} THE ' - - F^s:•Jc:r(5\ r,. Railroad Transportation Question The Objections to Specific j Legislation as "a Cure for Railroad Abuses. (unfinished). thesis- submitted as one of the requirements for the degree of Ph.D., in the School of Political Science, Columbia College, •• F. Benedict Herzog, Ph.B., LL.B. COLUMBIA COLLEGE, (May, 1883.) THE Railroad Transportation Question and The Objections to Specific Legislation as a Cure for Railroad Abuses. (unfinished). —t H E S I s— Submitted as one of the requirements for the degree of Ph.D., in the School of Political Science, Columbia College, by F. Benedict Herzog, Ph.B., LL.B. COLUMBIA COLLEGE, (May, 1883.) COPYRIGHT, 1883, BY F. BENEDICT HERZOG. Press of Gii.liss Brothers, 75 Fulton Street, New York. PREFATORY NOTE. The sources of information upon ' this subject can be divided into six distinct classes. The first three are official, the others are private. (a.) The opinions of the judges in decisions of special cases. Each case is here judged strictly upon the merits of the (piestion without reference to the several principles involved. Also, legal text books upon the legal aspects of the ques¬ tion. (b.) Testimony before and reports of special investigatiug committees and bureaus appointed by the various govern¬ ments. These in general deal with the question how a specified railroad has treated the citizens of that State, or how a proposed policy would affect it. {c.) Reports of, and proceedings before, special railroad tribunals or supervising commissions. These also invari¬ ably take up the question with a special end in view. id.) Diatribes and i^olitical pamphlets directed against the existing system, and apologies and justifications of present methods. Legislative debates, pro and con, utterances of railroad organs and Anti-monopoly bodies. All of these are manufactured for the'purpose of couvincing and not of examining, and do not hesitate at occasional misstatements. (H. CONTENTS. SECTION I. {Introductory.) The " Railroad Prob¬ lem" II. The Transportation Question III. Discrimination IV. Method of Discriminating v. Personal Discrimination VI. Allowance for Quantity VII. Classification of Freight VIII. Protection to Industries along the Road.. IX. Differential Rates X. Discrimination against Local Points XI. Discrimination in favor of Export Trade. XII. What is " Unjust Discrimination" XIII. Fluctuating Rates and " Railroad Wars" XIV. "Pro-rating," and "Through" Bills of Lading XV. Publicity of Rates and Notice of Change. XVI. "Reasonable Rates" XVII. "Reasonable Profits" and Limitation of Dividends XVIII. Capitalization, " Stock-watering," and " Deferred Dividends" XIX. Cost of Service vs. ^alue of Service— ' ' What the Traffic will Bear' ' XX. Basis of Charges and Tariff Formation 4 SECTION XXI. Competition 2'S. Combination XXII. Is a Railroad a Monopoly ? XXIII. "Pooling'' or Apportionment Schemes.. XXIV. Legal and Constitutional Questions XXV. State and N ational Commissions XXVI. Government Directors and National Clear¬ ing House XXVII. Publicity of Accounts »s. " AVall Street" Methods XXVIII. "Railroad Book-keeping" XXIX. Some Special Freight Questions XXX. Some Questions relating to Passengers... XXXI. Economic Waste of Competition XXXII. Over-Construction and Panics XXXIII. Special Charter vs. í^dreneral Laws'^ XXXIV. The "Problem" in Europe XXXV. State Railroad Ownership and Control... XXXVI. State Ownership of Competing Line XXXVII. State as Lessee vs. State as Lessor XXXVIII. Stockholders vs. Directors XXXIX. Cumulative Voting and Minority Repre¬ sentation XL. Rights of Small vs. Large Stockholders... XLI. Special Railroad Tribunals NOTES Appendix. Literature of the Subject '^/h^ ^ \ ' C V ^ "{✓¿^^C-t./t-tX , í i. THE RAILROAD TRANSPORTATION QUESTION. I. {Itdrodnctory.) THE "RAILKOAD PROBLEM." What is popiilaiiy called the railroad problem embodies two distinct classes of questions which are connected more or less directly with the existing system of private railroad ownership of this country. These questions have at the present time reached proportions so great as to call loudly for a thorough and systematic investigation. To the first class of questions belong all those inquiries which touch upon the direct relations existing between those who use the railroad and its owners. Considerations arising from these questioñs will particularly take up our attention in this paper. These, however, cannot be fully understood ' if they are not studied more or less in connection with, and ' : in the full light cast by an examination of those of the second class. It will be found that only in a few cases have they been properly separated in the public mind, and as a » result most of the plans proposed, are advanced as cures for j the evils prevailing in one class, without the slightest fore¬ thought, as to their even probable effect, upon difficulties which do not appeal so strongly to the personal interests of the complainants. The questions of this second class, treat of the relations existing between the railroad corporations as a whole, and the people in their unorganized as well as in theii" organized form. Of these there are two which must particularly be understood before we can go fairly to work at the examina¬ tion of the more private ills. The first of these is the charge that the ever existing contrast between the many ^ poor and the few rich, the old, old story of the demos and ^ the aristocracy, has of late years been enormously strength¬ ened by the operation of causes dhectly to be ascribed to the existing method, or rather want of method, of conduct- 6 ing our railroads. The second of these questions is that of the growing power which these few rich men, by methods more or less open and corrupt, are constantly and rapidly gaining in our political system, and of the rise that they are 'making of this power in oppressing and spoiling the people. These statements require no further elaboration than is a,ft'orded by their notoriety. .... Of these enormously wealthy men, who, it is claimed, have onlv lately become such a power for evil in the State, the majority doubtless, have made their millions in railroad¬ ing. Óf tlíese again, manyxin ways entirely honest in the best sense of the word ; but most of them by the use of very questionable —or rather not even questionable means ; some few indeed, through the employment of artifices and meth¬ ods which differ from those of the counterfeiter and forger, merely because by reason of their novelty, they could not at the"^ time be reached by the existing laws. Among those means which it is claimed these latter con¬ stantly make use of, is that of bribery. This brings up the second jniblic question. Bribery direct and indirect. Be¬ ginning at a free pass to every possibly rising man ; on through money to secure his nomination ; a bought news¬ paper to insure his election ; dkect payment to him to in¬ fluence his action ; and so on through the Avhole gamut of the tempter's art. Bribery of the judiciary, the legislature and the executive, not only of the individual States, but in too many cases, even of the nation ; bribery because there were rich public lancls to be A'oted away ; bribery because there were suits to be decided ; bribery for the sake of public concessions and condonations ; bribery in short, for reasons which do not love the light and cannot bear repeating. Such being the facts, from these facts we must draw our conclusions. No man who has studied history with a purpose deeper than that of engraving upon his memory the correct date of the battle of Salamis, the authentic birthplace of Homer, or the pet names of Bluff King Hal's many wives, can doubt ' that such a condition of affairs is in the highest degree dan- ' gerous to the State. If, indeed, this be really dire to the system of private railroad ownership as is claimed, then every plan which promises a cure should receive the most <;areful consideration. But though all observing men must agree as to the fact of ap existing danger to the State in our present corrupt public life, there need be by no means such unanimity concerning tlie I'elative efficacy of the various plans proposed as reme- rr ■fj 4—O n t' \ ' ■■ ,\.-\. • : . ,- ll.'li; II I- ) ; i „ W I,.'!; I; t* t ' 'I . I ] ■;! ' " II ' ' 1 ^ , ■'- ■ til«' .-.•li-!' ! mhiTN . . : I • ■' >i||-l I , ! if I •:; I ■! ,.■ li 1 ÏÏV 7 dies ; not even, indeed, as to the true soiirce and origin of these evils. The extremists of one party place the entire blame upon the rapid growth of the modern joint stock corporations by means of which the wealth of a number of individuals is so compacted and reciprocally strengthened that no single man can successfully compete with these. But, of these corpora¬ tions they especially single out for blame the railroad com¬ pany, and say that by the present system of private owner¬ ship and lack of adequate means for supervision and. repres¬ sion, this delegation to private individuals of a so important public functioii cannot but ruin the State in time. They claim that, owing to the physical nature of the railroad, and to the necessity "for means of rapid communication so essen¬ tial to our highly retined civilization, the delegation of the control of a single line, is tantamount to a grant of a right to levy an Tinbounded tax upon the people of the district " tributary" to the railroad, and is as a rule, made as great a source of wealth as was the farming of an ancient Persian satrapy ; and with like disastrous results to the people. These opponents of the present system maintain, also, as to the ,more public ills, that by no amount of brains alone, or of what is called legitimate labor, is it possible for a man in one lifetime to amass such sums as are held by many railroad magnates, as the direct fruits of a short con¬ nection with corporations that never die. They claim also, tliat since in no other known lawful field of human employ¬ ment is there so much opportunity for the "making of vast amounts of money, and no other employment in which suc¬ cessful bribery can to so great extent aid the bribe-giver in accumulating this wealth, therefore if this one pasture were barred to private enterprise and only the State admitted therein, this change alone would cure the many ills under which the shipper is languishing when in the toils of " soul¬ less corporations" and of " rapacious monopolists." This change would, also, at the same time take away any incentive for and all means of biibery, and would lessen the widening gap between rich and poor. In short, that this most opportune interference by the State would restore an Arcadian simplicity to our present corrupt public life. To this theoretically simple, and only to a visionary, at all" adequate, method of tinting oiir troubles with rose color, those holding views of the opposite extreme reason as fol¬ lows : While, conceding that these private ills at times call loudly for notice and that these public evils are indeed ter- 8 rible, could in fact, hardly be much worse and while ad¬ mitting that every proposed method of cure is legitimate, if c>nly it can be made effective, and that every plausible plan deserves serious consideration, if only it be one whose adoption would not clearly engraft new evils upon this rot¬ ten trunk of ou]" national corruption, they_ advance grave objections to both the premises and conclusions here taken foi" granted. They deny that any railroad is a monopoly as is so frequently charged, and allege that even where it is alone in a district, it can be paralleled at any and every point. They affirm, that it is not fair to call a franchise a monop¬ oly, which is indeed, so far from being exclusive, that by taking advantage of the general raih'oad laws now enacted in almost every State, any company of men whatever, may become incorporated and be invested with the power to ex¬ ercise the mnch talked of sovereign right of eminent do¬ main. They declare indeed, that even if this were not so, even if a railroad corporation would have to obtain a special charter before it conld compete with an already existing line, as was necessary here in former years and is still universal in Europe, even then, it could not be said to be a monopoly. The reason of this denial is that the price it can chai'ge is, in fact, nowhei'e entirely unaffected by competition more or less dii'ect, and by other amply sufficient regulative forces. In the next place, they maintain, that the other evils of which the shipper complains, are only partly due to the rail¬ roads, are often, indeed, entirely imaginary, but that by far the greater part arise from unavoidable practices, which, tliongh they are without doubt often highly injvrrious to the shipper concerned, are still on this account alone by no • ; I means abuses, but are hardships arising entirely from the operation of natviral laws for which the railroad system should in no way be held responsible. They are moreover, hardships of snch a character and origin, that even admit¬ ting the highly-colored picture of State railroad ownership and control to have no reverse, indeed, perhaps not even to iiave a background, still, even such a system could by no means remove these ills, could in fact, hardly alleviate them. But above all they loudly contend that, passing by this subject of private ills and even conceding that these might • be swej)t away by such action, the public ills, those which menace the life itself of our institutions, those which threaten the integrity of oni- system, wonld not only be by ^o means amelioj-ated by any such plan as State control, Ibut wonld thereby be increased an hundi'edfold. 9 Tliey remind those proposing such a plan, and hoping by its adoption to effect such a change, that to bribe success-' fully requires a bribe-taker as well as a bribe. They main¬ tain that it can only show a deplorable lack of every-day observation to hope to drive the poison of corruption from the body politic, by removing one of the thousand present subjects for bribery, and by killing one out of the countless living germs of that corruption ; to hope to do this by this means alone would imply that we had never heard of an itching palm on the hand of the x>owers that be, except in connection with the railroad. Leaving entirely out of con¬ sideration the past story of the world's rulers and the pres¬ ent history of its governments, and looking merely at the record of the first decade of our own second century, such a hope would imply that we had never heard of venality in connection with pensions or an Emma mine, with public bridges, aqueducts and monuments, of ship repairs and Star Route trials, of court-house, cajpitol and lightJiouse jobs, of river and harbor and of internal improvement bills, of edu- "cational and reservational land grant tricks ; never heard of excise and of custom frauds, of Indian agencies or fat gov¬ ernment contracts. A most profound ignorance of the natural history of one species of our public man would be shown by this implied belief that the wicked railroad lion who in the hope of making money, to-day by offering a bribe risks a felon's cell, and the innocent office-holding lamb, who by taking that bribe commits perjury and betrays his constitrrents for a like reason, would to-morrow if this one single srdrject of public plunder were removed, lie down side by side in this reconstructed Eden without looking for other food. It would, moreover, show an implied belief that the orma- ment of our (Jivil Service who to-day can be bought with a fractional percentage of what is to be made out of the rail¬ road, would not if the railroad were under his control to- morrcrw, try in a much more direct manner to make at least so much ; or that even if the entire railroad system were swept out of existence he would find no other method for spoiling the Egyptians. An expression of that hope, more¬ over, would imply that the pillar of society who to-day buys a whole legislature to help on his railroad scheme by a land grant, would not to-morrow if this one path of honest enterprise were closed him, find many other walks wherein to try his mettle and to rob the public purse. These defenders of the present railroad system, further an- - swer those who, holding more or less socialistic views affirm' 10 that it is a duty of the State to equalize the material condi¬ tions of all men an exercise of a distributive justice. Tliey assert, that even granting this to be a duty and a possibility, even admitting that the improvident leopard can keep his spots changed for any length of time by means of a constant State intervention, still, such an interference with the railroads, as often jiroposed, and with them alone, would in no wise remedj^ this lamented existing, and as is claimed, ever growing inequality. They remind these, that, in_addi¬ tion to sums made and in making by means of railroad enterprise, there are enough other ways of amassing large fortunes and enough such fortunes already won. Further¬ more, that this method is unjust and entirely subversive^ of a sound State policy, making an experiment as it does, with only one of the multiform varieties of invested projierty and interfering, as it does, with only one out of the many classes of interests. Either—they say—try this equality with all or else with none. If there is to be a community of goods, a brotherhood of man, or a phalanstery then let all be treated equally. If a modern Saint-Simonian, a Pourier- ite, a Lasalle or a Marx is to dictate how we are to live in this broad and rich land of ours, if it must be so—why, then, we will all begin together to day, and to-morrow rail¬ road brains will have the same chance wdth others to get back what was confiscated—and brains will do it. If, however, the plan proposed to effect this equalizing process is to take the railroads and other propei'ty in some eqiritable way, bearing no resemblance to a virtual confisca¬ tion, let the State try the experiment. Let it also nationalize the land, let it abolish competition by act of Congress, enact that no child shall be born with less than a legally specified and duly certified amount of brains, or award a prize to the best paper-scheme of changing by suf¬ frage, popular or unpopular, that immutable law of nature which decrees that energy, industry, integrity and ability will tell in the long run of every race—even tlie human. Thus reason the plaintiffs ; thus argue the defendants of the present state of affairs in the existing system of private railroad ownership. Touching the charges and the defence, the truth here, as is usually the case, lies between these extremes. As to the plan of ^te control, however, any proposed expedient, no matter uoav insufficient it may seem ¿it first view, deserves careful examination ; and even if it be found wanting here, we niust not rest or give up the search but must continue until successful. State railroad ownership and control may 11 be the ultimate form of railroad policy, and even now some portions of the conntry seem almost ready for the experi¬ ment on a small scale. But, as for any national system,- passing grave doubts concerning the power of the na,- tional government to do this under our present constitution,. there is no doubt to one who has carefully studied the sub¬ ject that at the present time and for fully as long as we can at all make out, its adoption is enth-ely unnecessary so far as concerns the private abuses even if there were not almost insuperable popular objections in the way. Nor could such a system be on the whole any more advantageous than the. present plan would become under a reasonable siTpervisionj and especially after an improvement in the means for secur-( ing and applying existing remedies. Whereas, such a change alone, might on the other hand, be in the highest possible degree dangerous to the integrity and perpetuity of our institutions. Concerning, however, the question of the continually as-( serted duty of 'the State to advance its power for the purpose of eqnalizing the diffñvñTifíP.s in the material conditions of men through any change in the railroad system, we will ex¬ amine this only where it comes in direct connection with in¬ dividuad practices of which the shipper complains as having a tendency to unduly increase the existing inequality. Nor have we space here, even to touch upon the various plans proposed for curing the undoubtedly crying -public evil—the power of railroad other money in politics. But this evil would in no manner be