i

ILLINOIS

UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

PRODUCTION NOTE

University of Illinois at
Urbana-Champaign Library
Brittle Books Project, 2015.COPYRIGHT NOTIFICATION

In Public Domain.
Published prior to 1923.

This digital copy was made from the printed version held
by the University of Illinois at Urbana-Champaign.
It was made in compliance with copyright law.

Prepared for the Brittle Books Project, Main Library,
University of Illinois at Urbana-Champaign
by

Northern Micrographics
Brookhaven Bindery
La Crosse, Wisconsin

2015A !5. I H /

THE

"V '

PRACTICAL WORKING AND RESULTS

INTER-STATE COMMERCE ACT

BY

JOHN A. WRIGHT.

PHILADELPHIA :

COLLINS PRINTING HOUSE, 705 JAYNE STREET.
1891.o O

DS;.5*5	j	£8

IV 13 p

Csyj** 5L

H
ri

n
o

CO*

THE

PRACTICAL WORKING AND RESULTS

INTER-STATE COMMERCE ACT.

7>

ORIGIN OF THE ACT.

The Inter-State Commerce Act was made a law by the Con-
gress of the United States for the purpose of reaching and cor-
recting certain evils which had grown out of the methods and the
charges made for the transportation of freight and passengers
(4 between the States, known as inter-state commerce. ^
x The very rapid development of the grain-producing States, west
i of Chicago, in population and production, was made possifte*i)y
\ the increase and fertility of the public lands opened for settlement,

0	by their cheapness, by a large foreign immigration furnishing
labor and some capital, by the construction of railways by the

) enlargement of the Erie Canal, and by the increased capacity
~ and speed of the carrying vessels on the Lakes. As a result,
] more land was put on the market than was required by the wants
\ of the people, and more railways and vessels were built than
could be made profitable in the transportation of passengers and
j freight. Speculation in land, in town sites, and in constructing
£i railways was an influential element in this development. The

1	greatest increase in the number of acres of land opened for
' settlement and in immigration happened at a time when the
- products of the soil, wheat, corn, oats, etc., were bringing abnor-
mally high prices, leaving to the producer a large profit. As a
result, lands were freely bought, people rushed into the new

» countries, and many railroads were built. The collapse of price's

I

I	(p 45966brought the people into financial difficulties, and to the railway com-
panies, in most cases, financial disaster. But the railways were
built; settlers occupied the public lands ; and the villages, towns,
and cities were crowded with people searching for something
to do. A prime question with the railway managers was to
secure sufficient freight and passengers to make their roads profit-
able, or even to meet expenses, while the total amount of the ton-
nage and passenger travel was not more than enough for any two
of the lines connecting with the chief Eastern cities ; yet from
five to ten lines of railway were each seeking for the lion's share
of the traffic. Such a state of things naturally led to the adop-
tion of all manner of contrivances to secure freight, by rebates, by
undercutting in prices, by less recorded weight, deduction of ter-
minal charges, free passes, etc. etc. Agreements were made
between the companies as to rates to be broken; they wTere
used as a snare by the weaker to gain an advantage over the
stronger companies, and as a result, the trade in the products
ol the West became so demoralized by the uncertainty of the rail-
way charges that there arose a necessity, felt by the people and
by the stronger railway companies, that something should be done
to correct the evils, and protect the producers, the traders, the
consumers, and the owners of the transportation companies.

It was thought that no State authority was sufficient to solve
the problem, and that the General Government alone had the
power and could overcome the difficulties, under the clause of the
Constitution placing on Congress the duty of protecting commerce
between the States. It was true, and it was so acknowledged,
that when this clause of the Constitution was adopted, it had no
reference to such a question as that to which it was now to be
applied, but it was urged, on perhaps stronger ground, that, as a
national duty, Congress should protect the people from injustice
in their inter-state dealings, where the power of the State or
States was insufficient.

CHARACTER OF THE ACT.

These influences, resulted in the " Inter-state Commerce Act"
being passed and approved by the President.Much good would have resulted to the country if a law could
have been passed which would have been confined or limited to
correcting the specific evils that had been produced by the pecu-
liar circumstances already stated, which would have recognized
the laws of trade and made binding all agreements as to traffic
and interchange of business between the transportation companies,
and which would have provided for the protection of the property
of the transportation companies by the General Government.
Producers, manufacturers, miners, business men, and capitalists
would then have understood their position ; in lieu of which an Act
was passed which, it is claimed, practically places the property
and management of all the railways in the nation under the con-
trol of five commissioners appointed by the President. This as-
sumption is based on the power given to the commissioners to
regulate inter-state commerce, and, as a necessary sequence, the
administration of this power and authority involves everything
that affects such commerce, including the management and all the
details of operating railways, carrying, or that are liable to carry,
any amount of freight or number of passengers between the States.
Further, as each railway company thus made liable in the law to
the control of the Commission, carries, under its charter, persons
and property within the limits of the State which gave it being,
and is liable to the State laws and answerable to the State courts
for the performance of its duties, a conflict of authority would be
created by the Inter-state Commerce Commission directly interfer-
ing with the performance of the duty of the railway company to
the State. In the power given to the Commission to regulate the
rates of traffic on inter-state commerce is involved the power to so
affect the revenues and resources of a railway company that it
cannot give the citizens of the State, to which it owes its existence,
the facilities in transporting their persons and property to which
they are entitled, nor at as low rates as they would otherwise be
charged. In the ruling that railways connecting at State lines
are continuing lines, and that their rates are under the control of
the Commission,—the authority of the State is superseded, and
the contract between the State and corporation is impaired. No
railway corporation can serve two masters. This power to control
every transportation company in all the States has been clearlyindicated in the reports of the Commission; that it has not been
exercised has been due to the prudence of the members of that
body.

The report of the Commission for the year 1890 acknowledges
the impracticability of the provisions of the Act, by their insist-
ing that the proofs and evidence in a case that may be laid before
a Court of Appeal shall be submitted by them. Such a recom-
mendation shows that they feel themselves powerless to carry out
the law with justice to all; this is due to its unwarranted assump-
tions of power, its false reasoning involving wrong principles, the
impossibility of devising rules and establishing precedents which
shall embrace the great carrying interests of this country. These
defects involve the Commission in contradictory decisions, in the
evasion of the true point of an appeal, or in an effort to harmo-
nize the letter of the law with justice.

That such is the result of their experience is not a matter of
astonishment to any one conversant with the questions arising in
the carrying trade of this country, and which, with the yearly in-
crease of business, will become more difficult. If Congress should
pass the law asked for by the Commission, the result would be
that the Commission would have the power so to formulate evi-
dence as practically to lessen the value of an appeal to a United
States Court.

When the capital involved in furnishing the transporting in-
terests of this country is considered ; when their value to the
nation and the people is reckoned up ; when the numbers of
population and the value of property that should be attributed to
the possible future of the nation are admitted as an element, and
the injury resulting from bad or unkind legislation in keeping
back the development of the country is also put into the question,
then the arithmetical value of these interests and of those depen-
dent on them would reach figures that would make any statesman
hesitate before he would hazard his country's welfare by placing
the control of these interests in the power of any five men, how-
ever pure or honest or in ordinary questions intelligent, but who
have not been trained in the lines on which they are to act as
judges, and more especially for the true reason involved in the
Commissioners' recommendation, that an unwise law cannot beeffectively carried out unless such power is granted the Commis-
sion. There would certainly be greater wisdom in revising the
act, striking out all that has been found to be unwise and im-
practicable, all that is contrary to common business sense and the
laws of trade, and improving the Act in the points already sug-
gested, securing the freest inter-commercial traffic between the
States, and protecting such carriers from interference or from
violence. Favorable legislation will help the people of the
country, because it will tend to invite capital from its centres to
develop district after district of our wide domain as population
or natural resources may indicate. Restrictive or unwise legisla-
tion will prevent capital being invested in such directions, and not
only will the supply of facilities demanded by the growth and de-
velopment of the country be retarded, but the facilities, when
supplied, will be in consideration of profits that will compensate
for the additional risk due to such restrictive legislation.

