight."* The expense of loading and handling is the same, whether 
 the freight be destined ten or one hundred miles. But the cost of 
 moving local freight is greater than that of through freight. When a 
 train of the latter is made up, it is sent through to its destination as 
 rapidly as possible. It requires no way stations, and should not be 
 charged with maintaining them. They are needed solely for local 
 freight, which is delayed at every station where a car has to be taken 
 on or oiF. Therefore it is that a local freight train timed to run one 
 hundred miles in a day accomplishes less work than a through freight 
 train that runs three hundred miles in the same time. 
 
 This question has frequently come to the notice of the New York 
 Assembly. One complaint was that of a man who shipped three car 
 loads of cattle from a station some twenty miles east of Buffalo, and 
 was charged the rate from Buflfalo. At that city the company had 
 cattle yards, men to assist in loading, and the appliances for doing 
 the business promptly ; whereas, at the way-station there were no facili- 
 ties. The cars had to be hauled there empty, and the whole train 
 iield while three cars were being loaded ; or, the cars were left on side- 
 
 * B. B Commr's' Bep. [Mass., 1873,] p. 56. 
 
10 
 
 track to be loaded and taken on by a subsequent train. Clearly, it 
 would have been cheaper to the company to have taken the freight at 
 Buftklo. 
 
 Suppose a shipment were offered at a point where there is no sta- 
 tion ; would it not be cheaper to the company to take it at a station, 
 even though it necessitated ten or twelve miles' greater haul ? And 
 what is true in such case is alike true between leading stations, where 
 facilities for large business exist, and intermediate stations, where 
 traffic is light and conveniences are few. 
 
 JUST OK UNJUST. 
 
 The question as to whether charges are unjust depends not upon 
 what price the company carries for others, but upon whether the 
 charges in themselves are excessive or not. 
 
 This accords with the view taken by the Supreme Court of Missouri 
 at their term last November. The right to alter or repeal any charter 
 is reserved by the Constitution of that State. In 1872 an act was 
 passed to prohibit unjust discrimination. Of this act, the Court say 
 it "undertakes to define the obligations of railroad companies, and to 
 declare that a charge for one distance, if it exceeds a charge for a 
 longer one, is an unjust discrimination. It may be so, but whether it 
 is or not is a question for the courts to decide, and not for the Legis- 
 lature."* 
 
 So, also, the Supreme Court of Maine say : " The common and 
 equal right is to reasonable transportation services for a i-easonable 
 compensation. Neither the service nor the price is necessarily un- 
 reasonable because it is unequal in a certain narrow, strict and literal 
 sense."t 
 
 In the outcry, one important consideration was ignored. When, for 
 instance, Sparta complained of being charged as much to Milwaukee as 
 was LaCrosse, no account was taken of the fact that it was because the 
 line ran through to LaCrosse that Sparta obtained so low a rate as she 
 did ; for, had the road stopped at Sparta, and been without through 
 business, the local traffic would have had to pay the entire expenses of 
 the road. In proportion as a road is permitted to compete for through 
 business, to that extent \t is enabled the cheaper to do its local business. 
 
 * Sloan & Co. v. The Pacific R. R. Co. [not reported], 
 f McDuffoe V. Railroad, 52 Maiue, 451. 
 
11 
 
 VARYING COST OF RAILWAY OPERATIONS. 
 
 As the cost is not uniform upon any one line, it follows that upon 
 different roads there must be great variation. Yet the present law im- 
 poses the same rates per mile upon all the roads operated by each 
 company. It Avill not be affirmed that the cost of operation is the 
 same upon each one or upon any two of these lines. For the year 
 ending December 31, 1874, the expenses per mile run varied, on the 
 Milwaukee & St. Paul Railway, from $1.17 on the LaCrosse Division 
 to $1.42 on the Prairie du Chien and $1.46 on the Northern Divisions. 
 
 Similar diiferences prevail in other States. During 1874 the ave- 
 rage cost of transporting a ton of freight one mile in New York varied 
 from nine mills on the Erie and the New York Central to ten cents on 
 the New York, Boston & Montreal Railroad; and, in the last report of 
 the Louisville & Nashville Railroad, it is shown that the average cost 
 of moving one ton of freight one mile varied from one and a quarter 
 cents on the main line to over eight cents on their Glasgow branch. 
 Like results are observed in Pennsylvania. According to President 
 Scott's last report, the average cost of transporting a ton of freight one 
 mile varies from seven mills on the Pennsylvania road to one cent and 
 seven mills on their New Jersey lines. To enforce a uniform tariff 
 where the cost of operating is so varying is clearly unjust. 
 