cured, would indeed be increased by the adoption of a policy so symptomatic, so entirely new to our system and foreign to our structure. The cure for these things must be by internal not by exter-j nal application, and he who offers any one specific or cure- all, be it State railroad ownership or be it a universal and exclusive land tax, can be looked upon only as visionary enthusiast or as quack. One point, however, must here be taken up although not directly connected with the shipper's evils. Among the many fallacies that pass unquestioned in this railroad dis¬ cussion, there is none more general and none more fallacious, than that which credits the fortunes of these railroad kings to the freight office. Where there has been a dollar made in extortion from the shipper, a hundred have been wrung from a helpless stockholder or from a duped investor, who held to the exploded theory, that the director of a railroad was a trustee, and as such was worthy of trust, and his word of belief. This is the result of a system of law which per- 12 mits the managers of a road to have unlimited opportunities for making it appear solvent, when on the verge of bank¬ ruptcy and penniless, when on the eve of declaring an over¬ whelming dividend ; a system of law in which a maximum minority has no right whatever which must be respected by a minimum majority, and in which, strange to say, the min¬ ority must suffer. Having indicated the negative subject of inquiry, the I positive subject is as follows : IL THE TRANSPORTATION QUESTION. This examination will be directed in particular at the private iils of which the shipper complains and will merely tonch the public evils where the two cannot be fairly con- , sidered apart. The a,nt-i-rai1rr.af1 1pg-iHl¡^|inri of what is now known as the " cast-iron"'' type, wliich in America first came prominently before the public in the Granger movement of the Nortli- western States some ten years ago, and which has been the prototype ever since followed in that section of the country, ¿ seems at the present time as if it had obtained a new lease of life. First brought into our system when the inadequa¬ cies of the unaided common-law protection became per¬ fectly manifest, tried by one after another of the States in the West and North-west, and now by one after another either entirely changed by amendment, repealed, or openly treated as a dead letter, this product of legislative nescience has at length reached Congress. , Bill after bill "to regulate inter-State commerce" has in the last two years been brought before the nation, and bill after bill has been remorselessly strangled in committees of the House which gave it birth. All of these belonged to the " hard and fast" class which aims at curing certain cat¬ alogued and specified abuses, by what may appear at first glance to be the most direct, simple and radical path, but which in this case has been pi'oven as by far the longest way round. Several more of these bills are announced as ready and as merely waiting for Congress to open its doors in order to accomplish their destiny, free the land from the . railroad tyrant and recreate the Garden of Eden. In view of the fact then, that the constant complaints at these abuses show they have some foundation, that the constant search for some cure for these, shows that there are no existing adequate remedies and in further view of the fact that the entire fruitlessness or the more positive draw-^ backs of this method of specitic legislation so loudly heralded i as a sure-cure for these evils is, if they exist, not by this! | time more generally recognized, I propose to examine : 14 {a.) Whether the existing abuses toward the shipper are in all oases as flagrant as would be supposed by one judg¬ ing not by actual experience but by their notoriety— (b.) Whether all practices charged as abuses are really evils for which the present railroad system should be held responsible, and (c.) IVhether such of these as are really abuses can be met and remedied by the existing law, and if not entirely, as is claimed by those having new bills to introduce, why not, and how far it can be counted upon, and {(1.) "Whether snch abuses as have no existing remedies can be adecpiately cured by any proposed legislation of this inflexible character, and [e.) Whether any such legislation might bring in new evils, exp>ected or unexpected, and if so what these might be, and above all (./'.) Why this constant anti-railroad legislation of what¬ ever sort which has to great extent supplanted the common law has not brought forth more lasting fniit. ^Was the nndoiibted failure of these repeated e^ctrnents due to the fact that they were directed at these private abuses without making dire allowance for the refraction caused by a blind and often unreasoning indignation at the more public scandals connected with the railroad organiza¬ tion ; or was it because such attempts were aimed at effect instead of at cause ( Was the remedy so radical as to im¬ pair the vitality necessarj^ to a proper maintenance of the system, or was it so superficial that it could not reach the real root of the evil ? Were the laws in themselves adequate and was their fail¬ ure simply due to administrative incapacity in enforcing them, or were they of such a character that no administra¬ tion could enforce them or that to enforce them would at the same time create fresh difhculties ? We will try after having examined the laws aimed at the abuses to see what there was in the nature of these prac- tices to malve them so little amenable to such constant treat¬ ment of a certain character as they have received until now, from the Granger 8olons of the North-west. I think that it will then be acknowledged that a majority of the observers who have influenced legislative action have looked upon the surface manifestations only as the subjects for cure and have not given due attention to the underlying causes through which alone the evils can be permanently abolished. As, in their efforts to do away with these evils, they invariably took aim directly at what they saw, they 15 have for the most part failed utterly in their attempts at correction. After such an examination we shall be able to formulate a theory upon which a proper diet and the vis medicatrix uatiirœ^ together with the aid of a careful government nurse, will, while less distasteful to all, prove far more efficacious than a dosing with any cure-all concocted in legislative halls and administered with a bonne-boucJie in the shape of plenti¬ ful penal legislation. iVhen the failure of these laws is spoken of it means fail- x ^ ure to bring about the intended result. It does not mean that their enactment was entirely without effect. Far from it. Perhaps no la w which woiild have been negatively useful and which though it did only little good, did no harm, Avould have been as efficacious in showing the rail¬ roads that no institution which is of public interest can long remain unaffected by the interests of the public. The rail¬ roads have now become thoroughly convinced of the futility of fighting the people and have for the most part begun to parley with them ; to give them the reasons for their appar¬ ently arbitrary action and also to help them to information which is necessary to the final and thorough solution of the question. All this has in great measure been effected bj^ this legislation—or rather this was an expression of a popu¬ lar voice which had to be listened to and treated respectfully even if it was hoarse and not happy in the selection of its language. In examining the ills under which it is charged that the shipper is suffering we shall see that they are in part evils . inherent in the present system of free railroad building and " ^ the price which must be paid for the possession of the safe¬ guard of a limited railroad competition at certain points. We shall see also that to a far greater extent they are- ■ ' \ flagrant abuses which arise, not from a want of adequate' ' prohibitory enactment, "but from a lack of due governmental suirervision over the railroad officials, and more especially to ' the want of some inexpensive, adequate and trustworthy ' method for summary punishment, when these transgress the ' (j^ already existing and amply sufficient common-law. Less I than this is useless, more than this—at best—superflirous. There is no doubt that in very many cases complaint is made of methods which are really not so much abuses, as they are misfortunes arising from circumstances in which the shipper is placed, a change in which methods would simply alter the incidence of the hardship and shift its un¬ diminished weight from his shoulder upon some other. But 16 even in these nnavoidable cases there is a dangerous possi¬ bility of acttial abuse, in that the power of the local railroad -X official may exaggerate the necessary amount of evil for his ^ own imr]ioses. This possible and in practice frequent mis¬ use of a discretionary power, is while peculiarly injurious in its effect, extremely difficult of prevention, from the circum¬ stance that while injuring one it at the same time tends to the mutual benefit of the railroad and of a particular indi¬ vidual, with Avhose interested aid collusion is rendered very easy. In both of these classes, however, it will be found that many of the charges cannot be considered as proven without 'important qualifications. In some instances where all of ' the facts are admitted, there Avill be no unanimity as to the conclusions to be drawn from these ; some holding these practices to be abuses, and others, by no means unworthy of attention, defending them as in every way proper and useful. In other cases, even of the charges constantly made concern¬ ing practices, as to the character of which there can be no de¬ fence, many are greatly overdrawn and exaggerated. In an examination like this present one—with a serious purpose in view—what we must particularly guard against, is the taking for granted without further inquiry that certain specified complaints necessarily exist to a great extent be¬ cause their presence has been repeatedly and loudly an- nouiiced. We must not forget that the prominence given a certain accusation, when public attention has once been fail'] y directed toward it, is likely to be much greater than is warranted by its extent in time and space. This is so even without taking into consideration the possibility of more interested calumniations. Although by no means intended as an apology for the railroads, it must not be forgotten, that even if they are to a degree culpable in all things charged against them, they may still be fastened upon as fit subjects by parties whose' interest it is at all times to look out for existing evils and defects in the body politic, and to make these appear as black as they can be painted. We have before this heard of I'eform measures in which the protec¬ tion of the oppressed was not the only end to be attained by tlie reformer, and in which the lonely laurel-wreath was not by him considered an adequate reward. This, however must by no means be taken as seeming to imply that there ai'e no perfectly honest and sincere agitators of this ques¬ tion ; but simply that there are many who are dishonest, and that the railroad has often served as a scapegoat, and as a convenient and shining mark, by aiming at which the 17 demagogue is at all times certain, of winning a popular ap¬ plause. But even the honest agitators, have greatly over¬ rated ; in order not to miss they have aimed high. Knowing that the average man is moved more by feeling than by rea¬ son, they have found it useful and necessary for their cause to exaggerate the truth—not dishonestly perliaps, but simply becaiise like the actor they play before a multitude ; and like < the actor they need much color to heighten the effect. Indeed on the whole it will be found, as the result of ax careful investigation, conducted with an entire freedom from i bias in eitlier direction, that these abuses are in general far less freqnent and far less severe than would be supposed from hearing those so often repeated and widely circulated charges made against the railroads as a system. Above all, it will be found that these ills, have in number and in severity, decreased to such an extent and with so great a regularity, that they seem to indicate to the attentive ob- j server that their limited presence, in a new road and in a new country like this, is to a certain extent unavoidable, and that their rapid disappearance as the road and the surround¬ ing country develop, becomes undoubted. After a thorough examination conducted with such freedom from bias, the wonder, I think, will be not that abuses have crept into the administration of a qnasi-public interest which in proportion to its magnitude has been left so unprecedentedly without governmental restraint, but that these evils have' not been far more freqirent and far greater. The practices complained of by the shipper himself as in- jnrioiis and iniquitous are for the most part connected with freight charges. They are ' ' unprst discriminations' ' of vari¬ ous kinds and degrees, " extortion" and unexpected "fluc¬ tuations'' in price. These of course, differ among themselves as to time, place, degree and frequency, but are as a class ^ , sufficiently universal in the railroad complex to be called " inherent in the present system, and although rapidly dimin¬ ishing in frequency, are sufficiently common therein to be ' called constant. While recognizing the foundation for¡' these complaints, yet, in so far as these abuses attach to and are reported by individuals whose interests must at all times nin counter to those of the railroads, we should be prepared to weigh carefully all charges made and to scrutinize mi¬ nutely all testimony received as to their existence, their severity, and theh injustice, and then to make due allow¬ ance for all bias and disposition to exaggeration. We must not forget that most men who are injured will, when in doubt, rather blame an agency which in theory at 2 18 least is amenable to a public control, than ascribe an un- jheasant result to their own lack of facility or faculty. The injured shipper himself although perhaps entirely honest in his belief that he is being greatly wronged by the railix)ad, will often be blinded by a biased judgment, will only see how a certain line of action touches his personal in¬ terests, and will never think of asking whether his misfort¬ une may not arise h'om circumstances entirely beyond the carrier's control. Take, for instance, cases like the follow- ing ; If he lives inland he will find cogent reasons why the rail¬ road should equalize his position with'that of his competitor upon the sea-coast. If he lives at tide-water he will blame the railroad which seeks to deprive him of the benefit of never so small a part of the advantages due to one so favor¬ ably situated. Is he a small shipper ! he will complain that tlie tendency of the age is to make the rich richer and the poor poorer, and he will call upon the iron horse to lift part of the biirden of his poverty by stopping at his farm- lu)use to take on board an occasional half-ton of hay at as low a rate as that for which it sweeps along the dail^' train- load for his richer rival. But this very same richer com¬ petitor will find reasons just, weighty and logical, why it is for the good of all concerned that the advantages which the very magnitude of his operations atford, should be adequate¬ ly utilized so that he may sell at a lesser price than can a smaller dealer, and that these should not be rendered nuga¬ tory to him as well as to the community at large which profited by his facility, by the introduction of sentiment into the realm of what should be impartial justice. If he lives in Baltimore, which is much nearer the West than Philadelphia, New York or Boston, he will find it pre¬ posterous that any one should dream of a différent basis for making charges, than that aifoi'ded by distance. Therefore, taking the distance between Boston and Chicago as a stand¬ ard, in so far as Baltimore is twenty-two per cent nearer, it sliould receive full benefit for this advantage in situation. The shipper, however, who lives in Philadelphia, which is only eighteen per cent nearer than Boston, feels instinctively that the distance principle is dictated by a regard for the eternal fitness of things and its justice can be controverted only by a madman, but that moreover in so great a dis¬ tance, so slight a difference as that between Baltimore and Philadelphia slioidd be disregarded and his freight should be carried fidly as cheaply as any from Baltimore. But, mirabde dictu! there is still another point of 19 view taken by the New York man who is eleven per cent worse off than the Baltimorean. He does not at all agree to the latter's way of thinking. Distance, to be sure, must enter into the consideration at times, but not at all in this instance. Distance deserves attention only where it affects cost. Cost alone should determine. What difference does it make if you carry ten miles or a hundred, as long as it costs less for a hundred ? And strange to say, the physical character of New York roads as to facility of operation is such that by a marvellous coincidence, if this only possible fair principle for charge were recognized, then New Y^ork freight would be carried fully as cheaply—in fact—New Y'ork shippers will be generous and not insist upon their strict right to have freight carried even cheajDer than that from Philadelphia or Baltimore. But, such is the diversity of human minds, there is still another opinion. The average Boston shipper wonders how such fallacies can for a moment be tolerated by the other¬ wise clear heads of New York, Philadelphia and Baltimore merchants. He admits that the principle of distance is almost perfect, the principle of cost however, is just as good ; each of these, in fact, would suffice as a standard if there were no other better basis. But if either of these were adojited it would do a grievous wrong to all the other cities. No, there is only one absolutely perfect principle, and its adoption should by no means be hindered because it inci¬ dentally (of course) would place Boston in a far more ad¬ vantageous position than it occupies at present. This long- sought for principle, this philosopher's stone, is that of ex¬ port reqiiirements. Although Baltimore is twenty-two per cent nearer Chicago than Boston, it must not be forgotten that Boston is just this distance nearer Liverpool. Now, as, of course, the bulk of this grain goes abroad, the real basis of calculation should be not the accidental one of cost, nor the one of vicinity to Chicago, but the distance from Chicago to Liverpool ; the American seaport cities should be regarded only as points upon the route ; they should ^ therefore all be served at jjrecisely the same rate. And thus they reason ever. But no matter which principle is just, while this dispute continues, hundreds of letters flood the daily press ; letters in which the railroads are continually assailed ; and each complaint becomes a first cause in many minds, which are ever after imbued with the idea that a system must be rot¬ ten to the core to tolerate such practices as respectively ; Allowance for quantity, or no allowance ; extra charge for 20 local freight or simple charge ; distance piinciple, cost basis or export requirement. Bnt, even were there no exaggeration and no bias, no tendency to compare the flowers cnlled from the garden of tlie shipper's morality with the weeds dug ont from that of tlie carrier, tliere aje"^ yet many complaints made of prac¬ tices which still give'rise to grave differences of opinion regarding their justice, and doubts respecting their expedi¬ ency ; donbts, not only on the part of the shipper or of the railroad immediately in interest, bnt of men free from bias —disinterested statesmen and critical economists. Many of these are solely questions of policy, many solely of princi¬ ple : in some cases it is entirely a matter of expediency while in others there is necessary a delicate weighing of rival interests in whicli the greater harm to one mnst be off¬ set to the lesser injnry to many ; and in which, as we have no flxed standard of benefit, the direct good to A can with difflcnlty be compared with the indirect advantage to B and C. In examining the different practices of the railroad of which so frequent complaint has been made, we