The legality of the Act will sooner or later be tested by an
appeal to the Supreme Court of the United States. The State
governments must protect the corporations they have created in
the performance of their chartered duties and in the enjoyment of
their chartered rights. Such a test will introduce a question of
State sovereignty that cannot be settled by any forced construction
of constitutional power, to meet, in view of the wrhole amount of
inter-state commerce, a very limited abuse of such commerce and
which was the development of a temporary condition of produc-
tion of trade and of transportation ; an abuse which will correct
itself through the settlement of the country by the increase of
consumers and of local business on the lines of the railways, by
the increase and permanent holding by capitalists of the shares
and securities of the railway corporations, by an increase of
general knowledge of railway operations, by a closer super-
vision over the managers and the officers of such companies by
the share owners, by the absorption or control of the weaker by
the stronger companies, and by the imminent changes in the cha-
racter and amount of the freight which produced the under-cutting
of rates, etc., and the consequent favoritism. These abuses could
have been largely remedied by the adoption of the rational mea-
sures already indicated, and they did not require the drastic pro-55 S'

8

visions of the law as passed, provisions which have failed to cor-
rect the evils and abuses for which thej were enacted and which
have injuriously reacted upon the general transportation interests
of the country.

More than this, in the attempt by the Commissioners to carry
out the law they have realized the impracticability of its provisions,
and have shown, by their attempts to determine laws of transpor-
tation and to affix rates, their utter inability to improve on the
well-known laws or economics of trade, which are as well estab-
lished in their line as the common law of England.

To form a correct judgment as to the wisdom of the law as
passed, a further analysis of the influences that led to its adoption
in its present form may be helpful. Such an analysis would in-
clude the communistic and political influences which were apparent
in the passage of the Act.

There is inherent in man a disposition to take the property of
others, whether under or in opposition to the principles of justice,
right, and law. This disposition furnishes one of the difficulties
in the way of legislation in a representative form of government.
The class of people who are in a majority invariably endeavor to
pass laws favorable to themselves, and where this majority is very
large, the influence of such a class becomes controlling in legisla-
tion. The essence of communism, as affecting the rights and property
of others in a district of debtors, develops itself, while the natural
unwillingness remains as to any division of their own property
among those less able. The depression of prices for the products
of the soil and for meats a few years back developed this feeling
throughout the more newly settled countries in the West, whose
people felt the change in prices most severely. That such a people
should have demanded of the transporters rates that would leave
the producers a profit was natural, but that such claim for relief
should go beyond the demands of justice and equity was left to
the practical politician, who saw his opportunity and made use of
it to gain place and power. The Western and Southwestern poli-
ticians grasped (1) the facts of the demoralization in rates, in all
cases precipitated or brought about by the weaker railroad com-
panies that never should have been built, and (2) the necessity of
some controlling power; but they went beyond the demands of thecase by placing the whole railway interests of the country in the
hands of five irresponsible citizens, to be appointed by the Presi-
dent of the United States and confirmed by the Senate. The
legislatures of many of the Western States completed the circle of
wrong by passing destructive laws affecting the ability of the rail-
way corporations to serve the people.

This communistic feeling, with its political attendants, is still
rampant in the West and is invading the Middle States. Its pro-
duct is to be seen in the Farmers' Alliance and the Grangers.
They are engaged in making war on the capital of other people.
The Inter-State Commerce Act, as it stands, was passed in obe-
dience to the presence of this feeling among the people, and for
the selfish purposes of the mere politician.

THE PRACTICAL WORKING OF THE ACT.

The object of this paper is to discuss the practical working of
this Act in certain directions, leaving the questions as to the legality
of many of its provisions to those who are learned in the law.

It was intended to cover three points in the treatment of inter-
state commerce by the railway companies. First. That the prin-
ciple should be established that no greater charge for trans-
portation should be made for a shorter than for a longer haul.
Second. To prevent the officers of any railway company discrimi-
nating in rates of freight between shippers, thus doing away with
the many devices adopted to secure freight; and Third. To regu-
late the rates of freight charged on such commerce by the railway
companies.

The first point presents two sides. While on the face of the
statement it has the appearance of fairness and right, yet it does
interfere in certain cases with the equities of shippers and with
the interests of localities wherein a large tonnage is concentrated,
and with the interests of the railway companies by the increased
cost of furnishing the same facilities for a small and irregular ton-
nage which are due to the shippers of a larger tonnage. The larger
cities do not derive all the advantages to which they are entitled
from their location.

The second object of the Act is to secure equal treatment to0

\ 1

10

all shippers, by preventing discrimination in rates of freight.
This is a most worthy object, and to some extent the Act has
been beneficial. It has placed all discrimination under the ban
of an immoral act, as being wrong in itself and in opposition to
the law of the country. It has decreased the number and amount
of such discriminations by the necessity for secrecy in avoiding the
exposure and the penalties of the law ; but the Inter-State Com-
merce Act has not stopped such acts of discrimination by the
various means so well known to shippers and freight agents, and
which cannot be reached by any Commission. These devices
might be partially exposed by a specially organized detective
bureau. Shippers hesitate at entering suit against fellow-ship-
pers and railway companies, due in part to the difficulty of proof
and to the uncertainty of success, and there is an unwillingness
of one railway company to bring suit against another railway
company. The inability in any case to receive sufficient com-
pensation for the losses incurred through acts of discrimination,
and for the loss of time and outlay of money, with the length of
time that must elapse before a decision by the Commission can
be reached, these have their influence on all parties. There may
be but one cause of complaint by one party, and the discrimination
against that party may cease with the one act. The simple fact
is that business men and railway companies in this country cannot
await the rectification of errors by such a slow process as an appeal
to a Commission ; if a loss has been sustained by some act of dis-
crimination, they charge it to their profit and loss account.

This evil of discrimination in rates cannot be cured by the pro-
visions of the Inter-State Commerce Act. So long as there are
railways seeking freight to the leading and distributing markets
that furnish facilities inferior either in time or safety to the prin-
cipal lines to such markets, there will be such discrimination or
under-cutting or evasion of published rates. The error of Congress
was in not appreciating this fact, and the utter inability to reach
and cure the evil by such provisions. The principal remedies
for the evils named have been already stated; they grow out of
the circumstances, surroundings, and future prospects of the rail-
way companies, and from the character of and the future markets
for the leading classes of freights.11

That the members of Congress forbade by the Act, legal and
binding agreements between the railway companies as to division
of freight, is another evidence of their ignorance of the difficul-
ties to be met in controlling the acknowledged evils, and the
groundlessness of their belief that they could produce a result by
law, which was otherwise impossible. The result has been the
opposite of what they anticipated, and the expression of public
opinion, supported by that of the Commission, enforces the argu-
ment, that the evils of discrimination can be, in addition to the
influences already rioted, curtailed, lessened, and brought to a
minimum by a legal recognition and enforcement of agreements
made between the railroad companies as to division of traffic. In
this way the weaker lines can be given a certain amount of freight,
which they will secure at any price, or by any evasion of the law.
In the one case there would be no necessity for discrimination
between shippers, by rebates, etc., while, as it is now, such dis-
crimination and rebates will be given. While such a law will not
altogether cure, it will do much to reduce the evils.

The third object of the Act was to secure to the people proper
rates of freight for inter-state commerce, by preventing over-
charges, by securing safety and quick delivery to the freight, with
proper power, cars, etc.

The provisions of the Act wThich gives this great power to the
Commissioners are of more importance to the people and the owners
of the railway than the other points already discussed.

The wisdom of such provisions, of giving such power, if it ex-
ists in the General Government, deserves most careful thought.

7	O

The encroachments of power should always be carefully watched.
If the Congress of the United States has the power to control all
the railway property in the country, it has the power to control
all other means of transportation. If it has the power to deter-
mine the rates of freight on a railway, it may fix the rent of a
house or of a farm, the price for the products of the soil, of the
forest, of the sea, and of all manufactures ; it may take the pro-
perty of one citizen and give it to another, without recompense.

In more fully discussing this question, the first point will be to
understand the equitable relations that the producer and trans-
porter bear to each other.^ o «>

fj «./

12

First. The Relations of Producers and Transporters.

The best illustration of the position of the parties to each other
may be found in the case of a newly opened section of country,
and the builders of a railway to and through it connecting by rail
or water with the distributing markets.

The land before the railway is built is practically worthless,
except in some cases for raising stock which are their own trans-
porters. Its products would not bear transportation. Capitalists
invest their money in a railway to such a district of country and
immediately a value is given to the land, because its products can
be carried to a market.

the law of distribution.

