Control of Ï^ailway^ by the
GENERAL ^ovef^MENT.
BY JOHN A. WRIGHT.
H E
2757
1% n
wi
PHILADELPHIA I
RAILWAY WOKL1), 423 WALNUT STREET.
1877.
CONTROL OF RAILWAYS
BY THE
GENERAL GOVERNMENT:
BY JOHN A. WRIGHT.
FROM THE
RAILWAY WORLD,
OF PHILADELPHIA.
PHILADELPHIA :
1877.
LIBRARY
EUREAU OF RAILWAY ECONO*""
I WASHINGTON. D. C
'.j ' ; . Ù it /.. f O
IAN 28 1911
INTRODUCTORY.
THE paper printed herewith discusses a question
of great importance to the railway interest and
to the country,—and is deemed worthy, for conveni¬
ence of reference and for distribution, to be published
in the present form.
Publishers of the Railway World.
Philadelphia, October, 1877.
(3)
CONTROL OF RAILWAYS BY THE
GENERAL GOVERNMENT.
PART i.—The "Why."
IT is very creditable to the intelligence and patriotism of the
people of this country that the proposition to give the Gen¬
eral Government control over the railways meets with grave
hesitation.
The people are very jealous of any interference of the Gen¬
eral Government with their ordinary matters of business, or
with such subjects as have been more especially committed to
or are supposed to be under the special care of the states. This
jealousy is partly inherited. To-day is but a few years removed
from that day when our country achieved her independence, and
much of the sentiment that has been handed down is in the form
of a protest against kingly assumption and kingly power. Then,
too, as a people we have not risen above the jealousy of state
pride and state rights, and though the north rose in arms to quell
the extreme assertion of the doctrine of state rights, yet the
people of the north were largely tainted with the same doctrine—
only limiting its range within the proposition to provide for the
continued existence of the General Government, as a necessity
for the welfare of the people of all the states.
While there are many good reasons why the autonomy of the
states should be preserved, as a prevention against too great
centralization of power in the General Government, yet through
this division of power the people are subjected to many evils
growing out of the diversity of legislation—as shown in their
laws, the decisions of their courts, their methods and amounts of
taxation, their methods of providing for and controlling their
necessary conveniences, such as sanitary arrangements, town
and city governments, internal improvements, banking, insur¬
ance, saving fund associations, their military provisions for quell-
(S)
6
CONTROL OF RAILWAYS BY THE
ing disturbances, their regulations for voting and the require¬
ments constituting a legal voter, &c. No one will question the
assertion that uniformity among the states in all these provisions
would be of great advantage to the people.
The peculiar construction of our General Government—due to
the jealousies between the states at the time of its formation—
operates now against any improvement or alteration, owing to
the changed circumstances of the times. If the question was
now to be decided, the construction of the constitution would be
greatly modified and changed, and in no one particular more
than in giving to the General Government absolute power over
all measures which affect the direct and material interests of the
whole people, and which cannot be as well directed by the state
legislatures. Quite early in our history the importance of some
deviation from the strict construction of the constitution was de¬
veloped, with the necessity of having a great national highway
between the Atlantic seaboard and the western country.
It is therefore not to be wondered at that there has been a
constant warring between the strict and narrow and the more
liberal and broad-minded constructionists -of the meaning and
spirit of the constitution and the duties of the General Govern¬
ment to the people, all of which might have been avoided if the
framers of that document had been gifted with the power of fore¬
knowledge. But this was not given them. That instrument
was the best that could be formed at the time of its adoption. It
was based on no eternal or inherent principles of infallibility,
but was adapted to the knowledge and wants of the peo-
p e at the time. Its provisions and restrictions are to be
accepted now in that light, and the people should feel them¬
selves at liberty to omit or change any of its articles, and
to introduce such new ones as may be found necessary for the
happiness of the people and the development of the country.
Any of its provisions which are found to operate to the contrary
will be treated as dead, if not repealed or modified.
It follows from this course of reasoning that whatever powers,
reserved by the states, are found to be in antagonism to the
general good must be yielded to and assumed by the General
Government. For many years the authority of the General
Government to charter a bank was questioned. This was thought
to be exclusively within the power of the states, and was exercised
GENERAL GOVERNMENT.
7
by them. Yet the necessities of the case have given the country
its great system of national banks and a currency issued by the
Government itself. This was an acknowledgment of the principle
herein argued. The result has been for the benefit of the people,
who never before had so good a currency, and one that no state
organization could have secured to them.
The national road from Cumberland, in Maryland, to Colum¬
bus, Ohio, was built by the Government, and if there had been
no introduction of railways, it is probable that this system would
have been extended, at least through the new states. Govern¬
ment aid has been extended to railways on the same principle,
and with generally good results. Experience has taught the
people that the Government of the United States is something
more than a mere machine, limited in its work to collect and
disburse revenues, to institute courts to determine the differ¬
ences between citizens of different states, to protect the com¬
merce of the country on the seas, and to defend her territory,
&c., but that its duty is, primarily, to take good care of all the
interests of the whole people, and in this duty is involved the
right to do whatever will produce this result. The right of
Congress to provide for the telegraphic service is scarcely ques¬
tioned. The only hesitation is one of policy, the determination
of the ability of the Government to manage this service to the
greater benefit of the people than is now afforded by the com¬
panies working under state charters. When that can be proven
satisfactorily there will be little hesitation on the ground of right
or power.
It is on these fundamental principles of the duty of govern¬
ment that an argument must rest in favor of any control over or
interference with our railway system before the people will con¬
sent to any change in the relative duties of the state and the
general governments.
It is proper to demand in advance that such a condition of
affairs has occurred, which places the railways beyond the ability
of the states to practically control; that the fullest expression of
their benefits are denied the people by want of such controlling
power; that there is imminent danger that the railways, unless
so controlled, will become a source of injury to the morals and
interests of the people, by corrupting the legislatures, by lowering
the moral tone of communities in introducing the bane of spec-
8
CONTROL OF RAILWAYS BY THE
ulation, and by failing to furnish the public with all the beneficial
results that would otherwise accompany such institutions.
It is not necessary to enter into a full discussion of the causes
that have produced the conditions on which Government interfer¬
ence will be accepted as proper and necessary, but it is more
important to ascertain whether they now exist. It is patent to every
thinking citizen that the principal railway companies, whether
their lines extend beyond the borders of the state that gave
them existence, or by the law of business attraction co-operating
with lines of railway in adjoining states, or by the law of interest
in leases or in guarantees, or for whatever reason they influence
connecting lines—that these companies control the legislation of
the states. The large army of share and bondholders, of labor¬
ers, machinists, clerks, agents, engineers, superintendents, law¬
yers, of suppliers of material for the uses of the companies, of
manufacturers and merchants on the line of the companies'
roads, make and control public opinion, as it affects the railway
interest, and these influences will always be found in sufficient
strength to mould legislation in favor of a railway company.
The united influence in favor of any two companies in a state will
make their victory complete. This power is represented by the
leading officials of such a company or companies, and the action
of the legislature of any state is thereby dependent on the pru¬
dence and the wisdom of such officials—the responsibility of
government being removed from the governors and the legisla¬
tures to the irresponsible decision of one or more persons, who
may not even be citizens of the state.