mnst not forget to allow for onr precedents—the decisions of the ccnirts in individual cases, and the reports of investigating committees called into being for the special purpose of ex¬ amining as to the treatment which a certain city or district has received from a specified railroad. These precedents jndge every case that comes nji strictly npon the merits of that question and \vith reference to that alone. We, how¬ ever, for the pnri')0ses of onr examination, mnst look not only at the dh ect and immediate effect which the adoption of any line of policy would have upon a particnlar shipper who complains of injustice, Tipon the section throngh which the line in controversy may run or even upon the whole State in which it lies—but it is our duty in the examination or in passing our judgment upon some coarse of action, at the same time to try and foresee the indirect and consequen¬ tial effect wliich uniformity in the adoption of such a policy as a whole would probably have npon the material welfare of the entire nation. But at the same time in our search for the best means for securing such a general welfare we must not forget that the evil which the shipper suffers and which is at hand is posi¬ tive, and so if we can clearly trace it back as the result of the present state of affairs, we would only be warranted in retaining such a system, either by seeing far greater attend¬ ant benefits or by detecting fully as many drawbacks in every jfian proi)osed in its place. As for calculating be- 21 forehand the amount of indirect harm any change in an ex¬ isting policy might cause it is manifestly impossible ; even the direct amount of good or evil which such a change would bring about canpot be discovered exactly nor approx¬ imated rapidity. Buc/^without even trying to calcidate the amonnt of direct or indirect good or evil caused by the retention or adoption of any course of action, we must remember that a policy which we allow to remain or to come into use simply becatise " it will do," is, if a mistaken one, likely to injure not only where it does direct or indi¬ rect harm as a restilt of its working, not only where it lulls to rest those who wottld otherwise be upon their guard, but also because when once introduced it obtains as it were, the sanction of existence and makes a change for the better doubly hard. These facts we must bear in mind in passing our judg¬ ment upon those of the ]>oints at issue between the railroad and the peopleJ which are not so much denial of the exist¬ ence of a practice, as a defence of that practice as being in accordance with the requirements of a sound public policy. It is especially in regard to tliis class of questions that we will find the greatest discrepancy in accounts of the benefits achieved by the prohibitory legislation so pojuilar in the AVest some years ago and which, as we saw, is now struggling for the Congressional recognition. In these enactments, tlie penalties were uniformly directed, not merely at offences universally recognized as such, but by reason of their inelasticity they necessarily included and forbade practices which even the common law would not de¬ nounce as a class, and others which this law would indeed recoguize as wrongs but as to the force of its reasoning in which recognition there was a fair difference of opinion. This difference was raised by a doubt whether in this direc¬ tion the slow pace of the law had kept ttp with the progres¬ sive needs of commerce. Statutes have before now been fotind necessary to change the direction of a system of law which after all is only the crystallization of old customs and still older modes of think¬ ing. As upon the one hand it is just this quality of perma¬ nence amid constant change which gives to law the virtue it has, so on the other must it not be forgotten that too great a permanence is retrogression. In its application to this qiiestion then, the unchanged continuance of a law which though it may be just and adequate in its application to a common carrier, who serves ten neighbors with his cart, 22 is not necessarily as perfect when applied to a vast agency that for every cart its peeudo prototype dragged, whh-ls its hundred trains, and deals with thonsands where the carrier dealt with one ; an agency indeed, indubitably to endow which with the joint character of a common carrier and of a pxiblic highway of which the common law treats, repeated reiteration in statute and even in Constitution (jp) of the State itself has been found necessary. A profitable lesson indeed might be read by these uniformity loving legislators in the 7 and S Geo. IT., c. 391, repealing several prior statutes relating to common carriers which had become necessary years before. This repeal was upon the express reason that they " are at inesent inoperative and inapplicable to the present times, and should be repealed." It now became manifest that here was a clear failure of laws which worked adequately in the case of a small carrier, btit not only had no beneficial effect when applied to a rail¬ road, but were the direct source of many a hardship'to those who managed this enormous agency, as well as to a great part of the public at large. The reason for this failure, however, was not set down as it should have been to the in- I herent functional disparity between these two merely quasi- analogous agencies in which a so great difference in degree ' was tantamount to a difference of kind, but it was held to be simj^ly due to a perversity which on the whole was quite natural in a creature born, not of woman but of law, and one which, being a corporation, had " facilities" but no body, and though immortal, "had no soul." Even now, Avhen nothing has been more frequent than their re- and re-enactment, and nothing more complete than their failure, these good old laws of our forefathers, full of the latent power of many a repeated " whereas" and " hereby" * and "be it enacted" are still I^eing inscribed upon the lYesjern statute-books by this time full to bursting ; con¬ tradictory in some of their demands, impossible in many of their requirements, andtotally unnecessary as far as regards the only cases in which they are practicable. These laws, just as we have seen in tlie case of a mistaken policy are directly harmful even if In no other way, at least in that by their jiresence they lull to a fancied security the guardians of the jieople's rights, and thus render more diffi¬ cult the enactment of better ones in their place. In tlie repeated attempt to solve this freight problem much harm has been done the people by this inconsiderate * These ßfjures refer to the notes. 23 haste to act ; by this " do something" desire, and by the self-sufficiency of "statesmen" who while they hope to know by intuition, act at hap-hazard, who think it deroga¬ tory to their dignity to study a disease before venturing to prescribe a cure, and whose principal aim judging from their actions, seems to be not so much to discover a remedy, as to be delivered of a statute. It must not be forgotten that each failure not only prompts the law-breaker to additional boldness, but while this useless act remains upon the statute book, it precludes the trial of any other expedient in its place, and after its repeal strengthens the opponents of legis¬ lation as a remedy for any abuse in their cry of—" whatever is, is—{cum granó) best." It must not, however, be thought that this specific legis¬ lation did not do some good. Far from it. It served as a means by which to awaken the railroads from their pleasant little conceit, that they were absolutely private institutions and owed no duties whatever to the public. They have by this time been shown their errors, and for this we must thank the Q-ranger legislation. It has served its purpose. The statutes that have been passed for the purpose of regulating railroad charges and duties, are in many^cases strengthened by constitutional limitations providing against their repeal. They declare as a class that railroads äre highways, common carriers or turnpikes ; that they shall charge so much per mile ("equal mileage"); that, they shall not charge more than so much ("maximum") ; that they shall charge at least so much and not go below the price ("minimum"), or that they shall charge so much for the " haul" alone, and so much for the terminal handling ("divisional"). They also prohibit many things. There shall be no "special," no " secrét" orno "preferential" rate; no " abatement," "rebate," "drawback," or " com¬ mission" shall be paid the shipper. There shall be no "allowance of false claim" and no "extra favor." No charge shall be for more than " actual cost" of transporta¬ tion with ten per cent "profit." There shall be no"extor¬ tion or discrimination. Eates shall be public, shall be changed only upon notice, and there shall be no wars. These prohibitions are strengthened by a generous addi¬ tion of all kinds of damage claims and penalties ; but, strange to say, only lately have they been fortified by the addition of that element from which alone any good results might have been expected—a special executory force in the shape of a commission which can easily and cheaply be called into action. 24 Some of these provisions, it is seen, merely declare the common law, while others contradict themselves. All of those which try to regulate charges directly by what are known as ''hard and fast" rnles are, we shall show, worse than useless becanse of their inflexibility. It has been often fonnd that for every case of overcharge thev prevent they are the canse of ten ; and that twenty cases of nnjnst discrimination arise wiiere they hinder one. Bnt, what above all mnst not be forgotten, is that as in the case of every ineffectual law, they do an indirect harm in so far as that'they blind many anxions observers, and by their presence perhaps prevent the adoption of means more suited to the end. On the whole, however, after making dne allow^ance for all false testimony on the part of interested agitators and for all possible bias and exaggeration on the part of the complainants themselves, many, many abuses remain which are inexcnsable, flagrant and ruinons in their effect. How to cnre and how to prevent these is the immediate question. But interwoven with these are many practices which are strictly evils and by no means abuses. These can be success¬ fully removed by the unaided " Be it enacted " of the sapi¬ ent legislator, as little as can the presence of a pestilential disease be so banished : like the presence of such a disease, however, even these mnst in time yield to a proper treat¬ ment. rnfortnnate now, as may be the joosition of those so situ¬ ated as to be exposed to the operation of such, for the present at least, unavoidable evils, the results can in no wise be at- ti'ibuted to the managers of the railroad and could not on the whole be improved by any violent or radical change. Owing to a jiopular fallacy wdiich sadly needs correction, these results are always attributed to the managers ra the .system by the use of arguments more or less plausible— in fact if they were not so plausible they would not be popular. These unfortunate results, however, are simply the friction attendant vipon the operation of a force which has revolu¬ tionized our entire manner of living, and especially our commercial preconceptions ; and for which we should no more blame the railroad system than could the feudal knight with due regard to the world's progress blame the manufacturers of gunpowder because its introduction sealed the doom of his steel-clad supremacy. These evils we can¬ not cure. But what we can do even to these, is by clearly I ■^•^'- ■ ^ ^ ^ . 1 t''^ /^-'^— ^Pvij— c^"^—í'v—l/"^— L ¿C?V«—^ 25 stating wlierein they differ from real abuses, to bring about a better understanding of the entire subject. Such an un¬ derstanding will doubtless lessen the complaints of the im¬ aginary evils, will to some degree prevent and cure existing abuses and will at least lighten the burden of those hard¬ ships which cannot be escaped, by enabling those subjected to them to prepare for their incidence. We come now to the more detailed examination of the different practices of which the shipper so loudly com¬ plains, and to the closer study of the various enactments by which their cure has been attempted. In order thoroughly to understand these causes of complaint and their origin it will in some cases be necessary to go more carefully info particulars than we should like for the sake of the reader. \ Although perhaps uninteresting as a matter of general in¬ formation, such an examination will in the study of this part of the subject be found to be absolutely indispensable, as these details enter into the very essence of the question. They, and they alone, determine between the advisability or in advisability of a disputed policy and between the practica¬ bility or impracticability of a proposed measui-e. No law can adequately remedy abuses of a moie or less general commercial character, which does not take into considera¬ tion existing commercial methods and practices and which does not form as it were a natural sequence to these. The law must be adapted to these practices as long as they do not run counter to a sound public policy—for the law exists for the sake of these worthy practices—not they as a littiug subject-matter for law. But these methods can only be mastered by a careful study of the circumstances- to rvhich they owe their origin and which, judging from experience, make their employ¬ ment a necessity. It would be far more pleasant and far more gratifying to our sense of an innate legislative wisdom to be able to evolve fitting laws from our inner consciousness and to settle all diificulties by an intuitive flash of reason ; it would even be easier not to notice them at all or to sweep them behind us with a Podsnapian gesture—but it would hardly meet the same want. Nor miist it be supposed that the examples given are ex¬ ceptional, and that they are not of suificient importance to stand in the way of the adoption of a general law. Far ' from it. Tliese are simply cases that have come under my personal observation, and could be reinforced by the addi- 26 tion of many more of eqnal importance. The objections and difficnlties are by no means like men of straw^—bnilt merely so that they can be knocked down, bnt occnr in daily prac¬ tice in any of the thousand freight offices in the country. If now we can foresee sncli difficnlties—what conld we ex- jiect to see if any law disregarding these plain hindrances were passed i The conservative may often stand in the way of a useful reform, but he never precipitates unexpected and entirely unnecessary troubles. P' III. DISCRIMINATION. A DISCRIMINATION exists where a railroad gives to one in¬ dividual or place some advantage or denies such individual or place equal facilities or treatment. Whether this be just, or unjust depends entirely upon circumstances. In the sight of the ^Ikw a common carrier (and hence the railroad) is one " who undertakes for hire to transport the goods or persons of such as choose to employ him, from place to place," and his duty is to carry what is offered him " at a reasonable rate, within a reasonable time and without undue discrimination." In each one of these injunctions there is a variable element, in each case to be fixed only upon full determination of the actual facts. The question of discrimination is well summed up, from the legal point of view, in two very recent cases (7) holding that the law will aation inures to the ound to carry for all at reasonable rates the carrier is by no means bound to carry at equal rates." iß) After the railroad officials, especially of the Western roads, which had little or no competition, had transgressed every law constantly, systematically and to a most exasper¬ ating degree, and aftey they had to all appearances taken for their motto that ' ' no shipper has any rights which a railroad is bound to respect," the total inadequacy of exist¬ ing laws which did so little to protect from these so flagrant ills, was taken for granted. So these States determined to enact others. Here was the mistake. They did not realize that the failure was due, not to the inadequacy of the existing, but rather to the insuffi- ciency of any law whatever, without some special supervis- p, ing agency with an executory force, which could at all times be counted upon and could be easily, safely and cheaply called into play. Of such a force we will speak again. Prom this time these States began to let flow that torrent of enactments of more or—more severe a character which has become famous. Not one of these enactments, however. some injustice in- 28 prevented this evil to any great degree. Nor can snch laws _ lia^ e this liaj^py effect, as discrimination {;an be practised in - so many ways and so easily that after examination it must be conceded that the practice can be stopped successfully only by striking at the root and by taking away as far as jT may be, the incentive and i^artial necessity for such action, " I in those cases in which it is unjust. The only advantage that the constant enactment of any of these laws gave the shipper, was that of a penalty to be I'ecovered which was out of all proportion to the amount of actual loss the plaintiff had been put to. The common law gave only what was directly overcharged, and would give this only upon clear proof that this was the direct and measnrable harm. In the case of most small shippers the cost of securing this through all the long appeals and " the law's delay," which the railroad knew so well how to sum¬ mon up, was far above anything that could be recovered ; and so the addition of this bonus to the injured shipper greatly increased the number of complaints brought before the courts. In some instances indeed costs were awarded against the railroad in either case—every unjust accusation cost it as mhch as one founded upon its misdemeanor. In fact it was a clear case of predestination. Such a procedure can be justified if at all only upon the ground of the direst necessity for self-protection. What can be noticed as influ¬ encing much of the legislation of that day is the often repeated fact that the injured shippers were in all cases citi¬ zens and the stockholders of the roads were always ab¬ sentees. But notwithstanding all this bleeding of, the ''bloated corporation," it did not have the anticipated effect and this was simply because—it could not. The objection to more direct legislation as a cure for discrimination lies not alone ^ in the difficulty of framing a law which shall meet the evil ^ and do no other harm at the same time. It lies as much in the ease of evading any law which has until now been raised against it upon any of the time-honored patterns, and the difficulty of detecting any evasion as long as such eva¬ sion is to the direct and sole advantage of the two in¬ terested i)arties. Tliere has lately been great dissatisfaction caused in England, by the operation of a law which was passed in 1854, and is known as the " Card well act." This was based upon the idea of facilitating the determination as to the rea¬ sonableness of any charge. It followed the principle of the 'y .1* t ¿^ J-' lí>^ 29 "most favored nation" treaty clause, and the construction given it was that the lowest special rate which the railroad made to any shipper would be presumed to be reasonable, and hence what should be charged all like shippers, and the railroad would be estopped from denying this excepting under clear proof of some special adequate reason. When first passed it was hailed with joy as being the touchstone upon which the false reasoning of the railroad could be de¬ tected. The only effect ho^vever, it has had, was that of to a certain extent lessening the num.ber of purely preferential special rates ; but it has been complained that in many cases the railroads have made up by extra charges allli around, what was lost to them by forbidding the employ-t ment of a convenience and method of economy. We here see one of the many cases in which, what iipon its face seems an evil dictated only by absolute disregard of the plain diity of a semi-public agency, but which is really at times the result of well-grounded policy, is not removed by most careful legislation, but is simply shifted upon others. — It may not at first sight be seen what liitcie~:i a railroad has in breaking a law, for tlie purpose of discriminating in favor