 A JUSTIFIARLE DIFFERENCE. 
 
 The equity of charging a higher rate of freight where the current 
 expenses are much greater cannot be denied. Precisely such differ- 
 ence was made in Wisconsin two years ago. Reason sufficient existed, 
 yet the act was bitterly denounced and made the pretext for the pass- 
 age of the Potter law. The North-Western Company had completed 
 their line from Madison north to a junction with the Minnesota system. 
 In doing so' they had surmounted stupendous obstacles. Three tunnels 
 were built in one county. So rugged was the country and so heavy 
 the work, that more money was expended upon the line than in the 
 construction of any other between the lakes and the Missouri. Its 
 grades are such that, with double power, less than one-half the load 
 can be hauled that a single locomotive will carry over an ordinary 
 road. Thus the cost per mile is four times that on a level road. Ex- 
 penses being so much greater, and local business small, a slight increase 
 over the rates charged on the Company's other Wisconsin lines was 
 made. The result is well known. The event has passed into history, 
 
1^ 
 
 and the candid inquirer must determine whether it was more just to 
 ask higher compensation when the service cost largely and traffic was 
 small, or to impose incomparably low rates regardless of cost. 
 
 For this action excuse could not be made that the railway companies 
 would not reduce rates unless obliged to do so by law. The tendency 
 had been constantly downward. On the Milwaukee & St. Paul Rail- 
 way the average price per ton per mile had decreased from 4y^ cents 
 in 1865 to 2y%V cents in 1874, and on the Chicago k North- Western 
 from three and a half cents in 1868 to two and a half cents in 1873. 
 
 The effect of grades upon the cost of movement must be self-evident. 
 Every teamster knows the difference between drawing a heavily loaded 
 wagon on a smooth, level road, and hauling it over a hill. The differ- 
 ence upon railroads has been ascertained by actual tests. For every 
 grade of twenty feet to the mile, the work required to overcome it is 
 equivalent to that expended upon two miles of level road. Justly, then, 
 the character of a road should be considered in establishing its tariff of 
 rates. 
 
 AMOUNT OF BUSINESS AFFECTS COST. 
 
 To determine the cost at which freight can be taken, it is essential 
 to know the probable amount to be carried. A large, regular business 
 can be done cheaper than a small, occasional business. This fact a 
 freight manager thus illustrates : "I had occasion to investigate two 
 roads and to compare them. One did a business of some four hundred 
 millions of tons one mile in a year ; the other about fifteen millions. 
 The difference was very great. The cost per ton per mile on the road 
 that did the large business was about one cent ; on the road that did 
 the small business, it was about 5 -^-^ cents. The large amount of fixed 
 expenses and the small amount of tonnage moved caused the differ- 
 ence." * . * / 
 
 Suppose a road carries one hundred millions of tons one mile in a 
 year, at a profit of half a cent per ton per mile, and another road car- 
 ries one million tons at one cent per ton profit, the one doing the large 
 business will, at half the rate of profit, make five times the money the 
 other does. What justice would there be in compelling the latter to 
 carry its one million tons at the same or a less rate than the former 
 receives for carrying one hundred millions? Precisely such rule 
 is enforced in this State. Last year, the Pennsylvania and the New 
 
 * Transportation Routes to Seaboard, Vol. II, p. 32. 
 
13 
 
 York Central Railroads each carried over thirteen hundred million 
 tons of freight one mile against two hundred and fifty-nine millions car- 
 ried by the Milwaukee & St. Paul and four hundred and fifty-four 
 millions five hundred thousand by the North-Western ; yet the Wiscon- 
 sin companies, although their expenses are greater, were compelled to 
 carry their small tonnage at lower local rates than the Pennsylvania, 
 over which one hundred and twenty trains frequently pass daily,* and 
 the New York Central, which has sixteen miles of freight trains 
 daily If 
 
 It is the transportation of such enormous quantities of freight that 
 enables the Pennsylvania, New York Central and Boston & Albany 
 Railroads to average each over $40,000 gross earnings per mile, and to 
 earn greater net earnings per mile than are the gross earnings of any 
 two Wisconsin lines ! 
 