Under these conditions there is no power in the state sufficient
to control such a railway company, and the people are at the
mercy of the officials. They mayor may not develop the wealth
of the country through which their lines of railways pass—they
may or may not oppress the people with undue charges. Such
power in the hands of irresponsible persons naturally leads to
corruption. The interests of parties concerned will cause them
to overlook wrongs—the temptation of power itself leads to
wrong. The end must be injurious to the people, because it is
against all the principles of and destructive to good government
to build up a power within the state greater than itself. Yet this
is the precise state of the great central belt of states between the
Atlantic and the Pacific oceans. There may be temporary and
GENERAL GOVERNMENT.
9
antagonistic uprisings of the people in any one or more states,
but in the end the railways will, by exertion of their influence
and by combination of their power, succeed.
With this example before the railway companies of other
states, it cannot be many years before the whole control of the
states, so far as it may be deemed necessary, will be assumed
by the railway interest.
Again, this is not the only direction in which the country will
suffer from such control. The railways, varying in the success
of their workings, being represented by immense capital and
having the control of the law-making power, furnish the most
attractive mediums for speculation. It would be an instruc¬
tive inquiry at this point to ascertain how surely and how rapidly
the speculative power in our great cities has used one line of road
after another for its purposes. These are not to build up, to make
valuable, to develop, but to play with for the profit that may be
realized from day to day. The purchases of the speculator are
not for investment, but to take the chances of putting them on
another at a higher price. An unfortunate year's business, an
error in investment, undue development, or increase of facili¬
ties—anything which will give a handle to lean upon for the de¬
struction of values—will soon take a property, that for years had
been well managed, out of the control of its owners and subject
it to the ruinous treatment of the stock board.
The effect of such an influence or power is now very plainly
seen. The control of the great lines of railway between the
east and the west is rapidly falling into the hands of this class
of people—destructionists.
Private owners of stocks are rapidly selling out; they feel there
is no longer any security for their property, and they look else¬
where for homes for their capital.
The point of danger to the people lies, then, in the fact that the
control of the railway system is rapidly falling into the power of
reckless speculators, whose interests are antagonistic to those of
the people. It is not a sufficient answer to the above that many
of these companies are now honestly managed, that much of
their influence over state legislatures may have been of advan¬
tage to the people of the states, and that they were forced into
such action to protect themselves; that their corrupting influence
is now at the lowest possible mark. The legislators and people
IO
CONTROL. OF RAILWAYS BY THE
must look at the tendencies and remember what reason and
experience teaches, of the inevitable result where doubtful power
exists, that in the end it falls into hands of bad men.
Then, too, unrestrained competition among the railways ope¬
rates against the interests of the people. Cheap and uniform
rates of transportation are required to develop any country in
wealth and population. Competition may secure for a time
cheap transportation, but it ends in depriving the parties afford¬
ing it of their ability to continue it. This is eminently true of
railways. By failing to keep the property in good order, ap¬
parent economies and ability to carry at low rates may be shown,
but in the end these low rates must be succeeded by higher ones
to renew the property. Bankruptcy follows such competition, which
means unnecessary destruction of capital and loss of confidence
in that class of investments. The result of this on the people is
that capital will not be furnished, unless at increased remunera¬
tion to cover increased risk, thereby adding permanent increase
to the charges of transportation. Continued competition, reduc¬
ing the competitors to bankruptcy, also gives the opportunity to
speculators to purchase the control, and by combination un¬
necessarily increase charges of transportation. Competition,
with low rates, induces people to purchase lands, to erect
buildings, to start manufactories, to invest their capital, &c.,
on lines and under circumstances that only under such charges
for freight can their investments be made profitable. When
changes of ownership come and rates are raised their pro¬
perty becomes of little value. The people are not versed in
the science of railway wars and cannot protect themselves by a
knowledge of the dangers to which they are exposed. It is,
therefore, but just, that they shall be protected from the injury
done by the misdirected use of the powers given to the railway
companies. It sometimes seems that the legislatures in charter¬
ing railway companies should have been more careful to estab¬
lish minimum than maximum rates for the better protection of
the interests of both their share and bondholders and the people
—their customers. This country will, in the near future, suffer
greatly in all its interests, from the direct tendency of the present
railway management towards bankruptcy.
Reasonable combination among competing lines to secure fair
rates is almost out of the question, because there are so many
GENERAL GOVERNMENT.
competitors. The financial condition of the competitors operates
as a powerful element in destroying the ability to combine. One
bankrupt company, with good facilities to compete, may ulti¬
mately bankrupt its competitors. This is a more serious truth
than at first thought might be accepted.
Combine these facts with the inducements they hold out to
railway wreckers, and the truthfulness of the statement that the
tendency of our railway system, as a whole, towards bankruptcy
will not be denied.
The general answer that will be made to much that has been
written will be, that all this is a matter for the shareholders; that
they must look after their own property, and if it is badly man¬
aged the fault and loss are theirs; that these evils will ultimately
cure themselves and the railway companies be rescued by intel¬
ligent bodies of shareholders. To prove this, reference is made
to the result in England and New England, many of the railways
in both countries having been thus rescued within a few years.
If this answer is correct, much of the fear for the future would be
removed, and though the road to this changed condition of our
railways would be very rough, as in the countries named, yet
there would be comfort in the thought that the suffering will be
temporary, and that no change in the relative powers of the states
and the General Government will be required, thereby avoiding
the dread of many—the centralization of power in the hands of
the General Government.
These reasonings are worthy of full consideration. To value
them properly the case of the railway companies referred to must
be understood. In New England, a few years back, many of the
railway companies were in difficulty, through competition partly
due to building too many lines, and to bad management both on
the roads and of their finances. There was not enough traffic
to sustain them as dividend-paying properties. It is true their
condition has been greatly improved, due mainly to two facts—
first, a large increase of tonnage and travel; second, better man¬
agement. The first was owing to larger productions, increased
amount consumed and increase of population. The second was
because the lines of railway were short, the chara.cter of the
management could be daily seen, the accounts of the companies
were few and easily understood, there were not many leased
roads or guaranteed bonds, and the affairs of such companies
12
CONTROL OF RAILWAYS BY THE
were within the observation of the shareholders, their traffic
was mainly local, they were not complicated with other compa¬
nies a thousand miles away from the shareholders, and the states
had taken an honest interest in the management of the railways,
securing some supervision of their management and reliability
in their reports.
In England the mania for railway building, some years back,
secured every important town, two, three, or four competing lines
to London; branches were built at great cost; the values of the
shares of the principal companies were at very low figures.
Many of the companies were bankrupt, though, owing to the
peculiar laws of England, they could not be foreclosed and sold
out, as in this country. The losses sustained by the share and
debenture holders was very great. Yet, in but one or perhaps
two instances the condition of no English or Scotch railway com¬
pany would have warranted the extreme American penalty of
foreclosure, but would have been reconstructed.