of a shipper and perhaps of carrying for him below cost. Leaving out of consideration the cases in which there j is a direct quasi-partnership^profit dishonestly made by the railroad, also passing by those cases in which a director, or officer of the road favors himself or some friend in this way/^here remains the ordinary and much complained of special rate system. Take as an exampld\;he following : Most railroads terminate at two comparatively large cities, which are of course " competing points." Owing to the now not so frequent violent competition at these points, the railroad often finds it in the highest degree useful to have a certain fixed amount of business which it can count upon and which it can be sure that its rival will not take away. All of the local or way business is, of course, of this charac¬ ter, but many parts of the country are too poor to support the road even if it pursued the policy so often charged against it : asking as much freight as the property can bear. In order therefore to be sure of a certain amount of business wherewith to furnish the sinews of war, many roads have made it a practice to go into various forms of special rates, among them what are called time-contracts. Naturally no shipper will without due advantage bind himself to send all of his goods by a particular line, from a place at which it is safe to expect that competition between the roads will cause ArvuÁ}—'^ 30 a fluctuation in price. He-therefore exacts special rates and. privileges in return. In this class of cases the right in law of the railroad to do this is bounded not by the line which circumscribes private ^ action, but by its quasi-public duties. If it were strictly a 'T pri\ ate business, no objection whatever could be raised to a fairly and openly stated line of action which had in view sucli a legitimate' purpose. This same policy is constantly followed by every business man who feels that upon occa¬ sion it will'pay him to sacrifice a possible future benefit to a present need. ' Taking even the most extreme case the rail¬ road carries at an apparent loss simply so as to obtain ready money. The loss is called apparent for the reason that, as we will see later the actual cost of doing any particular ser¬ vice cannot be accurately determined and can be less and less nearly approximated in proportion to its smaller ex¬ tent . In our final discussion, \as to the economical cost to the entire community, of saving an individual from dis¬ crimination of this character, we shall again take up this question. In hearing these constantly advanced statements and the often repeated complaints of discrimination without motive, and to such an extent that the road carries for loss, careful attention should be aiven to even the probability of the truth of the charge. The railroad corporation can surely not make money by the transportation at a loss. The only alternative is thai it may be in partnership with the favored shipper, and divide the profit. Of course this has been dis¬ covered at times, but it would only be worth while in the case of commodities in which there was a fixed competition in the markets and in which the transportation charge is necessarily high. Tims prima facie the evidence is against any such action on the part of the railroad itself. Then comes in the possibility that the shipper shares his profits with some manager or freight agent who in this case is cheating the road and also the shippers. But most roads are now run so well that there are many checks against any such action on the part of an official. The pipbability is that there are not many discriminations which do not come to light. vr*s Í >; ^ /OA /i ^ J, /- A 'r- ^ IV, METHODS OP DISCRIMINATING. OxLY the principal methods will here be given, as these will nndonbtedly suffice to convey an adequately clear idea of the difficulty of preventing the employment of such means by any predetermined rule which does not contain much more than even its framers intended. We will first take up the method of 1. conwissioYS. Every road of course aims at securing as large an amount of business as possible. I* order to obtain the best men as agents their salary is usually made to depend more or less upon the amount of custom they bring. This, then, will induce these when a shipper is hesitating between two rival lines, to offer to share with, or even to give to, the customer the entire commission as an incentive to shif)ping by them. ^ He knows, when the latter has once made definite ar¬ rangements to ship by the line he represents, that he will probably remain ; if so, this present sacrifice of his commis¬ sion will be repaid the agent by his being credited with having secured a large shipper. This method of jDayment of a part of an agent's salary, by commissions upon amounts secured is not peculiar to railroading operations, but is used with advantage in most businesses, notably in insurance agencies ; all of these occa¬ sionally show the same zeal and use the same method of sacrificing their present profit to secure the customer. But in no other business are (he effects so disastrous as is the case here as the saving of the commission will often make a living profit. Such pure should be stopjjed if possible, not only on account of its inherent dan¬ ger, but also for the reason that under cover of its occa¬ sional necessity the roads make use of the practice as a regular means of secretly underbidding rivals ; they can at all times regularly reimburse the agent, merely using his act to cloak their own breach of the law., This is one of 32 tlie few methods of discrimination wliich can be reached by a statute. Another means of discriminating is by the use of 2. EEBAÏES AXD DUAWBACKS. The method here is in general the same in principle as the government drawbacks used in every customs service. It consists in taking full price from a shipper and afterward returning him a part thereof. Now, in general, such a mode of procedure would apirear dangerous, no matter for what good reason adopted, as it may serve as the means by which the most flagrant discriminations can be secretly prac¬ tised. There are, however, cogent reasons advanced by the railroads in favor of its occasional utility, among them the following ; When one of two competing roads wishes to obtain cer¬ tain business at a time when rates fluctuate, it has been found that the best way of securing a customer is to carry his freight at a certain price and tlien, when at the destina¬ tion it is seen that the competitor under like circumstances served for less, the carrying road gives a rebate wliicli shall equalize the amount paid by their shipper with that paid by his rival upon the competing line. Of course in this case the necessity for such a system rests upon the fact that it is based on the power of the roads to fluctuate in tlieir charges and it may be objected that all roads should be forced to have a certain fixed tariff ; in which case no such practice would be necessary. Concerning the ad^'isability of a fixed tariff we will examine later, but the jioint here is not only whether this method is founded on reason and necessity, but also whether any law can be drawn so binding as to prevent collusion between two so interested parties. In 1 ])ractice it has not been found so. When innocently used this method of allowing a rebate is nothing more than an account current between the railroad and the shipper, by which the latter is credited with any subseqiiently disco^'ered overchai-ge. Rebates are also generally made openly to shipjiers who pay promptly, take away their goods japidly, and are in general easj^ to deal with. In effect this is nothing more than the " ten per cent off" so customary in all mercantile transactions. We must concede that here is not necessarily an abuse, but rather a practice which could be made a valuable aid in the rapid and economical transaction of business, and if the discretionary jiower of the manager could always be trusted ¿^^-»^-4^*72^ <^-á2Zi«^ 33 or all danger of inisnse be eliminated no objection conld be taken to ir. Bnt it is jnst in this possibility of misuse that the danger rests. There" are, however, in addition to these above specified general instances, certain special cases in which the utility and even necessity of such methods cannot be denied ; in which, moreover, any general prohibitory legislation would i-esult in increased expense to the railroad which would then simply shift it n]3on the mass of shippers. Take a case like the following illustration by Mr. Blanchard (1) : A manufacturing establishment is erected which will take in every month fifty car-loads of supply and will forward twenty-five of product. To be assured of siich quantity and regularity (which as we shall later show at large greatly in- fiiience the cost), by which station, train and other expenses can be regulated with economy and certainty, is a valuable railway consideration, and if tire railway j)rovides improved facilities upon such assurances, and then fell materially short of the assured traffic, it would increase rather than de¬ crease expenses. A new siding is mayhap provided, a new storehrurse erected, an additional clerk and moi'e laborers requir'ed : and to secure the railway for this outlay, and at the same time to provide a penalty for the non-fulfilment of such engagements, it has become a custom to charge a local rate, and at the end of agreed periods r-efund an amount justified b\^ the volume and regularity of the traffic ; or to impose the penalty of Avithholding the excess in case ship¬ pers fail or refuse to comply with their agreements. In this case it simply protects the I'ailroad against bad faith upon the part of the shipper,"and a means by which good faith is secured at less price, more surely and more speedily than by subsequent apiilication to -the courts for relief. Or take another case—one where the railroads have found it necessary to protest against the general way in ivhich their cars were used for storage because the shippers do not make due haste in removing their goods. Hei-e, to be sure, the roads miglit have made each shipiier pay for the extra time he detained the car and, hence the additional expense to which he put the railroad, but in practice it has been found much cheaper and much easier to put a uniform extra chai'ge at tlie terminal points and then to give public notice that if any consignee unloads the car within say twenty- four honi-s after its arrival, the railroad will refund this exti'a amount ; if he does not, it will retain it (IS^). 3 I I 34 These niethods explained by lliis light are surely nothing more llian t)rdinary mercantile expedients, and vary so ol'ttm in detail that no inflexible law can be made to stop their adoi)tion in cases where they are abuses without gi'eatly liainpering the railroad at the same time. Simply to forbid them, and enforce the prohibition by ])enal legislation which is the general method used in all the Western statutes, would not greatly lessen their employ¬ ment in the cases in which they are a wrong and are against the law as it now stands, while such a statute might prove A ery harmful in many cases in which the present di'awback system Avorks an atlvantage. There is still another kind of rebate AAdiich is often C* , i found expedient and Avhich deserves attention. For in- stance: An inland manufacturer of some article comes to the rail¬ road and says that if the rates were lowered to a certain tignre, he could compete in some siDecifled foreign market, aa'irh the foreign manufacturer, but that he cannot do this at the present rate ; he therefore asks for such reduction. The railroad if it reduced the price outright aa'ould hua'e no Avay of flnding oirc Avhether these goods Avere really shipped as claimed and might be in constant danger of having suit brought against it by some one aaIio had paid more for a like service to the seaport of shipment. To pi-event such an occui'rence the railroad demands the full price from the would-be exporter, but alloAvs a rebate upon his presenting a foreign bill of lading as proof of his bona fide exporta¬ tion ; in this manner it escapes the charge of unjust dis¬ crimination against the other shippers. As to the policy of jalloAving a lower rate under such circumstances and for ex- /jport purposes, for exactly the same amount of work from J the railroad Ave aauH examine later. This simply amounts to an arrangement by Avhich the price of carriage betAA-een the iilace of origin and the foreign destination is '^pro-rated'" by the railroad and steamship cond)ined ; and the seaport at Avhich the rebate is allowed may be considered as simply a station upon the through route. Noaa', in so far as the sailroad makes some profit by rhis transaction^ it most certainly does or it Avould not regii- larly engage, in such practice,'; no other shipper is in anj'^ Avise taxed for this carriage ; and as the article which has thus been favored does not compete in the same market Avith anything wliich has paid full rates, it is difficult to find any Just cause of complaint here. à /W^ 35 All of these exceptional cases, however, together with many more jnst as permissible, have been made the subjects of general assault by interested parties or impetnons enthn- siasts nnable to distinguish clearly between real and fancied wrongs, andhavé become so interwoven with the real abuses , for which the railroad is actually at faulty that they wete in- eluded in the constant anti-railroad legislation which here took on the shape of penal prohibitions of rebates and draw¬ backs. This legislation, while" having in its favor that it gave to the honest railroad official the moral sanction of its presence in helping him refuse to give any purely preferen¬ tial drawback to dishonest and importunate shippers, still had the fate of every law which is recognized by the com¬ munity as too rigorous ; was broken constantly where it was found to press too harshly and to work injustice, and grad¬ ually became a dead letter even in those cases in which it was really useful in preventing abuse. To revert again to the merely administrative difficulty of preventing this method of discrimination, where it is to the interest of all parties concerned to make use of it, we need remember only that it may be practised by the aid of a third party ; by piior arrangeaient with connecting lines ; by voucher a year or more after the transaction ; and in many similar ways. Cases have often come to light in which by collusion, fictitious claims for damages were allowed ; in which a greater amount of freight was carried than was specified upon the bill of lading ; or in which by accident—of course/ occasional shipments would not be charged at all. Railroads have also been kno wn to give a shipper of grain, for instance, a contract for supplying steel rails—of course his commission upon this was nothing more than a rebate. Another method of discrimination is by granting or with¬ holding 3. SPECIAL FAVORS AWD EQUAL FACILITIES. Any special favor or undue facility awarded to one ship¬ per will be a discrimination against such of his competitors as are not similarly treated. Speed, by which one shipper's goods are regularly delivered to his consignees before those of his rivals ; storage facilities, by which the articles remain at risk of the railroad and the expense of warehousing is saved ; or terminal facilities, ,by which one man receives un¬ due benefit and advantages from the way'in which his prop¬ erty is treated. These are undoubtedly in the vast majority of cases, unjust 36 and purely preferential, but unjust as they are. no statute cau be laitl down which can be even approximately followed without either greatly" hanqiering commerce or else forcing the railroad ofñcials to transgress thejirw. Take as exam¬ ples several of sxicli statutes : Many of'the "Western States, thinking to cure one evil, enactedofliat goods should ''be transmitted in the order in which diey are received." The I'esult was that if, for exam¬ ple, ther e was a press rrf business or an insirfficient number of cars, perishable goods like vegetables or eggs would either have to be left behind till they could be taken in their turn and so perhaps be spoiled, or the law would have to be broken by carrying them" out of their turn. In either case the r-aihoad rvonld be the su%rer without a corresponding benefit to the people. The coh^on law here, simply for¬ bids pi'eference without good reason. Again : ¡Suppose as beform that a railway is for the mo¬ ment short of cars ; would it not be justiñed in forwarding hrstythe most valuable goods even if these had been received last, if it does this^for the purpose of freeing itself from the risk which attaches to everything in the care of a common canfor (lordd any such law d(^ what was expected, and nothing more ()]■ again : take as an examjde, another of the enactments of that class : "no carrier shall make any extra charge, for extiu speed."' Is not this law trarrsgressed every time wiien an express train takes perishable goods to a market, even ^vhere the shipper desires to pay the extra price Í Is it not upon this piinciple tliat passage irpoir the " lightning exi)ress"" usually costs more thair upoir the way-train t To obey this law the railroad would either have to keep to a low uniform speed at all times or else give the high speed which costs proirortionately moi'e to maintain, at the lower- rate. Aor could " ecpial expedition" be given in cases where tlie I'oliing stock was ditferent in construction for fast and slow movement and where only that suited for the latter - _ a_ third examide : A law which commanded "ecpial facilities in storage." It is a constant custom to make a lower charge when freight is to be takerr at the con¬ venience of the railroad at a time when it has a srrrplus of empty and idle freight cars. In the mean while it remains under the warehousing care of the railroad, perhaps with¬ out additional charge. Is not this fair Í Would it be a dis¬ crimination on the part of the railroad if it refused in like manner to store freely, ior the same lengtli of time, a ship¬ ment that had to be^aken upon a certain day no matter how inconvenient to me road nor how crowded it might be >. Or take the case of goods sent say from Chicago to Liver¬ pool which arrive at New York on Sunday and the steam¬ ship line by which it is to go has no steamer sailing until the following Saturday ; the railroad is under its bills of lading reqirired to liolcl the goods for that sieamei'. Should it then be forced to store all goods free for six days How could a law be made which should amply allow for these special though common cases without being a mere nullity , - • Take again, for a fourth example, a statute paHihg for "equal handling facilities and chai-ges." (^'iPreights are received, delivered and handled at different stations undei; various conditions : (u.) At the railway station buildings and handled by its employes. (Ö.) In car loads upon the railway's sidings to be there unloaded by consignees or the employés of the railway. (c.) To be unloaded by the railway or consignees ui^on sidings privately owned as at manufacturing establish¬ ments. {d.) Lpoii sidings owned jointly by private persons and railways. All this variety of service involves different charges whether based upon an approximated cost of service or upon mutual agreement. Or take a case like that of the Erie Railway which (47 makes deliveries about New York Harbor at over one hundred points of delivery other than its stations^including all sailing ships and steamers at their docks, vessels at anchor in the harbor, and at ^varehouses private and public. To be sure the case of a railroad ter¬ minating in a city like New York is exceptional, but the difference between the difficulties in this case and in that of a smaller place are merely of degree and not of kind. In this whole matter of trying to draw up a law which will insure equality of treatment to all, irrespective of cir¬ cumstances we are constantly met by such difficulties and are brought to the recognition of the improbability of fram¬ ing an enactment which will upon the whole turn out as satisfactory a result as that brought about by the unaided or unhampered actions of the laws of trade. All that can be acfiieved, is to prevent the abuse of a so necessarily wide- reaching discretion in the hand of the railroad manager ; and 38 - above all in every way to facilitate the obtaining of justice in cases where such discretion has been abused. The last method of discriminating we shall examine is that by SECRET RATES, ETC. In general, purely preferential rates are strictly secret. There is in some cases some slight advantage to the railroad to be gained by secrecy, especially in the matter of not having a competitor "familiar Avith all these details ; but the evils to the general public so far otitrveigh any good, that no rate should be permitted to remain a secret. We will examine more at length as to the advantages of and difficulty in securing an adequate publicity Avhen we come to take up - '/the question of fluctuating rates. ""Having described some methods by which discrimination is practised, Ave Avill see Avhether the railroads are in all cases as culpable as claimed, in defending practices which are almost universally branded as unjust discrindnations. 