 FREIGHT MOVEMENT LARGELY IN ONE DIRECTION. 
 
 The distribution of traflSc in this State renders a fixed tariff especially 
 burdensome. The movement of freight is largely in one direction. 
 Timber is cut in the northern and consumed in the southern counties. 
 Grain is carried eastward. The cars required for the service are usu- 
 ally sent out empty. Therefore, when a car load of lumber is offered, 
 say at Tomah, or a cargo of wheat at Monroe, empty cars have to be 
 sent there ; thus making a double trip necessary to secure freight for 
 one trip. 
 
 During the year 1874, the Milwaukee & St. Paul Railway hauled 
 1,251,234 tons eastward and only 484,321 tons westward. The cars 
 requisite to carry this difference of 766,913 tons were hauled westward 
 empty in order to be loaded. Had the Company been enabled to load 
 the empty cars with out-bound freight at the best obtainable rates — 
 however small — the money received would have been net gain. Cars 
 and locomotives deteriorate as rapidly when idle as when in use. 
 
 Yet the inequality of business — in order to move the freight during 
 the busy season — demands as large equipment as though it were con- 
 stant. There might be facilities enough to move large quantities, yet 
 the rates might not justify sending the freight. The market price of 
 the commodity determines its movement. There is a point beyond 
 which property cannot be moved without consuming its value. This 
 was shown by a calculation made in Ohio when there were but few rail- 
 
 * Testimony of A. J. Cassatt, Trans. Route to Seab., Vol. II, p. 66. 
 t Speech of Hon. H. R. Pierson in N. Y. Legislature, Feb, 18, 1873. 
 
14 
 
 Toads in the State. It was seen that, at the prices then current in the 
 East, a ton of corn at 170 miles, carried by wagon, became worthless, 
 and at 330 miles wheat was valueless ; while at the same distances, car- 
 ried by rail, the corn was worth $22 and the wheat $44. 
 The highest courts concur in recognizing the 
 
 CONDITIONAL FAIRNESS OF UNEQUAL RATES. 
 
 Referring to such a case, one authority says : " The decision was 
 given upon a principle of common sense founded upon the acknowledged 
 fact that, if it cost a railway company less to carry the goods of one 
 customer than those of another, they w^ere entitled to make a reduction 
 in favor of the former." * Likewise another jurist says : " The crite- 
 rion for determining how far a charge is reasonable or not, is, to con- 
 sider the trouble, expense and responsibility attending the receipt, 
 carriage and delivery of the goods in question. Where these are equal, 
 the charge should be the same ; where they vary, the charge may fairly 
 be varied in the same proportion." f 
 
 And in a leading case, it was held "that a company may charge 
 different rates for transportation where the expenses thereof are differ- 
 ent; and, as the expense of starting a train is the same for a long or 
 short distance, this may fairly be taken into account and justify an 
 inequality in the rates of carriage between different places."! 
 
 In like manner, when this question arose in Pennsylvania, it w^as 
 held that " the charge might, under different circumstances,, vary in 
 amount without being, therefore, necessarily unreasonable. If reasona- 
 ble, it may, though unequal, be unobjectionable."§ 
 
 Again, railway companies were "justified in carrying goods for one 
 person at a lower rate than for another in consideration of a guarantee 
 of large quantities and full train loads at regular periods. "|| 
 
 Also the propriety of a company charging more upon a branch line 
 than upon their main line was clearly upheld, and it was declared that 
 " to constitute undue preference, the unequal charge must be upon the 
 same line or upon the same portion of the line."Tf ' 
 
 NECESSITY OF PRACTICAL KNOWLEDGE. 
 
 Consequently, an intimate knowledge of the varying conditions of 
 each line is necessary in order to prescribe reasonable rates. So 
 
 * Browne on the Law of Carriers, p. 258. g Camblos v. P. &. K. Kd, 4 Brewster, 620. 
 
 t Waif. Sum. Law of Rys., p. 317. |i Nicholson v. Great West'n Ry,4 C. B. [N. S], 3G6. 
 