These railway companies were saved by the application of the
same principles that brought the New England companies out of
ruin. They secured economical management, established uni¬
form rates of freight and travel between competing points,
inaugurated the "clearing house," and were placed in a posi¬
tion to make profits. Increase of traffic and travel followed,
and the English railway companies, with but few exceptions,
now pay dividends, their shares and debentures are considered
safe investments, and these properties have reasonable assur¬
ance of future prosperity. How much Government interference
and other regulations had to do in producing this changed status
will be referred to hereafter. But the additional reasons
why they have regained a successful position was due to the
fact, as in the New England companies, that the lines ot
railway were short, embraced within a limited district of
country, the business of which was readily understood, the de¬
tails of management were constantly before the people, their
accounts were rendered every six months, and the absence
of complications with distant companies. Under similar con¬
ditions the result in any part of our country would be the same.
Herein lies the trouble: there are very few railways west and
south of New England that are not so connected with and in¬
fluenced by other and greater lines of road, that the control of
GENERAL GOVERNMENT.
13
the management of these roads is not in the power of their share¬
holders, and this influence is so complete that such roads, acting
as branches, are subjected to rates'that prevent their becoming
profitable. There have been so many roads built that if an impor¬
tant connecting line should assume".to control its own business,
contrary to the wish of a greater company, it would soon find
that its through business was gone and its receipts materially
lessened by such greater company using another line of road
between the same termini, or, if needed, by constructing a rival
line. This position is irremediable. The shareholders are power¬
less and must accept what is granted them by the greater organi¬
zations. There are a few exceptions where a company has a
reliable local traffic which gives it some independence of the
greater companies.
This disposal of the short-line interest and of the power of an
intermediate or connecting railway to regulate its own affairs
without great loss, leads up to the] practical question, Can the
shareholders of the leading lines of railways, which form the
trunk lines between the east and west, north and south, or west
and south, regulate their separate organizations? The answer
is, emphatically, No; because they do not understand the com¬
plications of business interests between the connecting com¬
panies. This, of itself, would be a study that requires years
of experience to comprehend Few people have any adequate
conception of the forces at work in regulating prices and destina¬
tion of freight. Neither competition, combination, nor discrimi¬
nation can absolutely control the destination of freight nor the
route which it will take. There are so many laws of trade that
come in to affect" these. These reasons are sufficient to endorse
the " No," for to properly influence there must be an intelligent
comprehension of the subject. But, further, the management is
spread over so wide an extent of country, the operations are of
such great magnitude, that it is beyond the ability of even a high
average of shareholders to determine whether it is well or illy per¬
formed. The accounts of such companies to the average reader
are so complicated that they would require experts to make them
intelligible. The ordinary shareholder cannot determine for him¬
self the financial position of a company, nor can he act wisely in
determining the proper policy of such company, for like reasons
which have been adduced heretofore—because they are ques-
14
CONTROL OF RAILWAYS BY THE
tions which require knowledge beyond the average intelligence
of the shareholder. Then, too, comes another grave difficulty.
The capital of such companies is generally so large and so widely
held, that it is almost impossible to reach the shareholders and
to secure united action. This is a serious difficulty, and has
given existence to a blind confidence in the judgment and pru¬
dence of railway presidents and managers which nothing short
of a serious financial difficulty, a stoppage of dividends, or non¬
payment of bonded interests will affect; this unlimited confi¬
dence almost always resulting in loss to the shareholders from
the want of a proper oversight by the owners which all agents
require. The absence of this oversight of shareholders pro¬
duces bankruptcy; bankruptcy hands over the control to gam¬
blers and speculators. The inference is irresistible that no
solution of the difficulties can be anticipated from the action of
the shareholders in directing the operations of their companies
and correcting errors. In isolated instances, like some of the
New England railway companies, it may be done; but for the
conservation of the great system of American railways some
other remedy must be devised.
If, then, there is no hope from the action of shareholders, nor
from the interference of the state, the General Government will
be forced to take some steps to preserve the railway system
from bankruptcy. Otherwise the character and good name of
the people will be tarnished, and the further extension of the rail¬
way system will be prevented. The United States cannot fulfil its
great mission to mankind without the fullest use of railways.
They are essentially necessary to furnish homes for the people,
to support them by affording means of interchange of produc¬
tions and the necessaries of life ; to secure the blessings of the
school, the church, the press, the mail, and the proper care of the
sick and afflicted. To bind the nation together railways must
penetrate every valley, cross mountains, and tie the great oceans
together at many points.
The dangerous position and the possibilities in the future of the
condition of the railway system thus demand national consider¬
ation, as they affect most directly every national interest. It has
been clearly shown that they are beyond private or state control,
and there is no power left to which appeal may be made but
that of the General Government.
GENERAL GOVERNMENT.
15
But the question is immediately asked, What can the General
Government do ? A fear of possible conflict between the powers
of the state and General Government is at once suggested. The
difficulties inherent in a legislative body, like Congress, taking
control of such an immense interest—the supposed increased
danger of corruption in that body as the farthest removed from
the people—are produced as lions in the way.
The conflict between the reserved powers of the state and the
committed powers of the General Government has already been
argued, and must be decided solely by the interests of the great
body of the people. In the case of the railways there is not
much difficulty-—the power, provided in the Constitution of the
United States, to regulate inter-state commerce, to provide for
the carriage of the mails, and to establish post roads, furnish a
stronger defense for the assumption of the duty to regulate the
railways and protect them, than the inferential authority for the
institution of national banks. To bring the railroads now in
existence under the General Government the power of taxation
might be used as successfully on railways as on state banks.
To devise a plan by which the General Government can
assume the control of the railway system of the whole country,
after accepting the necessity for it, is a very difficult task. No
plan that would be adopted at first would prove faultless. It
would therefore be more prudent that the Government should,
after thoroughly investigating the subject, take moderate ground
and trust to experience for suggesting further action.
Whatever plan Congress may adopt should be prepared
with a clear understanding of the errors and evils connected
with the present system of railway management, whether in
reference to the procuring and the wording of charters, the
organization under them, the financial methods adopted in recent
years in building railways, or the methods of conducting them
after they are built, and careful provision should be made against
the possibility of a continuance of such errors and such further
measures adopted, whether of a permissive, restrictive, or pro¬
hibitory nature, that will secure safety to invested capital and
place the railway interest on a solid basis. Some of these
needed guards and measures will next be discussed, and in
them will be found the answer to the question: What can the
General Government do?
i6
CONTROL OF RAILWAYS BY THE
PART 2.—The "What."
'T^HE first part of this paper was devoted to a consideration of
-l the power and duty of the General Government to assume
such control of the railways of the country, now and to be here¬
after built, as might be required to encourage and protect capital
in making such investments, that through this capital, thus in¬
vested, the nation might reap the benefits of a system of railways
that would secure to every district of the country a railway as
soon as its interests demanded improved means of transportation.
It was shown that the present tendency of the railway system is
towards bankruptcy, and if space had permitted it could have
been more fully explained how inevitable this is, from the condi¬
tions which have surrounded them from their inception to the
present hour, and which will continue unless a thorough depar¬
ture is accomplished.