'Ji^ ez i^-i-^^^-^-e- iZ. -ir^^sj-^^JLiL^ PERSONAL DISCRIMINATIONS. PeksotsI'al discrimination is said to exist where one ship¬ per is favored above another ; and such inequalities of treat¬ ment are in general for more or less inadequate reasons. This practice when based merely npon personal favoritism is absolutely inexcusable and is deserving of the highest | condemnation. This is so, even where the person so advan¬ taged is a director of the discriminating road who has ^ entered the board for expressly such a purpose. This difference in transi^ortation charge is often, in these days of hot commercial competition, enough to turn the scale and to enable one man favored by the railroad to make a living profit and irndersell and perhaps ruin his competitor and less fortunate rival. From carrying below regular rates it is but a step to carry at mere cost of operating—this step, however, puts upon the unfortunate co-traders of one so favored the additional burden of paying for his share of the fixed expenses of the road. At some non-competing points it is absolutely in the power of the railroads to ruin one or to elevate another ; and they have frequently exercised this power. In these cases, i, however, the common law can, if called upon, give adequate f redress, but only after the qvil has been done. Injurious as it is the practice has been impossible to pre¬ vent by means of any known formula. The general statu¬ tory enactment is to treat " all alike under like circum¬ stances," but this does not in point of clearness advance the question much beyond the common laAV injunction to the common carrier. Behind this seemingly sufficient clause there lurks ample chance for discrimination. There are, however, cases in which it woidd prove harsh to enact strictly that under no circumstance should allowance be made. Take, for instance, a case like the following : Two millers ship regularly upon a road under conditions alike in every particular ; they both own the customary sidings upon their own ground, upon which the cars of the 40 railroad contaiiiins: their consig-nmeiits are broirght up for lading and unlading. A. regularly empties his car within twenty-four hours, sends it back in good ordei', pays his bills promptly, and in case of slight and unavoidable damage, does not troiible the road with frivolous or petty claims. B..on the contrary, puts off his unloading for three days, thus making the road lose the use of and perhai^s pay extra for this car for that time, is constantly irregular in his pay¬ ments, sues for every fancied claim, and is generally trouble¬ some. Has the carrier no right to make any allowance for this i Even admitting the extreme view occasionally ad¬ vanced, that a railroad is strictly a State function in private hands and has thus no rigTTf to be conducted upon " busi¬ ness principles^", is such an allowance anything more than a jiulicitms method of self-protection against future costly inconveniences, and at the same time a puuishment for the deliiupient Í The road, to be siu'e, might sue for demurrage but prefers this more rapid, simpler and cheajrer plan. Take another form of what is strictly a personal dis¬ crimination : There are certain considerations rvhich should legitimately influence the amount that ought to be charged, because they to a certain extent affect the cost of this service to the road. Among these considerations is that of relative quantity taken to one destination at one continuous carriage. But it is clear in this case, if alloAvance for amoTint shipped is jiermitted to go on indeflnitely, it really becomes a personal discrimination, for—taking the extreme case—he who ships absolutely the greatest amount will be most favored and \vill have relatively the greatest advantage. Of course in such a case the mere difference in the railroad transportation charge may be enough to give him a profit, c Of this we will treat in the next section.') But though we may see that this would make a serious discrimination against tïie small ship- ])er, still, passing by the consideration whether it is the duly of the State t(^tr\vte> remedy it, we see that it would be impossible to p«4tetFruiiiw Lliê-llSB by enactment. To drarr this line judiciously.would in each individual case be a question of great difficiflty,_even to a jury after hearing all the evidencer-iind perfectly impossible to determine by u ¡¡riori legislation. A e can see from the stndy of examples like these, that personal discrimination may be forbidden forever—even dis- crimi]iation '' nnder like circumstances," but in every case such prohibition will still leave open the question as to where it really begins to be so injurious as to call for the ^ , I , . ^ (*, I. v... — . *" d -V -Ji—j , , ^ i t c¿¡h c « << Cynu<^-/ ,,^ (j , P /H- ^¿u*/(Pv PQ. , Aw^ UA. .^"Híakíí^ ^ C^^A,-. v/í>í¿. Q^'iu^-P'p a^ (iC^r^ rj^ ^1*'^ ^Xri\'ileye to his coupietitois or others. In the passenyer tj-atlic there is a casenldch is somewhat analoyous : In many roads it was and is still the custom to run only one ordinary 2>assenuer car and all of the rest of the train was made up of drawinmroom or sleejány-cars— upon which an extra charye would be made. This of coui-se practically amounts to foi'ciny all of those who cannot ob¬ tain accommodatio]i in the ordinary" car to pay the extra fai'c. Here, howevei', if the passeiiyer wishes to stand in a cj'owded car he can do this, or at most it is a sliyht extia expense. But v hen this takes place in a business it is at once seen what a ruinous advantaye is hereby yiven one over anothei". Take, for hrstance, a case like thefollowiny : " It was the custom of the j-aihoad coi-jioration to jam cars ' especially adapted to caiTyhiy Jiiilk in connection witli cer¬ tain passenyer trains. These cars had a cai j'yiny ca])acity of about ndlk cans, and were let to sinyle individuals known as milk coiitractors. No provision avas made u[)on these trains for the carriaye of milk lor any person otliei- than those contractiny I'oi' entii'e ca)s, and tills arranye- ment, it was alloyed, pi-actically confened a monopoly of the busine.ss upon the contractors, as the milk jiroducers had no means of jeacliiny the market except tliroiiyh (Ikmi' ayeucy." isiass. Com. l\e[) iD). This case needs liai-clly any comment to show that if this wej'c permided then in¬ deed the sliipiier would be at the mercy of the carrier. 42 It must be noticed that in all these cases the railroad makes tlie excuse that it is ready to furnish the same facili¬ ties to all Avho will ship in the same quantity. Practically, it amounts to giring the favored contractor full power to buy the commodity at his own jirice. In such transactions the sus])icion may be permitted that the railroad divides the proceeds with the shipper. Take as another example of such quasi-partnership, a case in wliicJi tlie railroad leases out its terminal facilities for the handling of some special article. Such, for instance, was the Standard Oil Co."s contract. "The terminal facilities for handling oil used by the New York Central Road in New York are (uvned in fee by the Standard Oil Co. This com- liany also own all the olí cars run in (m the Central Road. The terminal facilities of the Erie for handling oil in New York are leased to the Standard Oil Co. This company owns all the oil cars run over the Eire except about two hundred. Thus, these roads have placed in the absolute control of this company the handling of all oil carried by them to New York and they can charge a rival shipper any price for terminal handling they choose."' "Hepburn Re¬ port"' (Kb. Now, these two cases are undoubtedly hagrant abuses, ... and are exanqiles of a class of transactions that should of course be condemned and forbidden. But how \ Can a law be framed that will leave sulficient latitude to the railroad, and at the same time keep them within jiroper bounds Let us see. Take, for instance, the following case : In certain special industries, special kinds of cars are required. Such are fruit and vegetable, stock, coal or oil cars. Now suppose the case that a coal company or an oil refinery owns its cars and makes a contract with the railroad to haul these to their destination. In many States, by statute, every railroad must haul a standai'd car of maxi¬ mum weight for a certain price. This company, then, owns a number of such cars and is the only shq)per doing that kind of business upon the road. It therefore builds such stoi'ehouse and tank or stock-yard terminal facilities as it needs at the terniin\is. Or suppose that the railroad owns these and that this only customer refuses to ship by that road ami threatens to deal with a rival unless these facilities are leased to him at a fully adequate price. A^'hat jiistitication to stockholders and shippers would this road have if it lefused to accept a fair probt for these cars and for those facilities, and preferred to let them remain idle. Or, why should it be forced to go to the expense of ut,.^„_XÍ,XXÍ 43 -7/ buying cars for anotber shipper who may possibly not do enough business to pay for the investment. It is not meant here to say that this was the case in the Standard Oil con¬ tracts. The only question is whethei such a case as the one exampled would be inherently unjust. We shall see when we come to " Protection to Industries" that whenever a railroad can make money by a certain policy it should do so ; in every case this is saved to the whole body of shippers. The question then always resolves itself into a conflict between the rights of the many shippers " and the rights of the few. In every case the necessity for such conflict can be avoided only by the exercise of some discretion. This discretion can only to a certain extent be limited by hard and fast enactments, or its exercise becomes unnecessary. In every case, moreover, there would still have to be some appeal to be settled upon the merits of the particular question. It is, indeed, very diiflcult to see wherein such a case as the one advanced above, differs in anything save degree from one in which a railroad refused to go to the expense of building a few miles of " feeder" or side track for the ac¬ commodation of a shipper who might not ship enough to pay for the investment. Such a transaction as the lease , mentioned above, would perhaps be ultra uires^-mià. as^suuh .. illegal ; but the princiifle is not of itself^(tihjust, and the ex- ercise of the power is clearly in some cases to the ad vantage of the railroad and hence mediately to the shippers as a- body. But no matter how desirable it may be in some in¬ stances, it could be done only by transgressing any hard and fast rule aimed at the practice when i|jl^j;.^çeakabTtse. ^ . "In this same connection we^jffhst^xamine into the foun-— dation of another chargeecdïïstaùtly made against the rail¬ roads. How far shou^dr a railroad corporation be permitted to engage in trade íK^f course if so permitted to engage it is immediately placed in a condition far superior as to facili¬ ties to any competitor and can in the long run drive all others out of the business it engages in. This would be so even if it did not make any unreasonably high charges upon those goods ; all the more so if it did. It is a very simple matter to say that it shonld never be permitted to do so, that it is against public policy, and so on Ahnt it is not at aU easy to draw the line. Take, for instance, the following case : A large railroad corporation may not wish to pay any A more than actual cost for its rolling stock and determines to 44 set up a car shop and build its own cars. This is constantly done and is nothing more than is included in the plain A "course of its duty to practice the strictest possible economy. ^ Should this company now be prevented from selling cai's to others Í It has a vvell appointed shop—all facilities and perhaps men idle at irregular intervals. Should we give much weight to the vague ccrmsifteration that a corporation has no r'ujlit to engage in trade and by its superior facilities and immense capital to drive out a nth so well equipped man If any one can be found who will deny the right to engage in such transactions what will he say to the simpler case of selling old rails or old cars t This is just as much competition with private business as the other. There are many who deal only in second-hand rails and cars, and they doubtless would make more money if the railroads were not to be permitted to sell them when no longer of use./i But is there any difference in kind between these two examples ; or indeed between them and the following A passenger train must start at advertised time. It costs very little more to haul five freight cars along after the train is made up and so these are regularly cottpled on. If now upon a pafticíílhr train there should not be enough freight to fill those cars the room would be wasted. Where now, would be the wrong in principle if the railroad bought some stajile article that could be sold immediately upon arrival— grain, for instance Í Take still another case wdiioh can hardly be differentiated from those given above. The custom of exporting grain from the West directly to Liverpool has rapidly grown up of late. This is done by means of through bills of ladings which in most cases are made out by the railroad ; this in turn makes a contract with the ocean steamer. This is usually a " mininmm contract" by which the road obtains loAv rates upon condition of shipping at least a certain amount by every steamer. If, now, before a sailing day there should not be enoiigh freight to fill this minimum space for which the road would be charged, even if it were not used—where woxild be the wrong if it boiight enough freight to fill this and so save this sum % The question must not here be misunderstood. The stock¬ holders may object that they did not invest their money in . a grain house—or that this is bad policy. But upon what ground can a dealer object, who has received grain by an¬ other line and cannot compete successfully \ If now, this is not wrong when done one day in the year, is it wrong in principle if practised regularly t The grava- 'ft lÀ^^^'fh- -71^. ¿r/ S¿¡AJy y^ 11 tií í-^CA, *~vr¿<-ny da^ in the year, at this point there woirld come into play the question of a standard rich or poor man ; and finally in every case the determination would have to be left to the individual discretion of a small-salaried government^ agent who shoirld say just how far the rich should be per¬ mitted to grow richer and where the poor should first be protected. In view of the utter infeagibility of any such method, it is sought to bring about this same result to a certain moder¬ ate extent, by fixing upon some arbitary limit as the point at which the consideration of cost to the railroad should be 4 50 abandoned in theory altlioxig-h continnmo- in practice (a car¬ load is often proposed), and at which tlie large shipment shonld be mnlcted for the benefit of the small. Here, even admitting that the large shipper "is always the richer, it is taxation based not upon equality to bear the tax, not upon the rich as a class, but upon the accident of shipi)ing a cer¬ tain quantity on a single train, upon one road, to a specified station upon a given date. Leaving now entirely out of question how far such an arbitrary levy is just or how far it is expedient in a State to threaten a gieat public confidence in the security of prop- ei'ty for comparatively so small a gain, it is merely asked of those adv ocating such a division whether it would not eco¬ nomically be wiser to tax uniDroductive rather than so clearly quick capital, f ''-v- Another consideration not to be lost sight of is that the large shipments are invariably for purposes of resale to smaller dealers and any additional charge in the ' first in¬ stance will be shifted oft' irpon the consumers, rich and poor alike, who in the case that such legitimate quantity allow¬ ance be interdic led, simply " protect" the small shipper who mutatis mutandis may be rich. This allowance for quantity and regularity of shipment, is not made by American piivate roads alone, but is made in England and upon the State roads of France, Italy, Prus¬ sia, Norway and perhaps on more ; it is j)ractised upon every government "post in the world which takes quantities of all except letter matter by weight and at reduced prices, and is insisted upon by every State in the transaction of its own business. Admitting thus, the justice of the practice where based upon legitimate reasons, we must, however, remember that it is liable to great abiise, as is everything which is left to the discretion of possibly interested individuals. Our aim must be how to prevent such abuse One of these is for the railroad to make a contract with a middle-man to receive large quantities—say a train-load a day for a month, know¬ ing well that the consignments would not be of his goods but that he woidd sub-let this contract to bona fide ship- pens, merely putting in a small iiortion of his own. This is the gravamen of the charge, for if he had not been a com¬ petitor it would simply have been a question between the management and the stockholders why the railroad had not done its own express business. An analogous case to this is that of the notorious cattle " eveners." "•^ ^ / O -7 ÍW. e-Ä^-w ^ \' . ■ .• r ' - ÍÍN¡ ^ , 1\ M»?n»v 1«. ;.... y-, * ' "Xu i: 1 I ! MIX iiV !i lU'- ■; Ii.' «S«; Í - ~M\ Zf- "■-'■^■*-- . 1 • , r^-.>iiL:' / >6-1^ ► < r, noi í?