 + Ransome v. Eastern Cos. Ry, 4 C. B. [N. S.], G3. «[ Caterham Ry Co., 1 C. B. [X. S.], 410. 
 
15 
 
 thought a Select Committee of Parliament when they reported : 
 " This is a function which no government ought to undertake. It in- 
 volves the necessity of determining what are the proper expenses of 
 the companies and what economies they can practice. These are mat- 
 ters which require the knowledge, skill and experience of the managers 
 themselves, and any attempt on the part of any government depart- 
 ment to do it for them is impossible, unless the government were to 
 undertake an amount of interference with the internal concerns of the 
 company which is neither desirable nor practicable."* 
 
 With this intelligent view the Railroad Commissioners of Maine co- 
 incide. In their last report they say : "In the minds of those who 
 give this subject the fairest consideration and possess knowledge 
 enough of it to appreciate fully its difficulties, it becomes a conviction, 
 more positive the longer it is dwelt upon, that the only sure way to 
 obtain pernamently low rates on railroad traffic — and especially on 
 freight — is to leave the problem untrammeled by legislative enactments 
 to those whose special business it is to study out all its intricacies. "f 
 
 For, as a rule, the men who manage railroads are credited with 
 shrewdness. That quality consists largely in a keen appreciation of 
 self-interest — which consideration alone will impel them to develop 
 their territory. Whatever conduces to its wealth augments the com- 
 pany's profits. Left to themselves, they will endeavor to create busi- 
 ness by fostering new enterprises and encouraging the development of 
 permanent industries. To this conclusion the English Parliament has 
 arrived after thirty years of patient investigation. 
 
 TEACHINGS OF HISTORY. 
 
 " History claims it as her prerogative to offer instruction." With 
 railways her experience has been large. Every Statfe that has known 
 them has sought to regulate them. The statute books are replete with 
 futile enactments. In Ohio nine distinct tariffs of rates for transpor- 
 tation have been prescribed, of which tlie State Commissioner, in his 
 report for 1870, said they were " the most fruitful s'ource of complaint." 
 
 Illinois early sought to define what should be charged. The first 
 attempts were either defeated or declared invalid. A subsequent 
 measure devolved the task upon three Commissioners, who prepared 
 one schedule for all the roads in the State alike. It has not been 
 enforced. 
 
 * Ry. Cos. Amalgamation, p. xxv. / t R- R- Com'rs' Rep. [Maine] 1874, p. 18. 
 
16 
 
 Iowa took the Illinois rates, reduced them ten per cent., and applied 
 them to four trunk lines. 
 
 Minnesota, failing twice to establish fixed rates, re-enacted the com- 
 mon law. 
 
 The result has justified the Massachusetts Commissioners in saying : 
 "It would appear that 'the more such measures are extended in their 
 operation, the more complex they become, and the greater must be the 
 difficulties in the way of their successful operation."* 
 
 To this rule the Potter law is no exception. A brief trial showed 
 the need of amendment. Rates were fixed for each twenty-five miles ; 
 thus, when the haul exceeded twenty-five, fifty or seventy-five miles, 
 the rate for the next twenty-five miles could be charged, even though 
 the excess were but one mile. That provision was amended by insert-, 
 ing a rate per mile for the actual distance carried. Its operation gives 
 some astounding results. Suppose a car load of lumber w^ere carried, 
 say thirty miles east on, the Green Bay & Minnesota Railroad, and 
 ninety-five miles south on the Chicago & North-Western. 
 
 Watertowx 
 
 The gross rate would be $20 — of which the former would receive 
 $4.80 and the latter $15.20. But, if this lumber were to stop at 
 Green Bay, the first named road would receive $9 — nearly double the 
 
 * R. R. Com'rs' Rep. [Mas?., 1873], p. 63. 
 
17 
 
 amount allowed it for the same haul when it takes the additional 
 trouble of handing it over to another road ! 
 