Three reasons only were given why a change of masters was
imperative: First. The inability of the legislatures of the states
to control and secure to the people and to invested capital in
railways proper protection, as well as the inability of the railway
companies in all cases to protect themselves against bad legisla¬
tion. Secondly. The inability of the shareholders to control the
management of the railway companies. Thirdly. The peculiar
character of railway stocks and bonds offers a most tempting bait
to speculators, who make more money when they can bring a
railway to the verge of ruin, than by making it a useful and suc¬
cessful institution. Their interests and those of the people are
diametrically opposed. Railways can be saved from their grasp
only by such management as will place them among the most reli¬
able and trustworthy institutions. Congress can do more towards
securing this result than either state legislatures or shareholders.
What action the Government could prudently take, it was fur¬
ther suggested, could be better determined after an investigation
of what measures were needed to secure safety to the railway in¬
terest; a fair inference being that if these measures were reason-
GENERAL GOVERNMENT.
17
able, and promised efficiency and salvation to the railway com¬
panies, and they could be secured by no other power than the
General Government, then it would be its duty to assume such
control. What measures the General Government should adopt is,
then, the subject of the following paper :—
First. The General Government should assume the direct pro¬
tection of the property of the railways, and of the traffic on them.
This proposition has been so fully discussed by able writers, and'is
so generally approved by the people, that it is not necessary to
further develop the arguments in favor of it by devoting much
space to it here. Investment in railway property has received a
severe blow in a new direction, the insecurity of the property
from violence, and the interference with the traffic by mobs.
Nothing can restore this serious loss of confidence,—which is
of great value to Ihe country,—except such action, either by the
state or General Government, as will provide against the re¬
currence of a similar state of things. The states cannot be relied
upon to do it and the General Government must, or investments
in railway securities be still further reduced in value, and the
property of the people be subjected to damage and risk of
destruction, which are entirely inconsistent with good govern¬
ment. If the General Government should assume this protection,
the responsibility for losses sustained through any want of such
protection would necessarily go with it.
Second. All charters for railways should be granted by Con¬
gress. There is no question as to the power of the General
Government to charter a railway company, either in a state or
connecting two or more states. All railways in the territories
and unoccupied lands of the United States are chartered by
Congress. If the Government assume the duty of protecting
railway property, and become responsible for damage done
to it, by reason of any failure to protect—if they accept the rail¬
ways as post roads, it would be but right that the Government
should have the control of the power to charter them; that the
Government should provide such laws governing the railways as
would tend to secure it against loss for the protection given; in
other words, if direct protection is assured the right of giving
existence and control goes with it.
And to the states the relief from responsibility for damage
done would be very great. Either the state, its cities, or counties
2
18 CONTROL OF RAILWAYS BY THE
are now responsible, and, from the present outlook, this respon¬
sibility is a very real matter and increasing in degree. To be
relieved, then, of such responsibility, the states should willingly
yield much of the rights they have heretofore exercised in char¬
tering and controlling the railways. There are no doubt great
difficulties in Congress assuming the whole duty of chartering
railways. Yet where a course of action is right a proper way can
generally be found to exercise it.
Several objections will be made to this proposition. It will be
said that it would very greatly increase the business of Congress
and the labors of its members to the injury of greater and more
peculiarly national questions; that the members of Congress,
coming from all parts of the country, would not be as competent
to judge of the propriety of an application for a railway charter,
intended either for the development of a large or limited district
of country, as a state legislature. There is some force in both
these objections. The question of increased labor or amount of
business is a secondary consideration when the interests of the
country require it. The ability of'the members of Congress to
act intelligently is more important; but there need not be much
difficulty in this. If Congress undertakes this work, the first
step would be to devise and adopt general regulations by
which the propriety of granting a charter might be determined,
as well as general laws to cover the whole work of railways.
Such regulations would provide measures and means by which
Congress would have the information necessary to enable it
to judge intelligently of every application for a charter. The
advisability of constructing a railway depends on the presence
of certain facts. If these facts are present in any case, which
can be readily ascertained by a proper commission, much of the
time of Congress will not be required in deciding the question of
a charter, and the report of the commission would fully state the
wants of either an extended or limited district of country. The
facts to be ascertained would determine the question.
If the General Government accepts this duty, the charters of
the railways would be made uniform in character, all having
equal rights and privileges, and being subject to the same
restrictions and prohibitions. The proportion of stock and bonds
that could be issued by railway compànies could be regulated on
better principles than has been done by the states. Congress
GENERAL GOVERNMENT.
19
would most probably require a larger proportion of stock to be
subscribed and paid in than has been the custom, and could,
through its officers, see that this was done in good faith. Again,
the form of mortgages would be made uniform, and the pen¬
alty, the power to foreclose, would be alike on all the roads.
This would do away with many vexed questions as to the rights
of the parties, the intent of the mortgages, the extent of prop¬
erty they cover, the right to foreclose, or by agreement of creditors
to reconstruct, or the English plan of debentures might be adopted,
which are perpetual and do not provide for foreclosure or sale.
The legal'questions affecting the railways should be decided
in the United States courts. The decision of these courts would
soon settle the principles of law involved, and avoid the troubles
arising from the very variable decisions of state courts.
The charters granted by Congress, if this great responsibility
was thrown upon that body, would probably further provide—
like the English laws—that no railway should incur a floating
debt for other than wages or supplies. No English railway can
issue a note of hand. If this had been the law in this country,
while the development of railways might not have been so rapid,
yet a very large amount of money would have been saved to
the people, and one leading cause of the bankruptcy of railway
companies would have been avoided. Floating debts are the
first step to bankruptcy with railway companies as with individ¬
uals; they have been used by speculators in building railways,
and by managers in anticipating revenues not received to pay
dividends not earned. By the use of the power of creating such
indebtedness, the public are deceived as to the financial condi¬
tion of companies. It is a constant temptation to managers to
make haste too rapidly, to commit shareholders to large outlays
without their knowlege, to cover errors, and frequently to de¬
fraud. Laws preventing the use of this power would do a great
deal towards making the management of railways more conserv¬
ative.
Congress would further require that the managers of a rail¬
way company should hold an interest in its stock that would
bear a reasonable proportion to the whole amount issued. The
charters of some of our leading railway companies require the
managers to be owners of but from three to fifty shares of stock,
representing from three to twenty-five hundred dollars. As the
20
CONTROL OF RAILWAYS BY THE
custom in this country is not to pay managers for their service, it
is not to be expected that competent men will give the time re¬
quired to properly fulfill the duties of their positions without re¬
muneration, unless this comes in the line of looking after large
private investments. In England the holdings of stock and of
bonds of a candidate for re-election are published in the semi¬
annual reports.
Careful provisions would also be enacted by Congress against
extensions of railways, increase of facilities, leases of other lines,
and guarantees of bonds, &c., being made without proper time
being permitted for examination by the shareholders and their
assent received.
Managers would be prohibited making use of their places for
their own gain, by the numerous ways so well understood and so
largely practiced in the past.