^ raí • iJ" ■■' <1 ■♦ - ái» . ■m-' 'ÍM '1 '•" 51 There is now, a very clear distinction between the legiti¬ mate case of allowance and this, in so far as in the second a direct profit is the aid of the discrimination, made by one shipper out of his competitors who are less favorably situ¬ ated than he, merely on account of this act of the railroad and by no means owing to any circumstance of their own. But, to show the difficulty of directly legislating against even so clear a case of abrrse, even here the railroads may be more sinned against than sinning. They would often be deceived by those wishing to transgress the law ; they could not, for instance, require every one who made arrangement for an extra large shipment, to swear that he was the hoiia flde owner of the entire amount,-nor could the fact that the shipment was directed to a hundred different consignees have any weight exceptiirg in so far as by extra expense of handling it reduced the reason for making an allowance. Limiting then as to this point the right claimed by the railroad, ta manage itself upon "business principles,"" by the coincidence with State methods employed in carrying out State functions : it can still only be said that its duty toward shippers is to maintain an unarmed neutrality and to preserve equality of existing conditions ; but in no wise to attempt to equalize these conditions arbitrarily or to point out the " most favored " party. Nor can it perform this plain duty in any manner more satisfactory upon the whole, and less likely to inta'oduce new complications than where it allows to each the full benefit of the advantages he has won elsewhere and which he has presumablj^ deserved by more energy, greater ability, or other superiority over his rival. We must take up this question broadly. The small shipper may be poor and deserving of our supremest pity, but just as i)oor are many of those who consume wliat the large shipper has by his quantity allowance been enabled to sell at a lower i-ate than his weaker rival ; and who shall decide between these 'i It is the old, old story of the survival of the fittest, and the objection of the weakest to go to the wall ' and merely another exemplification of how the constantly progressing division of labor makes one larger than another, makes his advancement gradually work the advantage of the entire community, though some must suffer in the attendant fric¬ tion. VIL 'CLAe^SIFICATION OP FREIGHT. AVk ('c)iue noAv to the consideration of one feature of the system by -»vhich 'a very severe and ruinous discrimination may i)e practised. This possibility can hardly be removed even by su[)ervision and would be «Teatly increased nnc^-er State control. This power as we shall see, must be left entirely to some t)ne and the discretion Avhich will have to be liiven to tliis ])erson or body necessarily amounts to an almost absolute control.over certain classes of industry. This feature has nor, in the discussion of the freight prob¬ lem. received the attention which its importance-would call for ; perhaps for the reason that this necessary discretion has not been so greatly and so frequently misused as to raise general (>omplaint. As a rule, this is of course due to the fact tliat in almost every case herein, the interest of the railroad fortunately coincides with the requirements of a I'nir treatment to the shipper. The only case in which the presence of this power for evil has in general been recog¬ nized in the auti-railroad agitation has been in its connection with extortionate prices ; the complaint as in general framed, being that railroads charge "what the traffic can liear." This question as a whole will be more fully treated in our consideration of the principles which should guide the fonnation of railroad tariffs. This will be done under the head of " Extortion." Glassitication is the name given to the act by which the amount of charge which is made upon each class of articles can be determined. To make a specific charge upon each of the innumerable commodities which can by any possibility be shi])ped, would if not absolutely impossible, be at least so laborious to fix and so ex})ensive to collect, that some siuqtlei' mode must be adojjted. Under any possible system which can be devised there would, of course, have to be some basis upon which this charge should be fixed. The basis which is adopted is a mean between two principles. Th(> liist is that of the cosi of the service to the railroad ; this is in gemual by the ship2)er at least, called the only l)ossible fail' basis. The railroad, however, makes as to the ■2- ^-c-c-t,^ s- •11"^!' !»•• 1' ■' ■■ ^'ts . • « -^ w ^ • -, 53 class of goods (as distinguished from as to its being through or local freight) one additional basis. This is the valneoi the service to the shipper. We will under the head of " Ex¬ tortion" examine as to the justice of this greatly vexed practice as a principle. Here we will touch upon it only in its connection with the subject at hand. Concerning, now, this cost of a service to the railroad, while admitting the fact that there must for convenience be several arbitrar}' lines drawn somewhere, we have not yet determined how to draw these lines. Let us see what fixes the cosl^ Hie cost does not de^ pend upon loeight alone, an iron safe four feet squaiW would weigh the same as twenty cases of that size fílled with straw hats, which would take twenty times as much room and would be far more difficult to handle. On the other hand it could not be size or bulk alone as it is obvious that the cost of handling the safe before mentioned and one of these cases would differ greatly ; or again, carriage set up on its running gear, taking five times as much space as the safe, may be just as cheap to handle and roll on to the car. Nor is the cost unaffected by risJi of loss:— a case of calico worth perhaps $100 weighs the same, takes the same amount of space, the same amount of time in handling as a case of books worth $2000. But as the railroad is responsible in case of loss, of course it makes some charge for this. But ' hei'e again enters another most important factor. - Suppose now that the same ]irice were charged upon both of these, as it would if both were sent at " owner's risk," that is, shipped under special contract that the carrier shall be absolved from his common law liability as an insurer. Some goods now are of so little value that it would not pay to transport the case at stringent times unless at low freight. So in order to get these at all, the railroad would have to make as low a price as possible while, in the case of the moi'e valuable goods it could charge more absolutely ; and this extra comparative charge would not be objected to as it would relatively to the expecteil profit be even lower than that upon the cheap goods. We see thus that considera¬ tion of value must enter to a certain extent. We have, however, by no means finished here. Some¬ times the mere method of packing woidd have some effect upon the question ; as if there were one hundred j)ouu(ls of coffee in a bag and one hundred pounds in a box. If the bag in the journey stood up against the side of the car so 54 tliat a hole might be frayed in it through which the coffee might fall outrthe railroad would be liable for the loss. Of course some consideration mnst be given to this in fixing the inice. So again : there should be a difference between charge made npon this bag of coffee and upon a bag of mat¬ ting of the same size, shape, trouble to carry, weight and value, for the latter could not be hurt by any amount of pounding. Again : some allowance in charge mnst be made for the risk to the other goods carried : as. for instance, a difference in charge should rightly be made between carrying a can of fine ])otter"s clay and a' can of oil. Both weigh the same, are tiie same in size, shape, ditficulty of carriage, etc.. the only difference is that if a hole were made through the latter the' oil might cause thousands of dollars' damage whereas the clay c'ould do no further harm. Some goods are so dangennis that they will not be carried. Dynamite, for instance, which conld blow up the entire car, wonld not be taken at any price. Or to take still another class of influ¬ ences which must be examined. A can of milk is carried with ice and necessarily spatters more or less and moistens the bottom of the car and this mixture of milk and water has the pecnliar property of rotting the wooden flooring very rapidly. This extra wear and tear must be taken into con¬ sideration. Consider now the case of live animals. Horses can be taken a long distance and fed in the car without any app]"eriable loss of weight or condition ; cattle on the other hand, slioiild be stopped on their journey and put upon a side track so as to rest. To the casual observer such a difference in chai'ge would seem in the highest degreé arbitrary. These examples might be multiplied indefinitely, but with- oiit going any further into technical details, than is made necessary for a due appreciation of the causes which lead to such ai)i)arently groundless discriminations, it is seen that all of the above enumerated factors mtist, to some extent at least, enter into the calculation. It is also seen from merely a glance at the possible variety of things to be expedited, that in almost all of these cases some compromise measure must be arrived at. In order, howevèr, to compromise there mnst necessarily be certain discretionary power placed in some one hand. Upon filis task, even the hard-and-fast school of our leg- islabirs feared to enter. I have not been able to find any statute which went nearer to this than that which in several of the States permits the Board of Commissioners to make 1 ,2^^ / <^71 /ua. /^'X¿^7 55 any changes it may find necessary. Every change oí rate, however, whether made by a percentage reduction orfin any other method, must have some effect upon the relative class¬ ification ; and to any one who has given the least attention to this portion of the freight problem, it will be clear that it is absolutely impossible without an immense experience to form any idea of what effect will be made by any impor¬ tant change in classification upon either the revenues of a rail¬ road or upon the business of the shippers. Yet this is at¬ tempted by modest legislatures. Railroad classification is exactly the same in principle as the formation of a customs tariff, but is rendered in¬ finitely more diificiilt than the latter for the reason that it does not aim simply at discovering what will give the great¬ est revenue, the greatest amount of protection, or try to bring reason out of that economical anomaly an incidentally protective revenue tariff". It is much more complex than that. Such a classification must make a provision for every¬ thing, and must as far as possible see that everything pays its own share if it can be made to. This matter again is further complicated by a consideration of the termini be¬ tween which certain of these goods must be carried ; that is, as to whether to competitive points or only local stations and even as to the direction. For instance, to bring grain to the seaboard, empty cars must be sent out as there is not so mtteh-traffic west-bound. This, for instance, as we shall see later is a very important consideration. After a careful examination- of all of the difficulties, we*« must recognize that in so far as the cost to thurailroad can in no case be determined exactly, some analogvTtrar taxing system must be followed. This may seem absurd and utterly vicious in principle to one who has not given the matter serious consideration and who woirld fix rules by a priori conception, but it is nevertheless true. A fixed and definite amount of revenue, at least the actual operating expenses, must be obtained in some way. This must be divided among passengers and freight ; sleep¬ ing-car, drawing-room car ; through or local trips and emi¬ grants ; valuable goods or cheaj) goods ; east-bound or west¬ bound ; small shipper or large shipper. The total must be secured—the rules analogous to those of taxation must then be followed. A further and careful consideration will point out another phase of this extremely complicated question. It is cus¬ tomary to say that it is the duty of the railroad to publish 56 its tariff and that no deviation from that should be permit¬ ted. Granting the necessity and the expediency of this and reserving any fnller examination of the stibject nntil we come to'discirss the matter of " Publicity and ííotice " we will merely look at the effect which such a law would have lipon the question of classiñcation. There would be no difRcnlty upon this score if the entire carriage were in all cases to'be upon one road. But as long as there must be several connecting roads to make up the distance between two places (and there must be some such cases until every road in the entire country is under one control) ; there will be differences of classification. To be sure classiñcation might possibly be made uniform upon different roads by Act of Congress as far as inter-State commerce would be con¬ cerned. but as we shall see later this would be in the highest degree disadvantageous and would entail new evils, much greater than any which could be so remedied. Admitting then that there is a different classiñcation as to certain goods iition several connecting roads, its effect as to this matter of publicity and notice would be greatly to complicate the question. Each road could only publish its tariff up to the point where it connected with the next. It needs but this suggestion to indicate how little could be accomplished by this meastire. There is no better example than this same matter of class- dñcation to show -whj- the interests of-dhe-railroadr and the shipper are not necessarily at all times identical. The necessity for averaging, as it were, the cost of all of these transactions, must be conceded by even the most fanatic anti-railroad agitator. But the advantage of this system to the railroad over that to the shipper is that if out of 1200 articles it classiñes so as to obtain a good proñt on all, it is satisfactory, because althoxigh some of the articles may have been carried at a loss, still the railrctad has made up the difference out of othei's. Not so, however, the shipper who has had to pay more than his share. jBe perhaps deals only in that one article and it is thus in the power of the railroad to ruin him simply by deciding to put the last article from Class X into Class Y. This possible misuse of a necess-ary discretion is the danger that is seen ; but it is not seen how to remedy it. It has been claimed that under a government supervision or control, this abuse of classiñcation would be impos¬ sible ; that this difflcidty arises only where the greedy rail- j'oad abuses its discretion arbitrarily. Now, no doubt, 57 government supeívision might do mnch and wonld in all probability cnre most of the pnrely arbitrary class discrimi¬ nations. But there is as great or greater danger that it would often be tempted to cure the ills of some directly at the expense of all the others. To those who make it "the State duty to bring about an equality of condition by any means whatever and in all cases to remedy the act of chance by the exercise of a distributive justice, the following exam¬ ples will of course can-y no weight, but some of the cases in which this power has been exercised by governmental agents point a moral which may well check rash action in this direction and which they may read who run. Take, say, the case given in one of the Georgia Railroad Commissioner's reports. It was complained that at the ex¬ isting rate the lumber industry of the State would die out. The charges to be sure, were not excessive, in fact, it was by many experts conceded that they barely covered cost. Now, in the case of a railroad which was xincontrolled by the State, the probability is that it would simply have left the lumber in the woods until such time as a rise in price would indicate that it was then needed. It would not have carried below cost, without adequate consideration, and could only have been bribed to do so by a sum which would have fully made up the loss. Naturally there would have been no one to bribe it at such price. But the Commis¬ sion did otherwise. There were four or five hundred voters in a useful district, and these must not be permitted to sep¬ arate or to become discontented. They must be used where they could do the most good. The way was beautifully simple—put lumber into a lower class, carry it below cost, let the other shipper subsidize the lumber mill—and a county is saved to the Administration. Let us look at this question for a moment in a broader light. It is constantly proposed that even if the nation does not buy the railroads outright it should at all events have a Commission with full powers to fix rates and snrely to do such a minor thing as to classify. This seems harm¬ less as far as any political significance can be attached to it. Leaving out of consideration all questions of bribery (for I believe that under proper conditions it is possible to obtain a body composed of men who could not bo bribed), leaving out of consideration also all question of the danger of pat¬ ronage (this we may be able to do with a very vivid imagi¬ nation), let us merely look at this one item of classification as a political factor. With our diversity of interests it would be impossible to 58 make one nniform classification suffice for tlie entire count-;^ Tobacco, for instance, might be put into a high class in Maine, and cause no comment ; if left in the same class in V irginia it would bring about a revc)lution. Cotton could be iu a high class in Illinois and wheat in a high class in Louisiana,' and no one objects. Change the relative posi¬ tions and contemplate the' result. And so on indefinitely. Imagine now—a doubtful State is to be carried ; would there not be a temptation to discriminate in its favor >. Would not the Stale that was sure to be lost to the " in"s be iu great danger of suffering for the sake of having the doitbtful connu unity feel that after all the Administration is not as black as it is painted. And all done so easily—so simply. No more assessments on reluctant office-holder, no moi e expensive mass-tneetings, banners and torch-light pro¬ cessions. Nothing, in fact, but an innocent " Circular 117 : Wlieat, black walnut and dressed beef to be transferred from Class X to Class X. Cotton and rice and turpentine from Class Y to Class X," and all is done. The cotton States pay the wheat States the main cost of transportation —and the" coiintrj- is saved ! Tariffs are in practice necessa¬ rily and frequently changed to meet variations in the sux^ply, and so, such a change could not be hindered. iX short crop here—an over supply there, changes the rela- tivemost of handling. No trouble, no risk, " no nothing." This is\an extreme case, but think a moment of what use such a discretion could be made where its exercise was not dictated by its financial results, but where these were entirely secondary. ÜJie very good economic result, however, would per¬ haps be brouglit about by government classification. This might and should be arranged with refei'ence to the impor¬ tant law of taxation which decree^that the individual shall pay ]io more tha» the State recei\ms. Its application here, would be, that raw material and cheap articles of necessary consumptiion sliould as far as possible be carried fr^ The government could if it ran the railroads to this^xtent, affoi'd to wait and to arrange its schedule witlgdhis purpose in view. The individual corporation, however, would not dare follow such a course, ^ Passing away, however, from these political difficulties which might result from state action let us once more try to see clearly what a vast inip^a'hce there is in this discretion as to classification. For ejianiple : There ai'e at the present mo¬ ment two important subjects concerning classification agita- I 59 ting the railroad world. The first of these is the dressed beef controversy, and the second is connected with dry goods. Unimportant as they may seem to the general public, their determination may have the most wide-reaching results. What is now known as the " Dressed Beef " controversy is whether the relative prices charged upon live stock and upon what is called "dressed meat" should be changed. Leaving entirely out of consideration the merits of the ques¬ tion as far as the financial policy of the railroad is concerned Ave look only at one of the many public results which would follow any change. As the matter noAv stands, any such alteration would in the first place ruin millions and millions worth of invested property. All of the stock yards at the entrances to the Atlantic cities, all the stock yards upon the lines of the railways, and the immense abattoires and wholesale butchers would be driven out of the business. Instead of shipping live cattle to the seaboai'd and having them slaughtered there, they would be killed in the West and dressed. Of course much more dressed meat can be sent in a refrigerator car and for a much less cost than in the case of live cattle. The result of any such change, however, does not end here. For the public at large in these cities the question is as to whether Avhen these butchers are entirely driven out of the business and dressed beef comes in regularly, will there not be a danger of the greatest possible monopoly Live stock can be kept in the yards until needed and hence will be killed when the demand arises. But dressed meat no matter how well guarded cannot keep forever ; as a result only a limited amount would be kept oji hand, and the great Atlantic cities would be entirely dependent upon the few large dealers who would in course of time monopo¬ lize this business. This would follow as the result, because it takes a large amount of money to go into this business, and requires a large working capital to remain in it ; whereas in the case of live cattle a man who has ten head can send them on to New York as he does not need special facilities. Without going more into detail it can be seen what a vast amount of good or evil might result in this case from aj)par- ently so simple an act as that of changing a classification. Let us now take a second example and go on and look at the facts of the case in the " Dry Goods " controversy. Until within the last few years there were no manufactur¬ ers of textile fabrics in the South. Lately, however, they have sprung up and have in some cases attained such im- 60 ]>orta]i('e as seriously to interfej-e with the business of the New England mills. " These latter for years considered their practical monopolj" as something in the shape of a vested interest and now feel aggrieved at the admittance of any new rival to the field. The mills, for instance, at Atlanta, (la., can sell bi'own sheeting in the West at a price much lower than is imssible for the New England merchant. The latter has in the first i)lace been compelled to pay freight on his raw cotton for fifteen hundred miles and then retnrn freight on the goods for a thonsand miles' longer distance to market than the (Georgia mamifacturer. He therefore asks that the railroad should help him in this competition. In the present classification, dry goods, from sheetings to silk are put in the same class. This is due in part to an accident we will not stop to discuss, but more to the fact that if a ditference in class were made, such as would seem just in relation to their relative value, the road would often i)e imposed upon. Silk and calicoes are packed in the same manner, and if the calicoes were pnt into a lower class then every sort of dry goods would be represented as calicoes and thns the railroad wonld lose far moi-e than would be gained by the calico shippers who really need snch a protection. As it is now, all the calico men complain that it is unjnst to charge the same for a case of calico worth |!150 as for a case of silk valned at 81500. But if the railroad should make a change of this charac ;er the silk men immediately conpvare it to the fendal baron who from his castle higlr swooped down upon the innocent commerce of his native ('(Uintry and fed on gore. Another consideration wdiich enters into classification is as to whether the freight is " throngh" or " local." Through freight is in its strict significance snch as starts from and goes to soine place where there are enough rival lines to make competition. In our examination as to the extent of allowance that should be made for quantity, we saw that this fact entered into the question of cost of service to the railroad. We shall examine later how much consideration should be given to the fact whether" freight is through or local. It will now snifice here, briefiy to i-emember that of course freight cannot be handled as cheaply at a side station where five men have to be ready for an occasional day's work as at a hu ge terruinusin which elevators, scales, buildings and men ai'e all maintained at the highest possible pitch of efficiency, ability and activity. So it is clear that some indication of ¿.