 Suppose, again, this shipment were sent five miles on the Green Bay 
 Road and twenty-five on the North-Western. The gross rate would be 
 $9 — which, on a pro rata basis, would give the North-Western $7.50 and 
 the Green Bay Road $1.50 for handling the car load and hauling it five 
 miles. Thus is ignored a principle which has hitherto been recognized 
 in every freight tariff — an arbitrary rate for the first few miles to com- 
 pensate for the expense and trouble of handling. In the charters of 
 British railways it is covered by the " short distance " clause, which 
 usually reads as follows : 
 
 " For articles or persons conveyed on a railway for a less distance 
 than six miles, the company may demand the same tolls as for six 
 miles, in addition to a reasonable charge for the expense of stopping, 
 loading and unloading." 
 
 Untaught by the failures recorded, Wisconsin likewise disregarded the 
 
 CAUTIOUS ACTION OF OTHER STATES. 
 
 In Massachusetts, where the railways are owned by the people who 
 make the laws, the Commonwealth can assume control of a road only 
 after it has been in operation twenty years, " by paying therefor the 
 amount of capital paid in, with a net profit thereon of ten per cent, 
 from the time of its payment by the stockholders to the time of the 
 purchase. 
 
 And in England, as early as 1844, Parliament enacted that if, after 
 twenty-one years, any new railway had made ten per cent, for three 
 years. Government might reduce the rates charged, but should at the 
 same time guarantee the company ten per cent, net for the next twen- 
 ty-one years. Such is the law of England, to-day. Ten per cent, 
 guaranteed where money is plenty at three per cent., while in Wis- 
 consin, looking to foreign capital for its development, the most beggarly 
 return is denied I 
 
 Railway investments are precarious. Unlike personal property or 
 real estate, they are not disposable at Avill ; therefore, should they 
 have ample security. So thought the New York Legislature when 
 they adopted the English rule in their general railroad law, the thirty- 
 third section of which reads : 
 
 " The Legislature may, when any such railroad shall be opened for 
 use, from time to time alter or reduce the rate of freight, fare or other 
 
18 
 
 profits upon such road ; but the same shall not, without the consent of 
 the corporation, be so reduced as to produce with said profits less than 
 ten per cent, per annum on the capital actually expended ; nor unless, 
 on an examination of the amounts received and expended, to be made 
 by the State Engineer and Surveyor and the Comptroller, they shall 
 ascertain that the net income derived by the company from all sources 
 for the year then last past shall have exceeded an annual income of 
 ten per cent, upon the capital of the corporation actually expended." 
 
 In Pennsylvania, legislation has taken the form of prescribing 
 maximum rates ; yet the companies most restricted are allowed to 
 charge an average of four cents per ton per mile. That rate of toll is 
 named in the charter of the Philadelphia and Reading Railroad, which 
 road averages a daily freight tonnage of thirty-five thousand tons, 
 making a train sixteen miles in length. " And such a train," says the 
 President, "is coming down the road every day." 
 
 The railroads of New Jersey, by general law, are authorized to 
 charge ten cents per ton per mile. 
 
 In Ohio, the railroads are unlimited up to thirty miles, beyond 
 which they are authorized to charge five cents per ton per mile. 
 
 The six leading railroads of England are empowered to charge six 
 cents per ton per mile. So careful has been the action in this regard 
 that a Parliamentary committee said of these rates: " They are always 
 fixed so high that it is or becomes, sooner or later, the interest of the 
 companies to carry at lower rates."* 
 
 PROSPEROUS ROADS A PUBLIC BENEFIT. 
 
 Railway owners are not alone concerned in the maintenance of their 
 property. Profitless roads cannot meet the wants of their patrons. 
 Considerable margin above expenses is required to keep a road in safe 
 running order. To a Parliamentary committee this was evident ; 
 therefore they say : " Where a company pays little or no dividend on 
 its original capital, the working expenses are often cut down injuri- 
 ously. Danger arises from insufficient service, and the risk of present 
 loss attending any reduction of fares, even with the fairest expectation 
 of future profit, is a bar to liberality of management. For the public 
 advantage it is desirable that a railway should yield reasonable returns 
 to those under whose control it is placed. "f 
 
 * Ry. Cos. Amalgamation, p. xxxiv. f Royal Commission on R'ys, p. xxiii. 
 
19 
 
 By wear and tear a railway will depreciate ten per cent, yearly. 
 To that extent companies that are able make renewals.* 
 
 To omit making these renewals would be held to be criminal negli- 
 gence. Yet to make them will require large outlays. These are 
 chargeable to the business of the road. They are part of the current 
 expenses, and should be defrayed out of the gross earnings. But the- 
 Potter law rates preclude this. Thus, Wisconsin law operates to im- 
 poverish the roads, render them unsafe, then punish the companies for 
 becoming so ! 
 