The assumption by Congress of the power to control the
railways, and to place all legal proceedings to which they
are a party in the United States courts, would be a great secu¬
rity to the companies, and especially to those whose lines
of road pass through or into more than one state. The di¬
versity of laws, of legal rulings, the risk of unfriendly legis¬
lative action, the power of boroughs and towns to regulate speed
of trains, &c., combine to affect unfavorably the value of the
securities of such companies, and to render their management
more difficult. Unfriendly legislation would also be avoided by
all the companies. The United States laws regulating railways
being uniform, they would not be subject to the annoyance and
injury often done to them by demagogues in state legislatures.
The tendency to corrupt influences and practices would, for the
same reason, be greatly lessened through the change from state
to government control. In every session of every legislature it
is not risking much to say that black mail is attempted to be
levied on the railway companies.
To the railway companies these suggestions should have force.
In the General Government taking charge of the railways, there
would not be the creation of a new master, but a change of
masters, and for the advantage and security of the property of
investors in railway companies.
Third. The General Government should enact laws that will
require all the railways in the United States to furnish from time
GENERAL GOVERNMENT.
21
to time, or at stated times, to a proper bureau of Government
full accounts of their organization, their financial condition,
their receipts and expenses, their traffic, and all information
that may be necessary to a full understanding of their condition
and operation. To secure this being properly done, this bureau
should be authorized to determine the forms of accounts and re¬
ports to be made by the railway companies. Something has
been done by the states in this direction. Their reports are very
meagre, imperfect, and do not cover all nor the same ground. The
returns made to the Government should be complete and published
at a low price. Then not only will all necessary information be
acquired, but comparisons between companies may be made and
much useful information gained. To secure this information
being acquired in due time and that it shall be correct, the
Government officials must have the power of bank examiners.
This suggestion is only translating the experience of England
to this country, and is the source from which the state of Mas¬
sachusetts derived its inspiration to enact a similar law for that
state. The objection that the secrets of railways may become
known to their damage, or some special gain in freights may
be interfered with, amounts to nothing when contrasted with the
good that will result.
This action would be of great value, for it would secure full and
reliable information as to the condition of every railway company
once or twice a year. It is, unfortunately, true that the railway
companies, considering themselves as close corporations, have
generally failed in their annual reports in making a proper exposé
of their position and condition. They have declined, as far as
possible, to encourage proper state reports being required. The
tendency has been to limit their reports to the narrowest bounds,
and in many instances they have not been truthful, but were
made to deceive the public. The secresy connected with Ameri¬
can railway management has been an almost unlimited curse.
The idea of the necessity of secrecy has been made use of to the
great injury of railway companies; its tendency is directly to¬
wards, and ultimates in, corruption; it has been, and is to-day,
the great lever by which speculators and stock gamblers are en¬
abled to make fortunes at the expense of railway bond and share¬
holders. Until this idea of secrecy in the management of railway
companies is removed, there will be no security in railway invest-
22
CONTROL OF RAILWAYS BY THE
ments. The Government cannot be prudently conducted without
a thorough knowledge of the operation of the railway system.
They are inland rivers on which a large proportion of our inter¬
nal commerce is transported, and are likely to be affected with
bars and snags, which render their use dangerous and expensive.
Such an act of Congress would do much towards preventing
a repetition of the rascally and fraudulent construction of rail¬
ways which disgraced the country within a few years and has
caused so great a loss to capital invested. To make the informa¬
tion complete it would be necessary to go into a full history of
each company. The exposé that would result would be of great
advantage in preventing a repetition of such conduct. It would
furnish creditors with a knowledge of their claims on the pro¬
moters of many companies, and the people with the facts of real
cost.
It may not be out of place, in this connection, to state that one
influential cause of the origin of Grangerism is to be found in the
fact that the people of the west saw clearly that the railways did
not cost more than one-half the represented outlay, and that they
were taxed with rates necessary to pay interest, or interest and
dividends, on this capital not expended. They further under¬
stood that their productions, in competition with those of other
parts of the country, would only bear rates of freight based on a
proper cost of the railways, and, therefore, judged that the at¬
tempt of the railways to extort from them this extra rate to rep¬
resent capital not expended was unjust and ruinous. Such rail¬
way companies have received but just punishment if it could
only be visited upon the doers of the wrong.
Fourth. No railway should be chartered by Government until
after the line was fully surveyed and estimates of cost given,
nor should any railway be opened for traffic without being pre¬
viously inspected by a competent Government officer, and liable
to further inspection at any time. Such action is due to the people
who are to, and do, use such road for the transportation of them¬
selves and their productions. This principle of examination runs
through the laws of all civilized society, and in no country is it
more important than in this, where life has a higher value to the
nation than in any other, and in no country are there less safe¬
guards thrown around it than in this.
Fifth. Another good result of Congress assuming the sole
GENERAL GOVERNMENT.
23
power to charter railways would be the repeal of all Free
Railroad Laws.
These laws were generally adopted by the states to free the
legislatures from the numerous applications for charters and
the contentions that accompanied them; to make the law affect¬
ing railways uniform; to facilitate the formation of railway com¬
panies, and to prevent monopoly of the business of any section
by any railway company on the ground of protection to the in¬
terests of the people. What has been the result ?
The way was at once thrown open in each state, as such laws
were passed or adopted into its constitution to introduce any
number of schemes for the construction of new railways. It was
not a question what corporate rights previously given by the
states were interfered with, what the needs were for constructing
a railway, whether the country through which the new lines were
to pass would furnish traffic to pay interest on their cost, or
whether the public good required the building of a line. The
effect has been to encourage speculators to build railways
whether they were needed or not. The power given under
these laws has been largely used to blackmail other com¬
panies, either by demanding money to prevent their building
or to force them to purchase a competing line when built. The
laws were used by rival companies to build branches extending
into each other's territory. The refusal of a company that could
be made part of a rival road's through line to give up its control
to others, was met by the construction of a parallel line, render¬
ing both of little value as money-earning institutions. These
laws gave full power to persons, through jealousy, or disappoint¬
ment, or loss of control of a line, to build a competing one. The
last few years have marked the country with many lines of rail¬
way built under just such circumstances and from such causes,
and it is very safe to say that probably not one railway that
should have been constructed has been built in this country
under the encouragement of such laws, that would not have been
built without them, and under the proper course of special legis¬
lative action.
The answer given to these statements by the advocates of free
railroad laws is, that the older and more powerful railways would
prevent the chartering and the construction of necessary lines;
that the people would be imposed upon in rates on travel and
24
CONTROL OF RAILWAYS BY THE
traffic, and for the protection of the people such laws became a
necessity. If this were true, then it follows that the legislatures
of the states were under the control of the' lines of railways al¬
ready built; that the legislatures failed in their duty to protect
the people, by failing to pass proper laws restraining the railway
companies, or in reserving such power in the charters of those
companies that would make them amenable to the legislatures
or the courts for the abuse of their chartered privileges. There
may have been some truth in all these assertions, and these
laws may have contributed something towards restraining rail¬
way companies in their business relations to the people. The
discussion of the wisdom of such laws may thus come back
to the determination of the balance of evils. In the one
case the dangers are hypothetical, in the other actual; and to
lessen the force of the argument in favor of such laws, it may
be asked that cases be pointed out in the states where there
are no free railroad laws, where any important sections of coun¬
try have failed to secure the necessary railways or where the
people have been unjustly treated by those that were in opera¬
tion. Until this is done these reasons are entitled to but little
consideration. It is true that many lines of railway have been
built under these laws that no sensible or prudent legislature
would have chartered. The results to the country have been—
First, The development in advance of the requirements of the
country of large sections of the new states; the imposition of heavy
taxes on the people to sustain railways that were not needed; a
very large loss of capital in building roads that were not required;
great injury to the financial and moral credit of the Ameri¬
can people. Second. The infringement of contracts made by
the states with railway companies that were built before the
enactment of these laws.