-¿^oJ[Lßt,^X^ 61 this should appear in the clsssiäcaikm-; even if there vs^ere not the other most important factor that at the competing places the price that can be charged is to a great extent flxed by such competition. If this possible charge is there fixed at a i^oint at vs^hicl;^ the total sum obtained from all the business that can possi¬ bly be secured by the railroad falls short by a certain amoirnt of the total which must be made to pay expenses, this can of coirrse only be made up by amounts collected from the interior places. There is no use in shutting our eyes to the fact and saying that it is not fair to the non- competing points to make them pay for the through freight. This question must be fairly met. A certain income must be secured. In the first place the operating expenses must be made ; then the interest on the bonds must be paid, or the railroad will be sold under foreclosure. As to the dividends upon the stock capital, leaving out of the question those cases in which it is to a certain extent fictitious and watered—if this is not paid at all there will be no railroads whatever; if it is not paid adequately, the service will de¬ teriorate. Consequently, if railroads are to exist, and are to exist efficiently, their expenses and dividends must be paid. A railroad although a g^/asi-public is not as might generally be supposed, j udging from certain arguments, at the same time a charitable institution. It is run to make money. This income has to be secured in some way. To listen to the complaints made of this discrimination against local and in favor of competing points, it might reasonably be supposed that the average railroad owed a grudge to the country through which it ran ; that the aver¬ age local agent, whose family and friends are all in the little village in which he rejjresents his principal, took a delight in taxing them arbitrarily for the benefit of a large city a hundred miles away and in which he knew no one. It might even be supposed that it was the special occupation of the railroad manager to lie awake at night and try to dis¬ cover new and distressing methods by which tonarry goods from competing points at a dead loss, and perhaps give a bonus besides, so that he might then gloat over the misery of the inhabitants of the country though which the road ra.i between those competing points. Suppose now that the annual sum needed for operating the road safely, is ten millions. Suppose again^ that orrt of the total amount carried one half is through freight and one half is local ; and the railroad cannot by any means get more than this half from its rival roads, nor can it get more 62 thiin t^v() and a half millions for this. Leave entirely out of consideration the fact that the cost of rendering this thi-ongh service is always relatively and in some cases absolutely less, and admit "the cost the" same in each case. The railroad cannot possibly get more for carrying the through freight. It must tliere'fore count upon the local freight for three quarters of the cost to pay for doing only one half of the total work. Tills indeed, may seem inequitable ; but leaving this part of the question for the ]U'esent we can suggest one way by which the local freight can prevent the through freight from being so advantaged, and only one. This method brings to mind an old maxim touching the nose and the face!^ It is simply to refuse to carry the through freight at that low rate ; and then there will be no discrimination,-bnt tlie half freight rvhich was carried before will now pay far more than it did then. < We have seen that cost of the service and character of the service entered into the consideration of classiñcation. We will now see the last element that has an effect on this : that of the direction in which the service is made. To give an examille, take the case which is being now agitated by the (diambers of commerce of the Atlantic cities. Without going into the exact ñgures, about three times as great tonnage goes to the seaboard as comes back. In other words two empty cars have to be sent West so as to bring grain and other bulky products to the East. East-lionnd freight starts from every little road in the West and from hundreds of small places. West-bound freight, however, has its origin in the four Atlantic seaports and can only start on its way npon the Trunk lines. A Trunk line is one that runs east and west from the interior of the country to the seaboard. Owing now to a combina¬ tion of these two causes west-bound freight is (say) twice as high as the same class east-bound. Of course in many cases the variety of goods is entirely different ; that is, no imported goods or New England manufactures go eastward and no grain goes westward. The railroad cannot possibly get any more foi' carrying the east-bound freight as there is so much conqietition due to the fact that it starts in many places and can be carried upon many lines and is further¬ more regulated by the Erie Canal competition. As to the A\'est-bound fi'eight, however, even granting that it costs the railroad exactly the same in both cases, still the railroads ask so much more. Tir -o -i/L^ V ■"" -foi^ ykj^^r-r-zyCJ-o' ¡.-e, (r-^^cy)- y/o^ ^ <• ^ ~ J . I. I ■63 The argument that is advanced in favor of this appar¬ ently gTO\indless discrimination, is the same as that made use of in the case of that of through against local freight. The cry>i^iere is not tliat the total profit of these roads is too large, but simply that as between the east and west-bound fi'eights the division favors the former. This is one of those questions in which argument is to a great extent entirely useless from the fact that while the interested parties will not be convinced the uninterested man will concede that if no more can possibly be obtained from the West, and if at the present rate anyiliing wlmtever is made beyond the mere expenses of running, the receipt of this sum, no matter how small, is still an advantage to the road and is of benefit to the Western shipper as well as the Eastern consumer. Since no more can be obtained for it there is no other alternative open excepting that of refusing to carry the east- bound traffic at that rate and thus reject what it brings into the common treasury. If all of the west-bound were re¬ duced to the same rate as the east-bound, the railroad could not meet its interest. But the shipper of west-bound freight does not want an argument, but desires a reduction and as long as this reduction is not made him he will not listen to any explanation. This is one of the many ways in which great harm has been done the real cause of the peojile against the railroads ; there are many abuses of the most fiagrant character which obtain comparatively little notice owing to the fact, that constant discovery of the interested motives which so loudly denuncíate the railroad, has in many cases led thinking men to the opinion that all of the complaints are more or less tinged with cant. To sum up this matter of classification. We must not forget that though this difference in cost has some effect upon the determination, this difference may be far exa gger- ated in practice. The factor which has by far the greatest effect is that which has been merely touched upon : that the railroad must take what it can get in those cases in which it cannot obtain the value of its service. This principle will hereafter be examined at length. í^í, *-i •■'"--»«-öC, T^*3vv^ Jf-"^ INDUSTRIES ROAD. DROTEOTION ^ c^ Y y This is perhaps the most vexed and certainly the mo^. difhcult part of the subject. Of all the moot points in this freight problem, there is not one that admits of clearer state¬ ment, nor one that has been in turn so bitterly denounced and so energetically defended as this. The charge is, that the railroads throw the weight of their power into the scale of what should be simply private com¬ petition ; that they give special rates a,nd other favors to certain industries along the road and deny them to others. The railroads admit the fact but demur to the charge of justice. The defence is that they have the full righU in certain tases to look out for their own future biisfaib^. If there is long the line of the road an unoccupied Wd favorable site for a saw-mill, an unworked field of coal, an undeveloped mine, or a clay bank without a brick-yard attached, or any other natural facility, they claim that it is to their interest and is also their duty to the mass of shippers to develop this in the best way possible. In the same way, they claim that they have the right to ajid in starting a wholesale house in an interior city if none exists there, in the particular in¬ dustry in question, if, in their judgment, such a house when established would help the general income of the road ; no matter if those engaged in the established industry would have to suffer from this new competition, the good of the mass of shippers and of the general body of consumers would be greatly advanced by this policy. The railroad position upon this point is well set forth by Mr. Depew before the Hepburn Investigation (11). " The jobber is a distributor of goods and upon the cost to him of the distribution depends whether he can do it success¬ fully and compete with another distributor reaching the same mai'ket. Now, as the State has increased in wealth and population, the cities of Albany, of Troy, of Rochester, of Syracuse, of Utica, and of Buffalo, have become great centres —places where the business of the localities about them come, and which supply the localities that lie about é ./ct 7^ C "Ti^/O ^ /$-i }> ^ t/^/ í^^~C/ít^»~CjC.^ ^ ^'t''*"^ »-W» í-4-.^í^ 4r At cù-t^ f) Oca. //)'>-< ^ ù (Z^í^ 65 them. Capital has accumiilated in these places to such an extent that the jobbing merchant of these cities comes to New York and bnys at first hands of precisely the same persons and at precisely the same prices as the New York jobber. Then he goes to a railway company and he says to it : 'I will give one or ten car-loads a day every day in the year, and yon can rely npon it,' while the'New York jobber goes to the railway company and says : ' I can only give yon the barrel of flour or the single package my customer may want.' Then when the jobber gets his produce at his place at Albany^, etc., he has cheaper rent, he has lowei- wages, and he has less taxes. . . . This jobber then goes to the cross-road merchant and says ; ' I buy my goods at the same place as the New York jobber, and, therefore, I can sell to you as cheap as he can on that element. I get my transportation at the wholesale rate, while your retail rate is twice as much. I will give you the whole of that.' " Their argument is furthermore that without some such help from the railroad no capitalist would enter into the operation ; as it would in most cases be too difiicult^for the new business to gain a foothold against its established com¬ petitors. With this aid assured them, however, the new industry will have an equal chance, will flourish, and in a 1/7 3 short time will generously repay the road for any previous J sacrifice. ' / The railroads go to the extreme indeed, to asseid, that they have full right, nay, that it is their duty to do this, even ^ far as to carry such new cargo below cost, if they can b^ assured of the future success of the venture. They assert ' this right in the face of the fact that if they do carry below actual cost of transportation the other shippers must of course pay more than their proper share ; and even if it is not done below cost, but merely at a rate that gives this shipper an advantage over the established houses, there is still a direct harm done these old concerns, which can often be traced in the deflection of some of the business which had before this belonged to these establishqtl industries. Those who object to this action on the part of the railroad,, (and these of coui"se are for the most part these same estab¬ lished houses,Jadvance the argument that the railroad is not a private institution that can follow bitsiness methods ; but is a public agency which has been created by the State for the benefit of its citizens and has in return been charged with certain duties. Among these is that of treating shippers equally. That moreover, in proof of its public character, it has had delegated to it, supreme sovereign power of eminent 5 66 domain wliicli it has exercised and tliat no argument of proñt or loss to the corporation itself, should be permitted to have the weight of a single hair in the balance of an impar¬ tial justice. They assert also, that leaving entirely out of the question any existing law upon the subject, it is not the policy of the State to j)ermit any irresponsible power within its borders, to have in its hand the decision of a question which can build up or tear down an industry or even an entire section of the country ; that this is a purely govern¬ mental function. Here seems to me, to be a very weak point in the attack, and a fallacy needing coia^ection. The frequently repeated comparison between the govern¬ ment protection which is aiforded an indirstry and that private protection which the railroad affords a particular individual or locality is founded on a misconception. This comjiarison is advanced nt^only by the opponents of the railroad but often by itp^ Mvocates in extenuation of their practice, but there is oiih" the slightest analogy in principle. Passing by the usual arguments marshalled in favor of State protection to industries, it is enough to remember that underlying them all is of course the idea of aiding the entire country indmectly. The individual harm which is done those who, not being interested in the designated industry, are not protected, is recognized and acknowledged ; but it is taken as being the price that must be paid, for the general benefits arising fj'om this and similar protection. It is moreover advanced that although upon any one particular commodity the injustice of paying this otherwise unneces¬ sary tax is clearly apparent, still, this is only the natural in¬ equality of incidence arising from an inherent imperfection of all taxation machinery, and that this is to a great extent equalized by the existence of an extended list of protected articles ; so that upon the whole there is a fair distribution of the present burden carried for the sake of a future gen¬ eral iirosperity. The free tradei's answer the protectionists by saying that from the nature of the case only the good effect of a pro- tectii'e policy can come to light, that the evil results are far greater but are not seen and cannot be measured. They maintain that, since in a purely protective tariff the idea of the government is not to raise money for itself by this means and so to .save the tax-payer a more direct levy, but it is simply done so as to foster the general good of the people indirectly ; but that as a matter of fact this general - r"^-^ 'X-e^ /V^ «-^¿r-6c 67 good is not only n(^ advanced but that on the contrary the whole nation siiflel's thereby, at all events as far as the purely economical cjonsiderations are concerned. In the case of the railroad protection, however, the argu¬ ment in its favor is'not open to these objections of the fi'ee trader. The distinction between the governmental protection and the fostering policy of the railroads is at once apparent. The railroad, even Where it advances the protective argument does not claim for i,t any so broad a scope. It asserts, that even if a direct injury to industries of another State or com¬ munity can be plainly seen as the unmistakable consequence of such a competitive policy upon its part, that policy will still be justified if ill; improves the position of its own patrons and its own State. 1 That, admitting its duty to the public, it is still only to that part of the public, from which it has received the considerations of a charter and of eminent domain. That it owes only a general duty at best to the people of the nation as such, and that, without at present trying to define where the duty to the general public begins, still in cases of conflict between the interests of those that gave it birth and support and those that perhaps have never had any kno wledgç of its existence, its duty is clearly to favor the former. But that, moreover, as a matter of fact, such legitimate protection and care as is given by a railroad to new industries along its line, does in no way injure any other siich concerns already established on or otf the line of the road ; that such help as is given is not enough of itself to induce new enterprises except in localities where there is more demand than supply. This reasoning of the railroad advocate, is clearly to u certain degree good, and the correctness or falsity of a policy of so fosiö¥»ig industries will not at all be affected by any arguments as to the beneficial or injurious result which such action may have upon business enterprises, on other lines and in other parts of the country. That is, it is only an application of the economic law which does not look at the effects of legitimate competition upon the more un¬ successful competitor where the gain to the general public is clear. The question thus narrows itself to the examina¬ tion as to whether there is such a general gain, and of the effects of such policy and justice of such practice, in relation to those to whom the road already owes the above clearly specified duties. Broadly considered, the plea of the railroad is, in this instance, financial expediency, pure and simple. In every 68 case, now, in wliicli tlie railroad asserts its riglit to do ör not do a particular thing upon the ground of financial con¬ siderations, there are tbit delicate questions to be adjusted. Eirst of all, we must rid ourselves of what. Judging from arguments constantly advanced is a possible^ preconception», that a railroad can luiii on for any length of time at a loss, or that it can go on with the same grade of perfection much >/ longer at an inadequate profit than it can at a loss. _ Even under State controlovhere the expense's could, if the income fell short, be paid out of the general treasury, it has in every country of Europe which has tried the experiment, been found ex]3edient to make the railroad entirely self-sustain¬ ing, even if the tariff has constantly to be raised ; therefore, as a matter of fact, while there is seldom a deficit, there im often a noticeable general deterioration of service, and^ fiM giTTiiit high tariff.