The next question is, How shall the moneys received for these
products at the chief markets be distributed ? First of all, the
commissions and expenses of the seller at the market must be
deducted. Next, such a charge for transportation as will pay the
capitalist for the use of his money, and properly reward him for
his enterprise and risk. Next, the cost of production, regulated
by the average wages of the country. Next, the interest on the
money invested in the property and in the capital employed ; and
lastly, or what is left will represent the value of the property, or
the royalty of the land, a value primarily due to the construction
of the railway.

The same reasoning will apply to a forest of timber, a mine of
ore or of coal. These are more worthless than surface ground
until capital opens a market for the lumber, the ore or the coal,
and the distribution of the proceeds of the sale of such lumber,
ore, or coal, should follow the same course : First, to meet the
cost of delivering from the terminals of the railroad or canal to
place of sale. Second, to meet a charge for transportation which
shall remunerate the capitalist for the investment of his money
and furnish an inducement to further investment in the same or in
other lines. Third, to the cost of production or mining and de-
livering to railroad or canal, including superintendence and man-
agement. Fourth, to meet the interest on capital invested: and
Fifth, the balance would remain as the royalty or measure of the13

value of the property, due to the construction of the railway or
the canal.

There is no value in the ground or mine until it is created by
the investment of capital in a means of transportation, whether
that is by wheel-barrow, by a cart, by a wagon, by rail, or by
water.

It is important that this analysis of the distribution of the pro-
ceeds of productions from the market should be thoroughly under-
stood, because it is at the bottom of this whole question, and is
in direct antagonism to the communistic theories involved in the
decisions of the Inter-State Commerce Commission.

The assumption of the Commission is, that the ability to produce
freight in any given case, whether from the farm, the forest, or the
mines, always exists ; that this ability is in the nature of a " public
interest," and, therefore, the charges on all avenues of transporta-
tion must be such as will permit such freight to be produced, to
reach a market, and receive such prices as will warrant the pro-
ducers in keeping up this interest in which the welfare of the
people is involved.

That this continues to be the position of the Commission is evi-
dent from their recent decisions in the cases of Coxe & Co. v. The
Lehigh Valley R. R. Co. and of the Delaware State Grange of
the Patrons of Industry v. The New York, Philadelphia and Nor-
folk and other railroad companies. A more unsound and dan-
gerous theory could not be imagined, unless it went so far as to
utterly destroy the value of the property of transporting compa-
nies or of all carriers. It is in opposition to all the customs and
laws of trade. The farmers who unite in sending their vege-
tables, butter, eggs, meats, etc., to a market by an agent who
owns a horse and wagon expect to pay such agent for his services
and for the use of his horse and wagon a price that will compensate
him for the use of his labor, skill, and capital—a price not based
on the profit to the farmer, but on the value of such labor, skill,
and capital.

The manufacturer buys his raw material, works it up into mar-
ketable shape, and sends it to his agent in a distributing market
to sell. The commissions paid such agent are not regulated by
the profits of the manufacturer, but by the value of the skill andO \
k J I

14

capital of the commission merchant. The manufacturer may lose
heavily through changes in the value of his wares, yet that does
not lower, increase, or affect the commissions paid to his agent.

The General Government collects postage on all the letters it
carries, without reference to the value of the letter to the sender
or receiver ; it first demands satisfactory pay for its services.
The Government collects customs to meet its expenses, without
reference to whether importers make money or not on the goods
or wares they bring into the country. The stockholders in a
transportation company must first pay the cost of conducting their
business, repairs, interest on borrowed money, etc., before they
can realize their profit.

If the theory of the Commission is correct, the producers and
transporters are not even partners; the transporters are merely
agents furnishing capital, skill, and labor, that the producers may
make larger profits ; the producers object to any idea of partner-
ship or any law that would regulate rates of freight by their
profit. While they are not communistic as to their own property
they are as to the property of the transporters.

Again, the Commission forget that the railroad companies are
producers as well as the farmers, manufacturers, or miners.
They produce transportation, and have it for sale, and there is
no justice in forcing one producer to sell his products at prices
to enable another producer to make more profit, and especially
when the other producer, the farmer, the manufacturer, or the
miner, is not required at all times to purchase the products of the
railroad company. This claim that the transporter is a producer
is in harmony with his or its duty as a " common carrier," and is
entitled to be fully appreciated in any discussion of the questions
now being considered.

The merchant rents a store at prices which are satisfactory to
the owner; but if the merchant makes more profit than was an-
ticipated at the time of renting, he would consider it a great wrong
for the owner of the property to demand more rent, and as well
would the owner of the store demand his full rent though the
renter failed to make his business profitable.

The farmer who rents a farm at rates based on low prices of
grain, is not willing to increase his payments to the owner if pricesadvance, and he makes more money than was expected when he
rented the farm, and vice versa, the landlord is not willing to fore-
go his rent if prices go down. The profit of the producer has, of
itself, nothing to do with the rates charged by the transporter,
except as they affect tonnage and its profits, and this is a question
not of right but of policy.

Take the public roads, the streets, and paved ways of a city or
village. The farmers, miners, and real estate owners have to pay
their share of the cost to build and keep such roads and ways in
repair, without regard to their use of them or the profit derived
from the farm, the mine, or the rented house. The users of a
turnpike have to pay the tolls which are laid to keep them in good
condition, and remunerate the owners for cost of construction, with-
out reference to the question of the profit the user derives from
them. To suggest that in either of these cases there should be a
division of profits, or that the taxes or the rates of use should
be measured by the profit of the user, would be accepted as
absurd. Wherein then is the difference between these cases and
that of a railroad company ? They are identical in principle.

Illustrations of the correctness of this method of distributing
money received from sale of products as herein laid down might
be multiplied. It forms the basis of all business transactions the
world over. No man is forced to cultivate the land, to produce
fruit and vegetables, to mine iron ore or coal, to manufacture any
article, or in any way to furnish products for transportation to any
carrying company ; and if he has been engaged in producing
freight he is not forced to continue in it. If he does so engage in
such business at any point or place, it is of his own choice, in ac-
cordance with his own judgment, with a knowledge of the markets
for his productions and the rights of the transporter, if such exist,
and he cannot claim that there is created, by his own act, any
special " public interest" in himself or in his employment.

Again, the theory of the Commission would subject one party
to the results of the bad management, lack of capital or business
incapacity of another party, which would be contrary to proper
principles. If a citizen engages in the production or manufacture
of an article which costs him more to deliver to the consumer than5 y ft

16

the consumer will give in return, the fault is not in the consumer
or the transporter, but in the producer.

Still again, if the property of any citizen is taken or interfered
with by the State or General Government in the public interest,
then compensation must be given, and a jury is the established
method of testing the value of such injury.

The law of distribution, as herein established, is the only safe
ground to take. It places all parties on an equality and would
prevent the gross injustice to many parties, and as a consequence
to the country, that has been perpetrated by the false theories of
the Inter-State Commerce Commission. As a result of these
theories the Commissioners have undertaken to establish what they
deem proper rates to be paid by producers or shippers, and the
cases of Coxe & Co. v. The Lehigh Valley R. R. Co., and of the
Delaware State Grange v. The New York, Philadelphia, and
Norfolk R. R., and other companies, are fair illustrations of the
impracticability of the law and the injustice of such decisions.

Second. Principles of Management by Transporters.

It will be well also to consider the general principles adopted
in the management of railways and by other transporters, in con-
nection with the public interests.

It will not be out of place to preface the discussion of this sub-
ject, by the remark that very much of the trouble that has arisen
in the management of railways has been due to the introduction
of general railroad laws in the different States, and to the looseness
with which these laws have been framed, providing no test whether
a proposed railway was required in the interests of the public, nor
regulating with any judgment the amount of stock or bonds that
the corporation might issue, nor the amount of charges that could
be made, nor the character of the construction of the road, and
retaining no supervision or control over their management.
Whether the advantages resulting from the original argument in
favor of such laws, viz: that the virtue of the legislators might
not be overcome by bribes, by advancing the interests of certain
parties against other citizens, by which the development of all
parts of a State would be restrained, have been equal to the demoral-17

ization of the people by their making possible speculative schemes;
whether the loss of many millions of dollars, not by the schemers,
but by innocent people placing faith in the promises of the pro-
moters of new railways ; whether the levying by weak roads of
black-mail on stronger companies ; whether the building of unne-
cessary lines of railways, by which the people have to pay an
increased charge for the transportation of their products ; whether
with all these drawbacks the States have been compensated by the
delivery from temptation to the legislators or their increased virtue,
could hardly meet with an affirmative answer. The passage of
such laws is, in fact, an acknowledgment of a defect in our repre-
sentative form of government. The evils arising from the general
railroad laws should lead legislators in the different States to
carefully revise them, and among other points provide : first, as
in Massachusetts, following the English laws ; that some proof
that a railway is needed before the kingly power of eminent
domain should be granted, and that the traffic would be remunera-
tive ; second, proper safeguards as to their construction; third,
that one-half or two-thirds of the cost should be met by stock and
the balance by. bonds, and speculative profits to construction com-
panies prevented; fourth, careful regulations as to charges, inter-
change of freight and passengers, and furnishing proper accom-
modations and facilities for those using the line; fifth, that such
companies should be protected from destructive or undue rivalry
from other roads and yet proper competition at all times be main-
tained ; sixth, that the same taxes should be levied on the profits
of the railway companies as on other invested capital.