The direct influence of these laws have been especiallly in the
west to open up large sections of the country in advance of any
healthy demand for more land by increasing population, or to
supply the needs of home consumption or foreign demand. The
accident and coincidence of large emigration, of high prices for
labor and materials, of abundant foreign capital seeking this
country to avoid the insecurity of home investments and for the
larger price paid for its use, gave to speculators—enterprising
men they were called at the time—the best conditions to suit
GENERAL GOVERNMENT.
25
their purposes. Aided by these free railroad laws they pushed
lines of railway far in advance of population at enormous cost,
tempting many to forego the social, political, and religious
advantages of older countries to seek fortunes in the new coun¬
tries. The effect of all this was to scatter the population, to
lower the moral tone of the emigrants, to increase their taxes
without their resulting benefits in older countries, and when the
railways were in operation, to require of the productions of these
people thus misled heavier prices for transportation of their pro¬
ductions than they would bear, and leave the producer anything
to sustain life decently. But more than this, no railway built
through a purely agricultural country can pay interest on cost of
construction, much less on one that passes through a country
but sparsely populated, and where the farmers have no surplus
profits to indulge in any luxuries; and very much less can such
a country pay interest on a capital represented by two or three
times what should have been the cost. The result, of course, has
been that the farmer has to pay the most he can, and the balance
has to be met by a loss of capital. In this direction these free
railroad laws have done the country great injury in dividing the
labor of the people, in lessening their comforts and privileges, with
these their morals, and in placing on their productions heavier
tariffs than would have been required in the older states, and
causing a great loss of capital that has been imprudently invested.
The temptation to competing lines of railway to build branches
leading into the territory of each other has been also referred to.
A pointed lesson may be learned from a speech delivered by
Mr. Franklin B. Gowen, the president of the Philadelphia and
Reading Railroad Company, in London, on June 6th, 1877 (pp. 13
and 14), the substance of which was that, through the building of
certain lines of railway and the threatened building of another,
under the free railroad law of Pennsylvania, the Philadelphia
and Reading Railroad Company was forced to make an outlay
of $49,000,000 and to guarantee some $14,000,000 or $15,000,000
more to purchase coal lands to secure traffic to its line. This
ability to build railways at will, under the present constitution of
the state of Pennsylvania, has cost capital a loss of more than
$100,000,000, and if an estimate could be made of the loss sus¬
tained through such laws over the whole country, it would not be
less than $1,000,000,000.
26
CONTROL OF RAILWAYS BY THE
The demoralizing effect on the people of this country has been
very marked. Energetic men, taking advantage of large demand
for lands, for cereals, for coal, for iron, for lumber, with a flush
money market, have been led into great errors of judgment. The
temporary successes which first followed their efforts affected the
masses with a mania for speculation, which went on until the
crash of 1873 exposed the false basis on which they rested, since
which time the hoped-for "bottom" has been anxiously looked
for, but not yet reached.
It is not strange that the credit of American railways has reached
in the European markets the level of Turkish promises or South
American pledges; that confidence in the integrity and judg¬
ment of the American people is sadly shattered; and however
erroneous and unjust this opinion may be, however much of the
disasters that have befallen our railway system has been due to
the connection of foreign banking houses with American specu¬
lators, or of foreign influence in directing the policy of our rail¬
ways; yet for one thing we are blameable, that through bad
legislation we made these results possible. Good legislation
would have prevented nearly all these bad consequences, and
no one course of legislation has contributed more than another
to aid in producing this sad condition of things than the introduc¬
tion of free railroad laws.
In the fever that spread like an infection over most of the states
of the Union in favor of free railroad laws, the moral if not the
chartered obligation of the states to protect the interests of the
railways already built seems to have been entirely overlooked,
or treated as of no force.
There can be no stronger evidence of decadence in the morals
of a people than when they, either personally or through their
representatives, openly violate an agreement or a contract.
Apply this to the railways chartered before the passage of the
free railroad laws, and it assumes a serious aspect, and becomes
-of grave importance.
When it became evident to the people of the older states of
this country that the railway was to become the future avenue of
transporting their persons and property, a question arose whether
they should be built by the public funds, or by private capital
assisted by public credit, or by private capital and corporate
-credit. All the plans were tried, but very early in their history
GENERAL GOVERNMENT.
2 7
the English system was adopted of depending on the enterprise
of individuals (incorporated for the purpose) to secure their con¬
struction. The theory of this system was, that the legislatures
invited the people to associate themselves in building railways;
that the state, representing the body of the people, might be
relieved from this duty, and yet secure to the people these new
facilities of transportation. To make these powers available the
state gave these new organizations certain rights which apper¬
tained only to the state in its majesty, and in most instances
placed them under certain conditions, intending to secure the
people against any abuse of these privileges thus granted. The
moral position and relation of the two parties is thereby strongly
marked—the consideration is very clearly stated. It simply
would read : That in consideration of the power and authority to
construct a railway between certain fixed points, which has been
accepted by the citizens of the state at the request and solicitation
of the state, the right being reserved by the state to take care
that the powers and authority thus granted shall not be abused
or used to the injury of the state, such citizens agree to con¬
struct a railway and accept the conditions reserved by the state;
such acceptance being influenced and controlled and determined
by the expectation that the traffic in persons and property, be¬
tween and on the line between the termini of such road, shall
prove reasonably profitable to the parties furnishing the capital
required.
Neither party provided for the case of a rival road, because
neither party considered such a thing possible, the state knowing
that with such a possibility the invitation to her citizens to build
the road would fail, and the association of citizens not doubting
the good faith of the state and its duty to protect them in the en¬
joyment of the right to convey by railway all the traffic that
might be offered between the two points named in its charter.
This is the essence of the contract made. The breaking of such
a contract between individuals would justly subject either to
damages. The state is above law and cannot be sued. The
railway companies are held to their contracts. By the adoption
of the free railroad law, making it legal to build another line of
railway between -these points, or the construction of a new line
between these points, the state breaks its part of the contract. If
no railway is built, yet the power existing to do so affects the
28
CONTROL OF RAILWAYS BY THE
value of a chartered investment, and if one'is constructed this
value is greatly injured. The evil and wrong of such a law is
further evident from the fact that but few investments in railways
have proven profitable from the first, the original investors in
almost all cases losing heavily, and the loss, which should have
fallen upon the whole body of the people for whom and at whose
solicitation the roads were built, comes heavily upon the indi¬
vidual. In some instances, after years of prolonged waiting,
the property in a railway may assume a value, with good pros¬
pects for the future. With how much moral right can the state
meet such a case with the permission under a free railroad law
that this promise of some return for years of loss shall be de¬
stroyed by the building of a new line, which adds nothing to the
facilities and comforts of the people, but will result only in the
destruction of increased investments.