 CAPITALISTS ALARMED. 
 
 Neither has the State benefited by the law. Wherever capitalists^ 
 meet, its baleful effects are known and appreciated. They deem its- 
 passage an act of dishonesty. Their impressions are conveyed to the 
 State Department through its agents abroad. Writing from Rotter- 
 dam, the Consul says : 
 
 '• The laws recently enacted in Wisconsin concerning railroads have 
 just affected those securities in which the Dutch capitalists had invested 
 enormous sums, namely, the Chicago & North- Western and the Mil- 
 waukee & St. Paul railroads. As yet, the holders of these bonds 
 still believe that the hopes created and entertained by the directors of 
 these railroads will be realized, and that those laws will be annulled by 
 the Supreme Court. Should this not be the case, a new depreciation 
 of these securities, as well as of all other American railroad bonds may 
 be expected. For years to come no investment of Dutch capital in 
 United States railroad enterprises will be made. Financiers who, in 
 this country, have been dealing in United States railroad securities, 
 agree in declaring that a revival of confidence in American railroad 
 enterprises can only be e-xpected when a radical change of the present 
 legislation on railroad companies takes place in the different States, "f 
 
 Were Wisconsin beyond the need of foreign credit, she might possi- 
 bly afford to repel it. But with the northern part of the State unbro- 
 ken, and her vast resources lying dormant, it would seem unwise to bar 
 out the means necessary to develop them. Capital can no longer be 
 drawn hither by specious statements. The promise of fair returns will 
 avail nothing unless there is positive assurance that the public guaran- 
 tees will be honored. " The Germans believe that they have been 
 deceived and defrauded," writes the Consul at Frankfort to Secre- 
 
 * Transportation Routes to Seab., Vol. II, p. 50. f <^ommercial Relations [1874], p. 902. 
 
20 
 
 tary Fish. " They also find that sovereign States deny and disre- 
 gard their guarantees ; that, from the distance, they seem indifferent 
 to them, and almost seem disposed to forget their liabilities, or to 
 wholly avoid their payment." And he adds : " The capital of Europe 
 has been turned toward the United States on account of the prospects 
 and hope of higher interest. Now the interest offered by European 
 enterprises is equal to the usual rates of interest in the United States. 
 Hereafter this capital will find abundant use in its own country."* 
 
 Still later, the same Consul says : " Extreme caution has been the 
 rule of action ;" and after remarking that " Frankfort continues to be 
 the central banking city of Europe," he adds : "I regret, however, 
 that American securities, other than those of the United States Gov- 
 ernment, are still regarded with suspicion. "f 
 
 In the light of these facts, and the growing needs of the State, 
 
 WHAT SHOULD WISCONSIN DO? 
 
 The Potter law has retarded her progress. It has injured the 
 State in the esteem of the world. Capital avoids her. Without credit 
 she cannot advance. Minnesota quickly retracted her restrictive law. 
 Wisconsin should do likewise. Thus would confidence be restored and 
 a simple act of justice be done. For transportation is a commodity, 
 and is sold as are other services. If its price can be fixed by law, so 
 can that of other commodities furnished by associated capital. If 
 rates for railway service are to be arbitrarily fixed, why not extend 
 the control to other associations, and prescribe the price of board at 
 hotels, the rate at which newspapers shall advertise and insurance com- 
 panies take risks ? In New England, less than a century ago, the price 
 of labor and the products of labor were limited by law. " Such good 
 orders," says Hubbard, "expired with the first golden age in this 
 w^rld." Civilization is thought to have made some progress, and leg- 
 islators are believed to be wise as they are strong, and just to all. 
 
 The rates of fare and freight enforced by law in Wisconsin are inde- 
 fensible. They are proven to be unreasonable. The railways are 
 compelled to furnish transportation below cost. In view of which, 
 Edmund Burke's utterance is pertinent and true to-day : " Men have 
 no right to what is not reasonable." 
 
 J. W. MIDGLEY. 
 
 * Commercial Relations [1873], p. 379. 
 t Commercial Relations [1874J, p. 440. 
 
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