To return to the discussion of the general policy which governs
the managers of railway companies as to charges, extensions, im-
provements, and development of country.

No one will deny that the people who invest their money in any
branch of business expect to derive a profit therefrom proportionate
to the capital invested, skill required, and risk incurred, and that
the legislation of all civilized countries encourages such expecta-
tion. Nor will it be denied that the original investor in railway
shares or bonds does so on faith in the contract made with the
State, its inviolability, its guarantees and the sufficiency of the
powers granted, and that the country reached by the proposedroad will develop and furnish sufficient traffic to make the invest-
ment of the money profitable. It is, also, but fair to assume that
the boards of managers desire to make their properties profitable,
and to do this use every effort to develop trade and traffic on, and to
attract population to, their lines. They expend large amounts of
money to improve their roads so that trade and travel may be
attracted both by the facilities afforded to shippers and by the low
charges for the service, well knowing that the success of their pro-
perties will depend on the character of the service rendered and the
rates charged. The managers of a railroad company consider the
local traffic for which the roads were built as the foundation of their
business, but to enable them to take better care of such local traffic
they encourage and aid branches and extensions of their lines and
make connections with other lines to attract business to and over
their main line on the principle that a small profit is better than
no profit, and for the many advantages that come to the main lines
by such branches, extensions, and connections. The local business
derives a direct profit from this increase of traffic drawn from other
lines in the ability of the company to furnish greater facilities for
handling their own products and for more frequently moving their
passenger trains, and ultimately in decreasing the cost of transpor-
tation to the local shippers.

Yery few people appreciate the work of the passenger and
freight agents of railway companies. The business of each line
of road has its peculiar traffic, to encourage which is the duty of
these agents. The work of classifying freight and affixing charges
that will pay a profit to the transporter while increasing the traffic,
requires an intelligent understanding of all branches of business
and a high mercantile ability to appreciate the influence of rates
on the traffic.

The effort of the Commission to secure general classification of
rates by the railroad companies will probably fail, as well as any
classification of rates on specific articles of freight. The rates
adopted by each company may be accepted as the best for the
development of each article of freight, and such rates cannot be
compared with those of other companies, nor can the different
rates on the same roads be compared, because the rates on each
article are determined by its own laws of increase and profit.19

It is also fair to add that freight agents, as a rule, err on the
side of the shipper, in the belief that the adoption of lower charges
than are at the time profitable will in the end so stimulate business
as to quickly secure to the companies a profit.

Again, the outlay of every dollar in permanent improvements,
in betterments, in leasing or aiding other railroad companies, over
and above the current expenditures required for a railway and its
business at any given time, is attended with a risk that the public
do not understand and cannot appreciate. The expenditure of large
amounts of money in additional power, in new cars, in enlarged
buildings, in the tracks, in stations, in wharves, in terminals, etc.,
which is made in expectation of increased trade, often meets with
loss in place of profit. The customers of a railway company are
often very wayward in their choice of competing companies ; slight
reasons will often decide the line to which they will give their
custom ; and managers are led to over-estimate the demand for
such an outlay of money in betterments, etc. The railway com-
panies are not exempt from the uncertainties of trade which often
wreck the most prudent business houses.

The influence of the two facts already stated may justify fuller
notice.

First. That the farmer, miner, or manufacturer is not forced
to use or to continue to use a railway for his transportation pur-
poses : and,

Second. That a railway company must carry all freight offered
to it to any point on its line ; and by the construction of the Inter-
State Commerce Act, must by connections with other lines carry
such freight to any point in the United States reached by a rail-
way.

The case of Messrs. Coxe & Co. furnishes a capital illustration
of the liabilities to losses by railway companies by reason of the
facts just stated. It is published in the press that Messrs. Coxe
& Co. have contracted with the Reading Railroad Co. to carry
the coal from their mines to certain markets; that Messrs. Coxe
& Co. agree to annually furnish to the Reading Company one
million of tons of coal for transportation, the connection between
the Reading Railroad Co.'s line to Catawissa and the mines of6 0 0

20

Messrs. Coxe & Co. being made by the construction of certain
railways by each party.

The withdrawal of such tonnage from the Lehigh Yalley and
other companies will render the outlay of money by the Lehigh
Yalley Railroad Co., which was made to carry the tonnage of
Messrs. Coxe & Co., for a time, useless. The tonnage of coal
on the Lehigh Valley Railroad lines will by this change be re-
duced about twefity per cent., being one million (1,000,000) tons,
from a total of some five million (5,000,000) tons. If this propor-
tion is correct, or whatever the proportion may be, whether the
reduction will amount to ninety-five per cent, or five per cent,
of the whole inter-state coal tonnage of the Lehigh Yalley Rail-
road Co., it simply means that this proportion of the cost of build-
ing the railroad, of the cost of its superstructure, of its power
and supply of cars, of its terminals and wharves, of its buildings,
of its superintendence, and of its general expenses, due to furnish-
ing transportation for such an amount of coal, will not earn any
profit to the company. It is in effect equivalent to a direct loss
of the amount of money represented by the first cost of such
facilities and its proportion of the annual expenses.

The Lehigh Valley Railroad Co. will, no doubt, make good
this loss by gain in other directions.

The wisdom and foresight of the managers of the company in
extending their lines and increasing their traffic in other branches
are now apparent. The increase of traffic on their different roads,
with an increase of coal mining, will rapidly supply the loss made
by the withdrawal of the coal tonnage of Messrs. Coxe & Co.
Should the prices of coal fall off, it is possible that all the carry-
ing companies may be forced to reduce charges and a lessened
amount of coal tonnage may prove to be no loss, if its place is
made up with other and better paying freight.

The commercial value of the liability to loss by diversion of
traffic is not appreciated by the people ; they fail to remember
that the stage may be taken to another route, the steamboat to
ply between other points, but that the railway wThen built is sta-
tionary, and its owners have to incur all the risks, while the ship-
pers incur no such risks or liabilities to loss. It is, therefore, but
just that the railway company should charge a certain amount to21

cover the liability to such losses, for they are constantly occurring
with every company ; and shippers of freight and passengers on
railways should recognize when such charges are made that they
are due to their own right to use or not to use a railway property.
This is entirely within the custom of merchants, miners, manu-
facturers, and business men, who add a percentage to the cost of
what they sell, for the risks by fire, losses in sales, etc. etc.

The public also fail fully to comprehend and value the fact that
the railway company is performing the duty of the State in fur-
nishing the necessary facilities for the transportation of the citizen
and his productions. If the States built the railroads, they would
not permit undue competition, and would not build a road to de-
stroy or seriously injure the property and value of another road
already constructed.

The immediate managers of the railroads are active, energetic
men, and have a right to demand that they shall be recognized as
treating the interests with which they are charged as business
men on business principles, and that every act based on business
principles benefits the contributors to the traffic of the railway
company. A very great wrong is done to those interested in rail-
way management, and to the country at large, by the unhealthy
charges which the public prints scatter before the people as to the
speculative and destructive tendencies of railway management and
its reckless disregard of private and public interests. Take the
men in responsible positions in our American railways, and a more
intelligent, skilful, honest and devoted body of men cannot be
found in any branch of the industries. Much of this clamor has
its origin in the effort to influence public opinion to force the rail-
ways to submit their charges or rates to the approval of parties
using the roads, and to this feeling, as has already been indicated,
are to be attributed the impracticable and unjust provisions of the
Inter-State Commerce Act. The tendency to control railways for
purely speculative purposes is decreasing in this country. While
there may be much gambling in shares at the stock boards, it is
based more on the prospects of the country tributary to a com-
pany furnishing freight, than on forcing freight from a line to
reduce its earnings, and thereby depress the price of its shares, or
by temporarily diverting traffic from another line to show a large6 0 *>

22

increase, and thereby add to the price of the shares. Such
manipulation of railway earnings is becoming more difficult and of
rarer occurrence every year. The direct management of the rail-
ways may be accepted, as a whole, as in the line of their best
interests, which includes the country they traverse and the owners
of the capital invested. Errors of judgment may occur; this is
common to man in his enterprises everywhere. The railway
managers have a right to be ranked with and judged as other men
are judged.