In any fair view taken of this question, there is a moral obliga¬
tion resting upon the state to protect the capital of the citizens
invested in railways at its solicitation.
Then, again, the power existing under these laws to build rail¬
ways, without regard to their necessity or probable ability to pay
interest on their cost, not only seriously affects the value of all
railway stocks and securities now existing, but they do the greater
harm in preventing capitalists placing their money in such prop¬
erties, without which this great country cannot be developed.
The legislatures of the states and the people in adopting in
their constitutions the system of free railroad laws, have not
properly estimated the moral obligation of the legislature or of
the constitution that should accompany all chartered state insti¬
tutions. The fact of a charter carries with it an implied assur¬
ance of the legislature or of the constitution that there is every
reasonable assurance that the created company will be able to
fulfill all agreements made under its chartered authority. It is
not to be supposed that the legislature would grant or a constitu¬
tion authorize a charter that was palpably intended as a fraud,
designed to rob innocent people of their money. Yet this is the
working of free railroad laws. The state or constitution, by
granting authority to build at will, gives the power to speculators
to do just this thing—to build railways that cannot pay interest
on the cost of construction. This may be thought to be making
too fine a point in morals—but if to open a wide door to fraud
GENERAL GOVERNMENT.
29
and injury is a light and trivial matter and in harmony with the
proper character and dignity of a state in the American Union,
then the point is not well taken.
This question of free railroad laws is one that will meet Con¬
gress in its legislation looking towards a controlling influence
over our railway system, and can only be fully met by Congress
assuming the sole power of chartering railways in the states as
well as in the territories.
Sixth. How far should the Government interfere in the manage¬
ment of railways and in determining prices of labor and tariffs
of rates? This is the stumbling-block with many people who
might agree to almost every other proposition herein made.
There are various good reasons which must limit the extent of
this interference. The officers of Government should not inter¬
fere with the ordinary management of the railways; the compa¬
nies must be held responsible for this. Nor can Government
prudently interfere with the question of wages for labor. The
fancy of making the Government an umpire or arbitrator to
regulate wages is impracticable, and would work great injury.
The peculiar duties and relations of the labor of a railway com¬
pany to the management renders it imperative that the wages
shall be fixed by the management at rates suited to the peculiari¬
ties of each case. The most direct way of avoiding any ques¬
tion of wages between the workmen and the railway companies
will be reached by the Government interference in preventing
ruinous competition in rates, by preventing the building of un¬
necessary railroads, and lpy the proper protection of the capital
invested. If Government should interfere with the management
there would be fess responsibility of the managers to the share
and bondholders, and there would be more temptation to corrup¬
tion and evil influences. The commercial interests of the country
are too vast, too scattered, the questions affecting railway
management too many, to bring the whole under the control of
any bureau of apy government, and this difficulty will increase
as the country develops.
Certain general action referring to the tariff of railways might
with great benefit be adopted. The first object should be to get
rid of the making of special or secret rates to shippers. This
has been one of the greatest causes of injury and loss to railway
companies. Its corrupting tendency is very evident, and exposes
3°
CONTROL OF RAILWAYS BY THE
officers of railway companies to very great temptation. Division
of money arising from such rates may be made without the
knowledge of any one but the parties interested. This habit of
special and secret ratçs has been a constant cause of contention
between the trunk lines. Each accused the others of bad faith,
and they were all most likely guilty, either directly or indirectly,
through the intervention of transportation companies; it is very
easy to understand how, with such a custom, very much of the
great loss to railway values has arisen. Such competition is
illegitimate. It operates unequally and unfairly on the business
of the roads. Destroy its possibility, and very much will be done
to place the leading railway companies on a sound basis. This
can be done by Congress making all secret bargains for rates,
less than the published tariffs, punishable as criminal acts. There
will then be no use for special lines, and their removal will make
harmonious action between the trunk lines possible. For the
purposes of interchange of articles of production and consump¬
tion between different sections of country on the main lines of
railway, and for the convenience of these lines, a very general
introduction of private transportation companies might result.
Congress might wisely provide, as a basis for railway tariffs,
that each company shall determine fixed prices for the following
classes of service, which embrace the whole cost of transportation,
viz., depot accommodation, siding accommodation, manual and
clerical service, shifting service, including movement any dis¬
tance within fifty miles; main service, movement for distances
beyond fifty miles; general service. These prices should be
fixed for each class of goods (the classification to be made by
the company) per 100 pounds per mile. Connecting roads
should be forced to make joint rates on same basis of division
of charges.
These rates, when determined, should be published as the
tariff by which all transportation on each line of railroad should
be regulated. These lists of rates should be made accessible to
every person, and should not be permitted to be changed without
giving thirty or sixty days' notice. The effect of such provisions
as to fixing basis of rates, with the prohibition for any railway
officer to charge less than the published rates, under penalty of
criminal prosecution, would do very much to make the business
of the country more stable, the traffic on the railways more remu-
GENERAL GOVERNMENT.
3»
nerative, and lessen the burdens now placed on the people
through the use of secret rates. Nine-tenths of the corruption
connected with railway management would thereby be removed.
In France, Germany, and other continental states, absolute
government control is possible, for there is neither the length of
road, vast extent of country, diversity of interests, difficulties in
the science of transportation and its practical application as in
this country.
In England such control is partially applied. That govern¬
ment has found it necessary to increase its care, watchfulness,
protection and control over its railway system. Their com¬
panies have passed through many of the difficulties we are now
meeting, and where the conditions are alike, we may well
learn from their experience, for from almost destruction their rail¬
ways have been brought to fair prosperity. The strongest influence
brought to bear on the English railway management is through
the board of trade, a government bureau. Most of the sugges¬
tions already made are derived from the results obtained in
England through the influence of this board. While it is
authorized to require full reports of the business and condition of
each company to be regularly made and published, to test these
returns by examining their books and accounts, to examine the
construction of their roads before being offered for use and at
any time after being in use, to be fully informed of the details of
their management, rates of freight and passengers, yet in these
latter points this board depends on its moral influence over the
companies in adjusting differences and making the system work
harmoniously, coupled with the fact that the companies know
that a report to Parliament by the board of trade that any railway
company was managed to the injury of its shareholders and
the people generally, would meet with direct action by that body.
This is a very wholesome remedy for evil doing. The certainty
of some kind of punishment would deter from the commission of
an act that would render such punishment inevitable.
Why might not the Congress of the United States go so far as
to make it the duty of the bureau that would be charged with re¬
ceiving the reports of the companies, of examining their accounts,
to further report to the Government in full the true status of any
railway difficulty, of undue competition, of causes that are de¬
structive to capital, of acts of railways that are oppressive to the
32
CONTROL OF RAILWAYS BY THE
producer and consumer, &c. ? The fact that there was such a
bureau, and that its conclusions would be published to the coun¬
try and to the world, would do much to restrain improper action
on the part of railway presidents and managers. It is true that
this power might be abused, but it is not probable from the care
that is likely to be taken by the president in the selection of such
officers. To do wrong would be a dangerous experiment, for
the whole country would be the judges.
Thus far—in addition to the recommendation as to tariff of
rates—the Government might go with safety without necessarily
interfering with the management of the railways. It would be a
strong moral force in the right direction. Time would develop
if any further interference was necessary.
This paper, while long, yet has only touched many interesting
points on the question of Government interference with the rail¬
way system of this country. It is intendedmore as suggestive to
the reader than as a full discussion of the subject. The terms
government "control" or "interference " are objectionable.
They seem to carry with them more meaning than is intended,
and thereby create an antagonistic feeling. "Supervision"
would, perhaps, express the proposed action more fully.
It is not wise or prudent that the General Government should
be charged with more responsibilities than are needed for the
preservation and conservation of the interests of the people, but
so far as this becomes a necessity there should be no hesitation
to place this duty on the General Government, and where no
other single authority is competent to regulate an institution like
the railway, on which so much of the welfare of the people de¬
pends, the General Government must assume the responsibility.
It is not a sufficient reason why no action should now be taken,
that the railway system has already acquired such immense pro¬
portions and such extended influence, but in view of these facts
and the future possibilities, it is the more important that whatever
is done should be done quickly, while the system is in a quies¬
cent and depressed state. The people are in a better state now
to appreciate the question than they would be under great busi¬
ness prosperity.
Nor is it a fair argument to use that if Congress should as¬
sume such control the people would be exposed to increased
evils arising from the corruption of that body. The impotency
GENERAL GOVERNMENT.
33
of the state governments in properly exercising their functions
as to railways arises not so much from corruption by money as
it does from the overpowering influence of the railway compa¬
nies and of speculators in securing such legislation as they de¬
sire, without regard to the true interests of the people. The
Granger legislatures would have been as much under their in¬
fluences as others, if any large amount of the stock and bonds
of these companies had been held by the people and the
centers of control had been within those states. The Granger
power is but temporary, and must yield to that of capital.
Congress would be more difficult to influence than state legis¬
latures, and if money was to be used, the increased number of
members and higher prices to be paid would operate against its
use. The people of the United States are not willing to acknow¬
ledge that its highest representative body would be purchasable
by every corporation that might desire to build or manage a rail¬
way. The control of Congress over the railway system would
be through general laws, their only specific action being confined
to granting charters and correcting any abuse of privileges
granted.
If the time has come when the direct interference of the National
Government is necessary to the protection of the property of the
railways and the capital invested in them; if their importance as
post roads and their relation to the inter-commerce of the country
is sufficient to warrant the assumption of such a duty; if the
future development of the country is dependent on keeping this
great means of transportation in healthy condition, that no part
of the country may suffer from want of such facilities; if the rail¬
way is the iron band that is to hold the country together—then it
is the imperative duty of the General Government to take such
action as will secure these results.
These pages suggest certain measures which the Government
may prudently, at the present time, adopt, all of which will tend
to secure to the railway system more public confidence, higher
credit, better management, greater safety of capital and pro¬
perty, and better returns for capital invested; and to the people
the highest development of the railway system, with the accom¬
panying result of the lowest possible rates consistent with good
management and a fair return in interest to the capital invested;
to the General Government the greatest economy in the trans-
3
34
CONTROL OF RAILWAYS BY THE
portation of troops and materials of war—in the economy that
comes from the use of the smallest force to defend the country
and preserve peace by reason of the great mobility that the rail¬
way gives this force; in the happiness, comfort, morals, and
wealth of the people derived from the largest construction of
these avenues of commerce, by providing for the freest inter¬
change of their productions, and the formation of social ties
between the people of all sections of the country.
These measures, which are herewith submitted to the con¬
sideration of the reader, are:—
(1) That the General Government shall assume the protection
of the property of the railways of the country and assume all
responsibility for damage or losses through any want of this pro¬
tection.
(2) That the General Government shall assume the sole power
of chartering all railway companies; that provision shall be made
with the states and the railways already constructed, by which
such railways may come under the authority the United States.
(3) That the General Government shall enact general laws
that will be applicable to all the railways, which, among other
things, will provide for full reports to be made of their organiza¬
tion, working, and financial condition as often as may be required,
with the power of verifying reports by examiners, which will regu¬
late the proportion of stock and bonds, make forms of mortgages
uniform, limit suits concerning railways to the decision of United
States courts, forbid the contraction of floating debts by railways
for other than wages or supplies, require the managers to be
reasonably interested in the shares of the company, protect the
shareholders by requiring their assent to all extensions of lines,
leases of railways, or guarantees of bonds, &c., provide that
the railways shall publish their rates of freight based on certain
principles, and make any evasion of such rates a criminal offence.
(4) That a bureau of the Government shall be created, or the
one on internal commerce enlarged, to be the medium through
which the President will see to the execution of all laws pertain¬
ing to railways, and that this bureau shall, with their annual
report, submit to the Government full details of the movement of
internal commerce, the rates charged by the railways,—with any
recommendations to secure the largest benefits to the country of
the railway system.
GENERAL GOVERNMENT.
35
The consideration of the measures herein suggested will lead
the reader to think of others, perhaps, quite as important. In
this way the public mind may be familiarized with the proposi¬
tion made, its real significance and importance appreciated, the
repugnance to government interference removed, and ultimate
in such action being taken by Congress as will be for the welfare
of the whole people.
% a xI xxx a y Ht o vlcl.
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by the
UNITED STATES RAILROAD AND MINING REGISTER COMPANY,
423 WALNUT STREET,
PHILADELPHIA.
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President. Manacbk
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RAILWAY Managers, Officers, and Employes, Railway Me¬
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Dealers in Railway Supplies, Coal Operators, Shippers, and
dealers, and all who wish to obtain prompt and accurate information
relating to railways and coal mines, will find in its weekly contents a
large amount of matter of special interest. Its features embrace: —
1. a Money article, written by one of the most experienced financial
writers in the country, in which the significance of the fluctuations of the
stock market and the prospects of the future are discussed with rare skill.
2. Editorial Articles on current questions, in which important in¬
dustrial events are reviewed, and railway reforms and measures calculated
to promote transportation and mining interests suggested and advocated.
3. Railway Industries. A record of leading events in great work¬
shops that furnish railway supplies.
4. Notes of the Week. A compendium of the occurrences which
have a direct or indirect bearing on transportation.
5. Railway News. An epitome of the notable events transpiring on.
or in connection with the management of the railways of this and other
countries.
6. Railway PROJECTS, A record of new railway schemes.
7. Legal Department. Abstracts or full reports of new legal deci¬
sions and suits affecting railways.
8. A Coal Department, embracing weekly reports of the coal ton¬
nage of railway and canal coal carriers.
9. Elections and Appointments of railway directors and officials,
reports of Railway Earnings, and a variety of Miscellaneous articles
on subjects which bear a close relation to railways.
Wide circulation among the managers of many railways and other par¬
ties identified with transportation interests, gives this journal special value
as an advertising medium.
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