The general policy of railway managers may be illustrated by
the twTo companies already alluded to, viz: the Lehigh Valley
and the Philadelphia and Norfolk Railroad companies. Take
the Lehigh Valley Railroad Company. This company received
its charter from the State of Pennsylvania, and became a citizen
of the State. The object of its building a railway from Easton to
Mauch Chunk was to develop a certain anthracite coal district, by
furnishing an avenue by which certain fields of coal could be
brought by rail and water lines to the cities of Philadelphia and
New York as distributing markets. If the company had built the
road and stopped at that point of its development, the region
reached by it and for which it was first built would not for many
years past have been able to send one ton of coal to market by
reason of the cost of carriage, and the want of facilities by the
railroad company through lack of financial ability to furnish
them. The company would have been entitled to demand, to
meet its expenses, such charges for freight as would have effect-
ually prevented all mining ; and the same statement is true as to
every other railway reaching the anthracite coal districts, or any
other part of the country, and anthracite coal land, now so valu-
able, would have been practically worthless, and the civilization
of the people, so far as it may have been influenced by the intro-
duction into manufacturing and common use of this coal, would
have been retarded, and the country would have lost one impor-
tant element of its wealth.

The query will naturally be propounded by what means or policy
the reverse of what might have been the condition of the Anthra-
cite coal interests has actually occurred, so that railways have
been constructed to every part of the coal field and directly to thegreat distributing markets on the Atlantic, at the same time
largely reducing the cost of transportation and affording some
profit on the money invested.

The answer is simply, that it became evident to the manage-
ment of the Lehigh Valley R. R. Co., as well as to the managers
of the other companies reaching the anthracite coal field, First,
that to increase the consumption of anthracite coal, it must be
delivered at low cost to the consumers ; and, Secondly, that this
would require (1) the adoption of the most economical methods
of mining on a large scale, (2) the handling of a large tonnage of
coal, and (3) the finding of new markets and consumers to save
the miners and owners of coal property from ruinous prices by
over-production. The result was that the different railroad and
canal companies expended large amounts of capital in reaching
such new markets. To introduce their coal into New England,
Northern New York, Canada, and the West, was their chief aim,
and for many years they have by low rates with little or no profit
been building up a demand for the surplus coal that would other-
wise have overwhelmed the Atlantic markets, and thereby have
saved to the complainants in the case referred to against the
Lehigh Valley R. R. Co., and to all owners of coal lands the
present value of their coal properties. But more than this, the
Lehigh Valley R. R. Co. has sought, by extending its lines to
Lake Ontario, to Lake Erie, to the New York Bay, and by various
branches and by its connections with other lines, to bring to and
over its line a greater variety of freight and an increased number
of passengers. This new business has to be done at very low-
rates, but the increased distribution of anthracite coal and the
increase of other freight have demanded a large addition to the
plant of the railway company, including tracks, power, equipment
of all kinds, terminals, etc., and have enabled the company to
carry the local freight at much lower rates than would have been
possible without such additional freight and travel derived from
these new and outside sources. This new traffic has saved the
original investment in the railways and the property on its line
from absolute loss, and furnishes a complete answer to the ques-
tions asked.

In considering the justice of the decision of the Inter-StateB 0 4

24

Commerce Commission in the case of Coxe & Co. v. The Lehigh
Valley R. R. Co., it should be borne in mind that this decision
affects all the companies reaching the anthracite coal fields, and
that the same policy which influenced that company to seek new
markets and sources of traffic, though at little profit, has influenced
the other transportation companies in the same direction; and
further, that the results have been in all cases the same, inuring
to the special benefit of miners and owners of coal properties on
the main lines of the different companies, as well as of the share-
holders ; and still further that these principles are all in harmony
with the duties of the transporting companies as " Common Car-
riers."

There is another view of this question of determining rates
that should have had weight with the Commission, viz.: that if the
protection of the " public interests" was the object of the law,
and the principle was recognized as correct that private interests
must sometimes suffer in dealing with questions affecting the public
welfare, and granting that it might have been proven that Messrs.
Coxe & Co. suffered from the rates of freight as charged, then the
Commission should have treated this question not as of Coxe & Co.
against the Lehigh Valley R. R. Co., but should have considered
the anthracite interest and all the railroads and canals reaching
into it as a whole, and the demand for reduction of tolls as affecting

'	o

the whole interest, and not in its relation to one region only, viz.,
the Lehigh coal field. The Commission erred in not recognizing
the fact that the case of Coxe & Co. v. The Lehigh Valley Rail-
road Co. could not with justice be considered by itself.

The question in this case is in some respects unlike any other
that has been before the Commission. The anthracite coal-field
is limited to a comparatively small district of country, divided
into the Lehigh, the Wyoming, the Lackawanna, and other regions.
They are reached by some eight lines of railways, distributing
the coal by rail and water to the same general markets ; the
charges for such services made by the railway companies must, in
the nature of the case and in accordance with the laws of trade, be
the same ; there is also a remarkable similarity or equality in the
cost of such transportation to the several companies. So that in
justice to all parties a certain rate for the carrying of such Inter-25

State Commerce coal should have been established for all the
companies. This the Commission could have done under the
power given them by the Act of Congress. Yet their decision
relates to one company only in its carrying business from only
one of these regions, viz., the Lehigh.

To ascertain what would be a fair charge, one that would not
discriminate against producers, the Commission should have in-
vestigated the whole question as to cost of such service to all the
companies, including all their operations and all the equities in-
volved. Now it is acknowledged that to make such an investiga-
tion, as well as to draw from the facts ascertained a proper
conclusion as to the proper rates, would have been beyond the
ability of the Commission. In the fact of such inability to de-
termine a proper rate for all the companies is to be found the
strongest argument for their inability to determine such a rate for
the Lehigh Valley Railroad Company. If this argument is in
the line of a reductio ad absurdwm, it also clearly shows that
these problems cannot be solved by a Government Commission;
they can be worked out through the business capacity of the
managers of these several railroads, who are not theorists but
practical men, and are governed by the laws of trade and the
hard facts of cost and profit. The Commission, therefore, failed
in the performance of their duty by not grasping the whole ques-
tion involved in the appeal of Coxe & Co. ; and by making a de-
cision on a part of a case which should govern the whole question
of rates from the anthracite coal field, they have done a great
wrong to the interests involved.

Third. Cost of Transportation.

The true cost of carrying passengers and freight by a railway
company is made up of many'items, the interest on capital, the
depreciation of property, real and personal, the liability to pay
heavy damages for loss of life and property, the loss through
machinery and rolling stock becoming antiquated, the financial
losses through customers, agents, etc. etc.;—these as well as the
direct charges for transportation must be taken into account.

But leaving out these and many other items, how could anbob

26

expert ascertain the cost of carrying each one of the many kinds or
even classes of freight annually passing over any railroad or over
any or all of its connections ?

To determine the actual cost of transportation of freight and
passengers on a railroad would be impossible by the best trained
railway men. This is due, as already stated, to the many elements
entering into the problem. Taking the expenses of a company
for an average of years will not suffice, for the condition of the
whole property of a road in the first and last year thus taken,
may greatly vary, and the amount and kind of transportation be
widely different. The result is that railway managers take the run-
ning expenses for each year, and recognize their annual statements
as approximate estimates, as a general guide to the officers, and
as some test of the economy of their management. It has often
occurred, where low cost of transportation was shown by the
figures in an annual report, that the property wTas being reduced
to a crippled condition, to repair which would cost a large amount
of money, and that the annual returns, perhaps for several years,
have been fallacious, and that interest has been paid and dividends
declared which were not earned. It is in proportion as railroad
properties are well kept up, and on the basis of the best experience
and judgment, that the condition of the property, as shown by the
books, will more nearly accord with that shown by the property
itself.

If it is true that even the best informed and practical men can-
not tell within close figures what the real cost of operating a road
has been during a year, or a series of years, then the difficulty is
greatly increased when an attempt is made to discriminate be-
tween the cost of transporting passengers and freight, and between
different kinds of freight, with various risks, and between the cost
of carrying passengers and freight at different speed of trains and
with greater or less accommodation of passengers.

Fourth. Profit on Capital.

If an estimate could be made of the losses in interest and prin-
cipal heretofore sustained by investors in railway shares and bonds27

at the bottom prices, and if to this could be added the difference
between the real value of the whole railway plant of this country
and the share and bonded capital it represents, the sum total would
startle the financial world. Such losses, without considering those
sustained by foreigners, could only be borne by a people situated
as we are, in a new7 country, with boundless possibilities, and hold-
ing out the prizes of constant opportunities for large earnings,
comfortable support, and amassing fortunes.

Those who remember the early struggles, the risk of property and
fortunes of the projectors of our leading lines of railroad, should feel
that those who have followed in their footsteps and have endeav-
ored to carry out their broad views, deserve at least just treatment
by the General as well as by the State governments, and should
not have the value of the properties they have so carefully nursed
endangered by unwise legislation at the bidding of selfish agita-
tors.

How much profit or what rate of interest the owners of these
railroad companies should receive as a result of their enterprise
may be accepted as an element in considering the question of
their relation to the public interests.

(1) It is fair to assume that the agreements made as to rates of
interest on borrowed money and on leases or contracts with other
companies are fixed, cannot be altered, and were accepted as fair
when the transactions were completed. The relative amount of the
interest on such borrowed money, and of the rentals to be paid on
leases or contracts to the shares of the companies, varies as greatly
as the number of companies. (2) That each company is primarily
entitled to earn all its fixed indebtedness (unless the General
Government, when it destroys values through its agents, will under-
take to force all its bond and lease holders to proportionately re-
duce their claims) ; to earn all its expenses and enough to keep
the property in good condition, and to earn such a dividend on
its shares as will fully recompense the owners thereof, and
enable such company to dispose of additional shares of stock to
make such improvements and betterments and general increase
of facilities as will meet the wants of the public. From this
standard, variations will be necessary to meet competition, or to
prevent by its charges a loss of traffic. Any railway companyGOS

28

that cannot raise by sale of its shares the money required for the
improvements, etc., that are needed, is necessarily on the road
to bankruptcy, either by failing to make such improvements, to
hold its traffic and to meet competition, or by its limit of sale of
securities to raise money for such purposes being sooner or later
reached.

The rate of dividend that will secure purchases of stock at par
varies with the price of money, which again is affected by the
business and political influences in the whole world, and is still
further influenced by the confidence in the management and the
future possibilities of any railroad company. The ability of any
body of sharp speculators, under the general railroad laws of the
States, to construct a railroad alongside of or closely competing
with a successful and prudently managed railroad for the purpose
of levying blackmail has had many illustrations, and, just as long
as these laws exist, will the confidence of capitalists in the shares
and securities of the railways be lessened, and to secure money
will require higher rates of interest and dividends, with increased
charges for carrying the people and their productions and manu-
factures.

The risk involved in the ownership of railway property is a
proper element in the determination of rates of freight. A share
of a railroad should be so well secured as to meet all the losses
from such risks and leave an acceptable dividend. Every good
business man provides against the contingencies and risks of trade
by his profits in prosperous times ; the same policy should char-
acterize railway management. In their efforts to meet the de-
mands of the public they are apt to expend money lavishly in
prosperity for which they suffer when the tide turns.

It is to be hoped that the people will consider these things
which unsettle railway values. If the people do not take action,
many important properties will be relegated to the control of the
mere gambler in bonds and stocks. There is no body of citizens
in whose profits the welfare of the people of this country is more
directly involved than in that of the owners and investors in the
shares and securities of the railroad companies ; the progress of
the country is dependent on the railways, and on securing the
building of those that are required from time to time.sou

29

If properly treated by Congress and State legislatures, rail-
ways will be managed and built on the proper basis. If the pre-
sent policy continues, with the promise of worse treatment, there is
danger that the railways will deteriorate in quality, render less
effective service, and charge higher prices for their services.

In dealing with such important interests the members of Congress
should take a broader view of the questions connected with the
control of the railways of this country, and not accept the teach-
ing that it is a mere contest between certain producers and trans-
porters as to who shall reap the largest profit, and to settle this
dispute that the Congress of the United States shall appoint
through the President five men, to make, as they may judge fair,
a division of the profits. Such action is beneath the dignity of the
nation and the importance of these interests to the welfare, pros-
perity, and safety of the people.

SUMMARY.

An effort has now been made, imperfectly it is acknowledged,
to place before the public—

(1)	A correct view of the law of distribution of the proceeds
of the sale of all products of the earth, the forest, the mine, or
of manufactured goods, which require the medium of transporta-
tion to reach a market.

(2)'	To state the general policy of railway managers and other
transporters in the management of their properties in view of their
duties and interests as common carriers ; such policy tending by
the natural laws of trade and competition to insure lower prices
for carrying persons and freight, and to establish just and equit-
able principles in their dealings with the people, thereby adding
to the wealth of the country and the happiness of the people.

(3)	To show not only the difficulties in the way of estimating
the cost of such transportation but the inability to arrive at its
precise cost, and more particularly of any one item or class of
freight.

(4)	To establish a measure by which a rate of profit on the
stock of such companies may be based which will be equitable
and just and to which additional profit may be added, according
to varying circumstances.0

30

APPLICATION.

The wisdom and justice of the provisions of the Inter-state
Commerce law, which empower the Commissioners to perform their
various duties and to prevent discrimination by establishing rates,
can only be sustained by their harmony with the principles and
facts thus summarized. These principles will meet with the ap-
proval of public opinion, because they are consistent with the laws
and economics of trade in this and in all civilized countries, and
with the experience and observation of every citizen. How nearly
the provisions of that Act or the decisions of the Commission har-
monize with such principles, or how far apart they are from any
sympathy or connection with them, may be fairly shown by the
decision of the Commission in the two instances already named,
viz., that of Coxe & Company v. The Lehigh Valley Railroad Com-
pany, and of The Delaware State Grange v. The New York, Phila-
delphia, and Norfolk and other railroad companies.

In the powers given to the Commission to fix rates, Congress
has certainly assumed an authority far beyond any precedent or
constitutional provisions. It has given to this Commission judicial
as well as executive powers, for there is involved in the perform-
ance of their duty: (1) the settling of the claims of different
parties to a fund; (2) the enactment of law to enforce their de-
cision. The fund is the amount that may be claimed by the trans-
porter and shipper, and the enforcement of their decision is to be
made by the rates of freight they may establish.

The Commission assume in each of the above cases that the
producers and miners represent a u public interest" which de-
mands that fruit, vegetables, and coal shall be carried at a rate
fixed by them.

To establish this rate they first assume that the owners of the
land are entitled primarily to a royalty over and above the labor
and interest involved in the production of the fruit and vegetables,
and in the latter case they fix the royalty on coal at 40 cents per
ton. This or any such assumption of primary value in the land
or in the coal mine violates the fundamental principle in the recog-
nized law of distribution the world over.

If this theory of the Commission is correct, as to protection of31

" public interests" and the primary right of every citizen to have
the advantage of his location and of his production secured to him,
then they violate it in both decisions. On that theory in the one
case the growers of vegetables and fruit in Virginia represent a
u public interest," by the fact of their position, and were entitled,
under the laws of trade, to the advantages of low rates arising
from their being reached by competing lines of transportation. And
as the profit arising from carrying their freight reduced the cost
of transportation to the producers and shippers on the main line,
the Commission having ordered a reduction of rates on the main
line, would, to keep the Virginia producer on an equality, also have
to force the railroad companies to proportionately reduce their rates
on that trade. If this was done, the main-line producers would
not be benefited, because the market price of their produce would
be proportionately reduced and the railroad company, from loss of
profit on the competitive trade from Virginia, could not furnish the
same facilities to the producers on the main line in Maryland and
Delaware. The Virginia producers are not dependent on this
line to reach the Eastern markets, and in the end the main line
producers would be injured by the very decision they asked for.

The same criticism is applicable in the case of the Lehigh
Valley Railroad Company. The Commission could not, with any
show of propriety, grant the claim of Coxe & Co. as to the rates on
bituminous coal, but, as in the other case, made it up by reducing
the rate on anthracite coal. If the Lehigh Valley Railroad Com-
pany had reduced their rates as per the fiat of the Commission,
the firm of Coxe & Co. would have derived no benefit from it,
because all the competing roads would have reduced their rates,
and the market price of coal would have been lowered by the exact
amount of the reduction in the rate of freight. The consumers of
coal would have had but a temporary advantage, because at the
rates fixed the railroad companies would have been unable to sus-
tain or continue the facilities they now furnish the coal miners,
owing to the loss of the profits on so large a percentage of freight,
and the miners and owners of coal properties would have suffered
more, because of the inability of the companies to meet the com-
petition of bituminous coal ; and further, this decision practically
interferes, according to the reasoning of the Commission, with " then i < >
b i :

32

public interest" as represented by the right of the bituminous coal
miners to the advantage of their location. This use of the term
" public interest" will always lead the Commission into contradic-
tory decisions, because it is not based on intelligent principles, and
is opposed to the laws of business. It is a mere catch-word and
deceives the people.

So that there would have been no reduction of rates in either
case if the " public interest" and welfare had been intelligently
understood and appreciated by the Commission.

The Commission, in their decision in the case of Coxe & Co. v.
The Lehigh Valley Railroad Company, make very full statements
as to many facts in the history of the cost of mining anthracite
coal, and the tariff of charges of the Lehigh Valley Railroad
Company in 1887 and 1888, and they argue therefrom that because
some items of freight were charged at a certain rate per mile,
even for successive years, such rate must have been profitable,
and, therefore, could be applied to the transportation of anthracite
coal. Here again is a fallacy. The Commission have not pro-
bably examined into the reasons for such rates, or the amount of
the business affected by them, or why the freight agents thought
it profitable to fix such rates at low figures. If the Commission
had pursued this question intelligently, they would have probably
found a profit in other ways that more than made up for the low
rates on certain articles ; or they might have found that the rates
had been too low, and that the freight agents had erred in their
calculations.

The fact, already stated, comes in here with much force, that
each company classifies its tonnage and makes its rates for reasons
peculiar to itself, with the object of securing the largest profit
consistent with the increase of traffic and of population in the
country tributary to it.

This ignorance of the Commission as to the philosophy of these
rates takes away from their pages of figures all their force, and
v the elaborate array of supposed facts on which to base their
decision falls to the ground. They are not only worthless, but
exceedingly one-sided and deceptive.

Again, the Commission blundered in the argument they draw
from the financial condition of the company and the rate of its38

dividends. No intelligent man, no one conversant with railway
accounts, receipts, expenses, and dividends would say that the
dividends declared by the Lehigh Valley R. R. Co. have been too
large or more than a fair compensation for the capital invested, espe-
cially when all the possibilities that may turn up to affect its profits
are estimated, and when the value of its credit and property is put
at stake by the decision of five men, not one of whom, it is respect-
fully written, would be selected as a competent person to make an
estimate or an analysis of the cost of transportation, wThether of
passengers or freight. But the Commission erred in admitting
this question as an element in making up their decision. The
railroad company had a perfectly legal and moral right to make
any possible profit from charges up to the limit of their charter,
granted them by the State, and the General Government cannot
break that contract. That the company has fixed rates far below
their chartered rights, whether of their own or affiliated companies,
was solely due to their intelligent appreciation of the laws of trade.
The interests of producers will always be protected by the interests
of the transporter, and the legal intervention of any arbitration or
power can only be mischievous in its workings.

Again, the Commission in both cases failed to render justice
from their inability to determine the exact rates which would,
according to their dictum, be reasonable and just, u both to the
parties immediately interested and the public."

As their acts are judicial as well as executive, there must be
some close approach to the accuracy of judicial decisions. Judicial
accuracy means that the increment of error should be so small as
not to injuriously affect either party. The interests involved are
too large to be left to the mercy of unprepared judges. A man
who is appointed a judge is supposed to be " learned in the law."
In this case, men must be chosen, by force of the law, who are
uneducated and unlearned in transportation problems. The requi-
sition that the appointees shall have no financial interest in any
transportation company would rule out almost every man properly
fitted for the place.

Any one at all familiar with railway management will see that
the whole argument in the case of Coxe & Co. v. The Lehigh Val-
ley R. R. Co. is an effort to get at some result, from, as has been34

shown, unreliable data. An accurate decision they could not
make, and the variation from correct principles on which it is
also based makes their failure the more complete and notable.

That this is so, is not the fault of the Commission. They are
fairly intelligent men, strictly honest, and desirous of doing justice
to all parties. The difficulty is in the law placing on them duties
that could not properly be performed by any body of men, even
by the most experienced railway men in the country.

Again, this decision of the Commission attempts to determine
what the respective profits of the grower of fruits and vegetables
and of the miner and transporter should be. Wherein does the
Constitution of the United States give Congress power to take
from one man and give to another, and by what rule does the
Commission make such a division ? In neither the Coxe case nor
in that of the Delaware State Grange have they made a compari-
son of the capital involved in the farm and fruit orchard and in
the coal properties and in the railroad companies, in the skill and
intelligence required for their management and the risk run by the
several owners, or given any clue to the rule by which they assume
to make such a division. There has been almost every variety
of cases before them, and on this most important question, the
one indeed on which the law hangs, and for which it was passed,
there has been no publication of the principles on which they
assume to divide the profits between the producers of freight and
the producers of transportation ; and yet in almost every case
that they have heard and decided, this question of division of
profit has been the principal one.

The simple fact is, they have no laws or rules or facts by which
they can arrive at such a conclusion as a judicial act demands.
It must be remembered that they are not arbitrators, but are
judges. In place of basing their judgments on a full understand-
ing and appreciation of the facts and equities, in every case, and
especially in the two cases now being discussed, they have merely
made an approximation, a guess. It is no wonder, then, that they
have gone so far beyond right, justice, and reason.

The Commission, having no secret tests by which they could
make the division of profits, might have learned from observa-
tion that profits are generally fairly divided between labor andcapital, brains and labor, skill and ignorance, brains and capital,
fixed capital and floating capital, employers and employed, etc.,
where the parties continue their relation one to the other. In this
fact is the true solution to be found of this question of division of
profits ; it settles itself according to the laws of trade.

It would seem singular that a Congress of the United States
should have been insensibly led away by communistic principles
as to authorize, and that a Commission of such able men should
have struggled through pages of figures, which they failed to
comprehend, to make what was impossible, a fair distribution of
the profits between Messrs. Coxe & Co., and the Lehigh Yalley
R. R. Co., or between the Delaware Grangers and the New York,
Philadelphia, and Norfolk R. R. This attempt at a forcible divi-
sion of profits is of the very essence of communism.

The Commission should have comprehended the business princi-
ples that where trade or production is not held back by charges
for carriage—where there are many avenues for such trade or
production to reach the markets and where such avenues of trans-
portation are competitive—such charges are not exorbitant, un-
fair, or excessive; and more than this, as in the present instance
where there is and has been for several years a pressure on the
market of more coal than it will accept, that these very transporters
to save their clients' and their own property have had to discourage
the undue production of coal.

These facts more than destroy all the force of the labored and
inconsequent argument of the Commission, though they do not
lessen the injury done to the " public interests" by their deci-
sion. The simple fact of the possibility of such a decision has
inflicted a serious blow on railroad property.

The reader of the report who follows up the analyses of figures
by which the Commission arrived at its results will be impressed
with the non sequitur of all their reasoning, and by the fact that
their conclusion is not logical, but is a mere guess—an approxima-
tion ; and he will further learn that the whole argument can be
summed up in a few words, viz.: Because at one time, some years
ago, the Lehigh Valley R. R. Co. made a certain charge for carriage
of coal to New York Bay, arid a certain charge for transportation
of pig-iron, and a certain rate of dividend, therefore, on the 20thb i iJ

36

of April of the year 1891, they must return to that charge,
entirely ignoring the peculiar conditions of the money market
in 1886 and 1887, of the trade of the country, of the demand for
iron and steel, the demand for coal, the prospect for larger profits
and cheaper money, the cost of supplies, the wages of labor, the
profit derived from carrying passengers and other freight, the
profits derived from carrying the coal of Messrs. Coxe & Co., and
the profits from other sources, and the coirfpetition from other
railroads, etc.

Now it is confidently left to the good sense of the American
people and to their love of justice to condemn such a decision—in-
deed, all their decisions where they attempt to say how much of the
profits arising from the sale of the products of the soil, the forest,
the mine, or of manufacture shall go to the producer, the miner,
the manufacturer, and how much to the transporting company—to
brand all such decisions as unjust and an illegal confiscation of
property and in violation of the fundamental principles of the
Constitution of our country.

To trifle with properties involving the investment of many hun-
dred millions of dollars—for their decision affects the whole an-
thracite carrying interests—by a guess, a lumped, jumped-at con-
clusion, is something abhorrent to every principle of right as
between citizens of this State and country.

DEFENCE OF THE COMMISSION.

But the Commissioners will answer that the law imposes this
duty on them, and that they are not responsible after using their
best judgment. This would be bad reasoning. The Commission
should have discovered long ago that the law could not be enforced
with justice to the people, that much of it was impracticable, and
that it assumed knowledge and ability that could not be gained or
found. They should have reported these facts to Congress and
declined to exercise their powers under the law. Such a pre-
sentation of facts would have had its influence. At all events the
responsibility would have been thrown back on Congress. Such
a course would have been far wiser than to attempt the execution
of a law by in many cases opposing decisions, by fixing rates tor>i7

87

take effect more than two years after the complaint was entered,
by evading decisions, and by the vain attempt to harmonize the
law with the business of the country and the intent of Congress
in its enactment.

A comparison of the reasoning of the Commission in the two
cases herein discussed with the proper principles as hereinbefore
established (1) of the distribution of the proceeds of transporta-
tion (2) with the necessary polity in railroad management to
make them profitable, (3) with the inability of any body of men
to either fix with anything like judicial accuracy the total cost of
transportation on a railway or the cost of the carrying of classes,
whether of passengers or freight, and, much more, to distinguish
between different articles of freight, (4) that the laws of trade
furnish the only safe rule for regulating rates of transportation—
such a comparison will show that the Commission have erred,
First. In recognizing a royalty as part of the cost to the producers
which must be met by the rates of the transporter. Second. In in-
terfering by their decisions with the public right that people and
places enjoy in the transportation of so much of their productions
as becomes inter-state commerce. Third. In admitting as ele-
ments in fixing rates (1) the rates charged by the Lehigh Valley
Company on other freight, and (2) the dividends and profits of
the company in other years. Fourth. In determining a rate to
take effect some two years after the question was raised without
reference to present conditions. Fifth. In the inability of the
Commission to ascertain so nearly the actual cost and value of
the transportation as to prevent by any error doing material in-
justice to either of the parties. Sixth. In the failure of the Com-
mission to recognize the experience of mankind and of all ages as
it is embodied in the laws of trade. Seventh. In the conclusion
of the Commission not being a proper inference from the statistics
in their report and thus evidencing that such conclusion was low-
ered to the fortunate or unfortunate ability of the Commission to
make a happy guess. Eighth. In the assumption of the power
to divide profits between producers of freight and producers of
transportation, an error of the broadest character, as such assump-
tion strikes at the root of all property and of the social status.
Ninth. In their failure to report to Congress the difficulties in the38

way of carrying into effect the Inter-State Commerce Act, with
any regard to justice or the rights of the people and of the States,
and to recommend changes in the line of their experience and
observation.

UNREST OF THE FINANCIAL WORLD.

The financial world is uneasy at the depreciation of values
of railway shares and securities, at the possible losses to be
met by owners of Western mortgages, and at the little business
doing in the stock exchanges of the country. The question is
asked why such a state of things exists, when the country is in
a good financial condition, with the prospect of large crops and a
fair demand for manufactured goods and wares of all kinds. A
very little examination will discover some reasons for such de-
pression in the financial world, apart from how far our prices
are influenced by the unhappy financial condition of the leading
countries of Europe and South America. The present status is
to be attributed in part (1) to the passage of the Inter-State Com-
merce Act, followed by the construction put on it by the Com-
missioners, and to the character of the decisions made under it;
(2) to the various laws passed by different State legislatures
directed to the same end; (3) to an almost organized war in the
West and Southwest on capital or on interests in which large
amounts of money have been invested by others than their own
people ; to the murmurings of the passage of stay and other
laws to prevent the collection of principal and interest on mort-
gages, etc.

Capital is with good reason becoming uneasy at the prospect.
It sees a practical and possible confiscation of values at the will of
three out of five men ; it sees that the place held by the present
Commissioners under the Inter-State Commerce Act may shortly
be held by others, who will not have the apology for their unwise
decisions that they were the results of their honest. convictions.
Capital sees in the action of legislatures and of railroad com-
missioners, in the demand for cheap money, or money at a low
rate of interest, a willingness to destroy the value-of money in-
vested within their limits, under the vain idea that they will therebyC 1!)

39

get the use of the machines created by such money at a low rate
or without paying any interest or profit thereon. That this passion
is permeating all parts of the country is to be seen in the acts of
legislatures levying taxes on invested money called capital. It
is simply a principle of communism, taking the property of other
people without giving an equivalent, and the popularity of the
principle is evidenced by the number of stalwart politicians who
uphold its theories. The result of these tendencies is to cause
those who have invested their money in railways, stocks and secu-
rities, in mortgages and other improvements to make an earnest
endeavor to get out of the fix they are in ; and for this purpose
they are willing to dispose of their holdings at low figures ; and
those people who have money in hand are unwilling to invest at all,
except at such low prices that they can stand unfavorable legisla-
tion. These are the chief reasons for the stagnation of the stock
exchanges of the country. It is due to a loss of confidence in our
legislators, and in the honesty of the people. It would seem
strange that these communists (for they are. nothing else) do not
see that the result will be disastrous to their interests, because
the development of a new country depends largely on the use of
borrowed money, and this must come from the money centres ;
that capital will withdraw itself from investment in mortgages unless
it can be better secured at higher rates ; that capitalists will not
be willing to aid the farmer, the planter, the miller, the merchant,
the manufacturer and the builder, by reason of the unreliability
of the security they may offer. Thriving cities and towns in
the West and Southwest have already found they could not borrow
money from capital to build water and gas works, to improve their
streets and ways, because of this prevailing communistic feeling.
The people should understand that while railways which are
built will remain to be operated, they cannot- be improved or
extended or prepared to do their best work by reason of their
inability to borrow money at a low rate of interest. The result
to the people will be fewer facilities and higher charges for ser-
vices. The people should further understand that capital repre-
sents the accumulation of small earnings from all classes of people
and when they destroy values, that they are not, as they suppose,
striking at the holders of large amounts of money, the " manyn



40

3 0112 06200

millionaires," but at the support of aged men and women, of the
widow and orphan, of children, and those who are incapable of
making money, or have retired from business. The " many mil-
lionaires" look out for themselves and the classes described must
bear the brunt of the losses. The people should also learn that
the way to get cheap money or money at a low rate of interest is
to offer capital the highest security. As a step in this direction
the Inter-State Commerce Act must be greatly changed, and all the
dangerous and destructive elements taken out of it. Legislators
must pass conservative, not ruinous laws. Public opinion must
undergo a radical change and politicians must learn that the way
to place, is to act in the true interest of the people.

Finally.

It is to be hoped that this presentation of the working and some
of the results of the Inter-State Commerce Act will cause the people
and the members of our new Congress to think over the question
carefully, and that public opinion will unite with Congress in expung-
ing from such law its impracticable and dangerous provisions and de-
veloping its i^fulness by the continuous accumulation of facts and
statistics of the movement of the internal commerce of the country,
by giving legal force to agreements between the transporting com-
panies, and by placing their property under the protection of the
General Government. With these changes the State Governments
should revise their general.railroad laws as hereinbefore suggested,
and the two powers, the General and State, could by harmonizing
their laws, establish principles for the construction and government
of railways, canals, and all transporting companies, that would
benefit the proprietors and people of the country, make investment
in such companies more safe, and thereby reduce the cost of trans-
portation, and secure to the people fair and equal rates for the
transportation of their persons and their property.

JOHN A. WRIGHT.

Philadelphia, June 1, 1891.This book is a preservation facsimile produced for
the University of Illinois, Urbana-Champaign.
It is made in compliance with copyright law
and produced on acid-free archival

60# book weight paper
which meets the requirements of
ANSI/NISO Z39.48-1992 (permanence of paper).

Preservation facsimile printing and binding
by

Northern Micrographics
Brookhaven Bindery
La Crosse, Wisconsin
2015