^^ ^ ftopnnrlly after liaviiig thiis at one extreme, by the natural order of things, excluded the possibilitj^ of a perma¬ nent loss in the operation of the road, at the opposite ex¬ treme, we exclude the possibility of undue profit. This is in the Enited States universal anfi is in general done on the very mistaken policy of a legal limitation of total anmral dividend ; as a rule to ten per cent on the actual amount of invested capital. Of the fallacy of this we will treat later. We have thus ñxed the limits between which the profits can fluctuate. As a matter of faut by means and from causes which we have not time here to examine at length, but mention merely so as to call them to memory, very few railroads ever come up to this maxi¬ mum. This is due, in part, to the fact that they cannot earn enough, in part to the fact-tliat such a limitation of dividend could not possibly offer a greater premium upon extravagance and short sighted policy than it does at present, if it had been framed expressly with that object in view. From this universal principle of limitation of divi¬ dend, however, we see that the interests of the wlmLù body of shqipers are guarded by the dorrble protection of the carrier's legal duty to the individual patron, and his char¬ tered limit of the possible profit he can exact from the whole traffic. We- must, moreover, remember and not suffer ourselves to be confused in this examination by admitting the possibility of personal favoritism. "We are here treating a question of principle and not one of fact ; we must exclude from the discussion the element of such favoritism pure and simple, and must suppose that the carrier treats on a parity all of GJ»-^ ' . Í f - >«- ¿V -«-X'' Oi.^f-f JtCu^ ^ 1 "2 , 69 his shippers who are practically upon the same plane. Clearly understanding tlxis xve can proceed to our examina¬ tion. When and how far should a railroad's immediate profit be sacrificed—first, to an existing duty, and second, to the certainty of fntnre gain. At one extreme, now, we see that on certain occasions it is clearly the duty of the railroad to do a specified piece of work even at an immediate and plain loss. Take a case in which for the time being the passenger traffic did not pay for itself, but the freight traffic was enor¬ mous. Can fhe railroad determine not to run any passenger trains and so force the passengers living along the line to walk ; passengers through whose honses the railroad had perhaps been built ? Clearly not. Take further the case in which a railroad by running a regnlar morning train from a certain station in the suburbs of a great city has attracted settlers and the place has grown, owing directly to this policy of the road. If now, for some extraneons reason, the traffic of this station should suddenly decrease to such an extent as to make it non-paying even to keep a station-man and ticket-seller, or to stop more than an occasional way-train there, could the railroad abolish that station the next day i Again, clearly not. It would of course not have to continue running forex er at a plain loss, but before it was certain that it really was a permanent decline, it would have to give a fair trial and what the law calls reasonable accommodation^- In other words, no one doubts that it woixld in^ ttiese cases be the duty of the road to give present,.a!ecommoda- tion, even at a slight immediate loss, •i^nen, howeveiy speaking of an impersonal agency of tills character, we say that it is its dnty to do a certain act at a financial loss^-^we" mnst of course remember from what we have seeiwthat it cannot make a practice of snch a policy out of us own resources ; it merely means that those who siijiport this agency should for adequate reasons bear this burden. This is so, in the case at bar. The other passengers from other stations and the freight shippers pay for fhe accom¬ modation of tliese few if in the case supposed a court of law or our good sense should declare that tlie circumstances so warranted it. They should do this for the reason that, in the matter of so great a public convenienc,e as the railroad, the precise amount of benefit which eacih individual receives cannot be alone estimated by the direct amount of his trans¬ actions with it. The case is exactly analogous to that of 70 the post office. If A pays three cents for three miles' car¬ riage of his letter he thereby pays a part for the three thou¬ sand miles' journey of B's letter. In this example, however, there is also an administrative reason for this. The levy of the transportation tax must be as nearly as possible, m k fat¡6' m ufandis, like that of any other tax ; it as nearly as possible be proportioned to the benefit received. This statement may perhai)s seem startling to those who liar-e not paid any particular attention to tliej:©' qnirements of a railroad policy, be it State or private: I3nt koven they, will see the truth of this if weJakSa^an illusti'a- 'tion the' working of a State rmiteaÍL In this case any deficit would of course liayri--fecr'De made ont of the general treasury even if it o£ui«ffed in a specified locality. Or, to keep to' orri-mivitfei'oad illustrations, no one ever doubted the right^(tf^he^^eiui£al government to give public domain f as a líuiaJirn.ntTo a. irurely local road like the Union Pacific. , TSbu- is it anything but right that all who are benefited in ■ ^ any degree should contribute, if those who use a i-ailroad directly cannot pay for its support ; lor, altJiough a man who lives wliere mere is a railroad never uses it himself, he is still indirectly benefited by its presence. Insisting upon this point may seem like advertising a truism, but it is none the less necessary to keep it clearly in memory. Judging from some of ííie arguments daily advanced against the railroads, one ndght well be pardoned the supposition that they evolved operating expenses out of their inner con¬ sciousness and paid interest through the kindly intervention of a slave of the ring. One might indeed suppose, that every dollar expended for fuel and labor was not taken froni its patrons, and that consequently, every dollar it saved by a line of action did not in some way benefit these. Understanding this clearly we may proceed. We have now seen that without doubt, it is sometimes 1 necessary that an actiral immediate loss be undergone by the railroad—and that this is shifted in all cases upon th'e whole body of shippers, either in increased expense or in decreased facilities. But we shall, moreover, see that it is extremely difficult to determine just how far this ininciple must be carried out —it is in fact entirely a question of degree. For, though plainly fair in the case of a small station, which did not cpiite pay for itself, and in a large road in which the burden is so distributed among a great number of shippers and pas¬ sengers that as individuals they cannot even feel its weight, it woidd clearly not be so fair if the case were reversed. áp '~í^u~-^,..^j c-1^ '^'T-t.-tri-, - , 71 That is, ninety-nine and nine tenths per cent might fairly be called npon to pay one tenth per cent for the general good. But one tenth per cent conld by no means be asked to sup¬ port the expenses of ninety-nine and nine tenths per cent free. Bnt again, between these two examples there is clearly a point at which private right and public right come into conflict ; a point at which the duty to an individual shii^per woiild not be clear as against the dnty to the body of shippers. At precisely this point some individnal discre¬ tion must come in. This would be so even nnder State con¬ trol. Now, leaving ont of question as we have before determined, all, cases of personal favoritism, wonld the public oíñcer under State control be anj'- more likely to rendei- a better, and wiser decision as far as the good of the many is con-| cerned than the agent of a private corporation which is' directly and selfishly interested in doing as much work with as little expense as possible, i.e., saving as great an amount as possible to t|ie whole body of ship])er^ The poini to be ^ made here mngijiot bu iiiisillideWttTO#-. The question is not at all whether a particular charge or whether the total in- come of the railroads is too large at present—that point will ^pjîome np later. The question is simply that, if a railroad is ' to cotfeel^s a maximum from a community—if it is permit¬ ted to do^his by the law and by the good sense of all who see that adequate service cannot be permanently rendi^red é s for inadequate c^^ideration —if fnrthei", the possibility of nnchie personaljSmmntage be minimized by adequate and .j., facile pi'ecantiom^'is it not prima fdcle, evidence when the permanent direction of a railroad does an act which is not spontaneons, bnt is the result of a policy, that this act is | one of economy, and will, as such, redound to the good of I tligjgia^of patrons. Mere again, it is most important that not the slightest misconstruction sliould creep in. The extent to which tliis fit policy can be allowed must be limited l)y the self-evident fact that the private right of no individnal is to be ti'ans- gressed in this search after general economy. The com- v < mon law, however, is always there to protect these lights, when threatened^^n this search after/^hneral economy, or to remedy the_pi after they have been invaded. No r/ priori legislation cqtild do away with the necessi/ry for the exercise of this disc^tion in every case, and hem-e, with the possi- p _ bility of occasional error. / —¿Üüi We have seen now that an existingdoody of shippers can fairly bfi^ asked nnder certain circumstances to contribute sometíiing—or to put in in anothe/ way—that they must ■ópjrfíje. 72 ^ necessarily so contribute for some present advantage to J some of their number. But there is still another view to be ^ taken ; that is, how far must present proñt be sacrificed to -future gain, /.c., how far must the present body of shippers coutribnte for the benefit of the fxrture shippers. Here, at one extreme, we can give many cases in which this y should be done, and is done. None of these cases can be I,, controverted. | The railroad, for instance, cannot suffer its '/Equipment to get out of repair ; those who use the road to- day must contribute at least enough to i)ay to keep the road, in "a fair xvorking condition for next year's shippers, as last year's shippers did for them. We ndll not here go into the very disputed question as to what is a fair ' ' maintenance of way" as ir is called, as, for instance, whether a road has a light to substitute stone ballast for ordinary, or steel rails ^ for ; of this wq wilks'^ifak later. Again ; it is the uni- versal custom for a large and imj^ortant line of road to build short branches at right angles to the trunk and into unde- ^veloped country and use them as " feeders." That is, the ^^iresent shi^ipers are taxed so that the future business of the road may grow. Once more : we have before spoken of tile fact thai many roads own more or less extensive coal a^elds Avhich have been purchased with a view to economize in fnel ; also that many roads own cjir-shops or docks at fhheir termini : these also, are for future economies./%.. We must be careful not to confound the question in point with that of whether a railroad, under the existing laws • limiting' net profits, has the right to invest any earnings whatever, for the sake of a future gain. This question, also, will be examined at length when we come to the subject of profits. The question here is. admitting the ]Dlain right, aside from a (diarter injiinction, to do^his, to a certain ex¬ tent—how far it shouldtbe pennitted. - Here again, as in the last question, 'this is clearly jtist^ in certain cases and mi to a certain point. The present shippers must plant so that the future shippers may reap. Bhe determination of this point, moreover, must be left to line individual discretion, and can by no means be made anecessary by any hard-and-fast law. then, after a long introduction, we meet this ques¬ tion df the advisability and justice of permitting a railroad to f»(^r industries, even to the extreme degree of doing it at a ipiWent loss. The case is here purposely put in as strong- a form as possible. It lias beten shown that on certain occasions it is right that ~TÍc^' ¿?iíjt<-í--t-í—«-Í *—y c».^t^yy ^ '^-■í^c^'/- — / Ö ^<_-»í.»^. //fi ■.z^/-.«'-^,' , , " y? 1=2 . 7^ 'T ^ r '" ' li^^L ^L'^Á--< ^ í?V^ c % ^ ^ ^ J ' , „X. /CíTVw-'-»^^ / / y ku<^^ y /¿.^ , ¿¡T ' - - x^/_ _ ^ "3^ - f^/Ct<^^ '2¿:ct >-^^'ÍJ ^ A^^íf /tJ />^^--<'-y ^ ^ ■■ 1 ^ d. *l-J —y—■ l ^ -A. ULéf^r ^ ^,-1,^^ ¿tÍ^ÍÍÉ^ Xpj. ftu^í^^ ziz ^ . _ ^ ír7*.r>É^^4. -X^ir-r>^J> ¿i/ ¿í^. /u%^ 73 the present body of shippers be mulcted for the present good of some of them, and also that to a certain degree these should contribute for the benefit of future shippers. Moreover, these propositions apply to all cases in which the , railroad clearly sees that future benefits can be secured only m ' at a present skcrifice. The question at issue, then, simply i resolves itself in each instance, in the first place, into one of | , fact, whether the particular industry is or is not worthy of I present sacrifice for future benefit ; and in the second place | it must be left to some discretion_as to howjhi^this present 1« sacrifice may be forced upon the shippers. ~~~~ - As far, therefore, as the rights of the whole bndv of shippers are concerned, it is at no time a question of prin¬ ciple. These shippers are, as we have seen, at all tjHrês protected in theory, at le^, by the selfish intere^ts^ the railroad. N o w, position ca nnot bq^eontrover ted, there are stilhtwrTdisturbing factors thatjpnm be considered. First, 6Í0W can adequate discretioipaS to this point be left with the railroad, and how, at tfie same time, can the possi¬ bility of its misuse be minimized ; that is, how can the ele¬ ment of j)ersonal favoritism be eliminated in special cases while permitting the practice as a general rule. Second. The undoubted fact that the permanent interests of the railroad is at all times that of the body of shippers, must be qualified by a recognition of the unfortunate cir¬ cumstance, that, as railroad corporations exist to-day it is, with slight exceptions, not so much the permanent interest 1 that is sought, as the interests of the temporary occupying | clique, which can throw the management upon the innocent | stockholder, when its fruits are no longer those of virgin soil. Both of these questions will be treated when we come ^ to the desciiption of means of cure for the really existing ^ abuses. • We have now clearly seen that the rights of the shippers as a class are not prejiidiced by such a protective policy. But, the question is further complicated by the fact that although the interest of the mass of shippers, may be plainly that the railroad shall protect a certain industry, and so in-i ¿ crease its income -to such a point as to warrant a general! reduction of rates, still one or more of the shippers may be disproportionately injured thereby. Suppose a concern already established suffers from the loss of part of its busi¬ ness. This deflection is toward a new competitor estab¬ lished solely by aid of the railroad's festering policy^ the result of following such policy, iiyfnany instances, the ' railroad makes a two per cent reduçtion in all its charges. 74 The old concern, liowerer, loses in the first year in addition to its quota paid as one of the body of shippers, perhaps a thousand times as much as its annual share of the general reduction will amount to. Now, is this right, and should' it be permitted ? Is it delegating to a politically irresponsible body a sovereign power which should be held only by the iState ? Or is it only a new way by which the benefits of competition may be extended Í If the practice is wrong in principle we must be prepared to condemn it, no matter how beneficial its effects may seem in'some cases nor in how slight a degree it injures the ^ established concern. Suppose the following case ; M company makes a public offer to carry at . fifty per cent below current rattís' for a -specified time—say two years—coal and raw material to and finished product front any mamtfactory that will be established along the road at any place in which there are undeveloped natural facilities. By the publicity of the offer the possibility for the exercise oí itersonal favoritism has been removed. How does this differ in principle from a case where the road btdlds out a side line by which new territory is brought into coitipetition with the old I In each case the established enterprise suffers—^be it one factory or an entire county,»^ but it is by no means an unjust burden. The general com- niunitj' is in each case benefited. The only possible injustice to this old concern, is that the offer of the road may be so favorable as to put the new in- , dustry on even a bettér footing than the old. But, in so far as all of the established concerns are by no means on a per- , feet equality, and as the only way to hurt none of these unduly, wotild be by permitting none to enjoy greater facilities than those possessed by the smallest_¿adr^orst equipped, it is clear that no injunction tqjMPesgrro any such ^ equality could be imposed upon thj0^*aîTroad, with any fair¬ ness to those better situated. /\ In fact, leaving out of ques- _ ition as before all personal favoritism, the railroad would of ' jitself be sure only to make an offer that, while attracting jnew capital to its line, would at the same time give no better terms than necessary. Here we again see that the interest of the railroad itself, if kept in restraint by proper means, is a far better regulator and adjuster of rival claims than any hard-and-fast legislation could be. But examples of still another class of cases must be ad¬ duced ^vhich are never objected to and which differ from the ordintp-y protection afforded by railroads to industries, 5^ / ¿*-¿--^ '-^ -r. ¿c-^^AU-^^' s ir^Lx- , >L-o c^-nffe ¿•-^,....-íUf--^.^>-.-'Vl^ -r¿Cc^ Y i^«¿ <2/* t... ' . >,■...- •• ^ • ' ,M 75 merely in degree. For Instance : it is the custom in the \^''est for railroads to carry seed to farmers at greatly reduced prices, often indeed absolutely free. This is re¬ stricted, however, to those cases in which it can be clearly ascertained that the seed will be used on farms bordering upon the railroadyv, This of course is done as a matter of investment. Or again : it is the common practice all over ^the country to carry fertilizers and agricultural machinery at-gj;eatly reduced rates, where they are carried foi- use and not for-resale, Once more : in certain districts in England and Belgiunmit is the custom to carry coal to every factory at much less than the actual cost of carriage. This is done upon the principle so familiar in taxation that a tax S'8 should be as light as possible on all raw material, so that the gain to the taxing power may be jiroportioned to the loss to the taxed. A tax on the first cost of an article is of course greatly multiplied before it reaches the consumer. Mr. Adams tried hard to impress his Massachusetts roads with the truth of this fact, and has treated this subject with the mastery that has gained him his reputation. Or take again ; the common practice—indeed in many States tlie law itself— that railroads shall carry at greatly reduced rates all articles intended for expositionin agricultural or State fairs, indus¬ trial exhibitions, or cattle síiow^.,-/V, E ow, in every one of thesercases, there can be no doubt of the justice of thejpractice, the benefit to the railroad, and also as to thp-^íéral advantage to the community. .. When, howevprp^fter an examination, we try to discover any dijfefence in underlying principle between these and a ^.--Wiase in which a specified enterprise has been harmed by the competition of new concerns, aided in their growth by rail- ^ ' road policy, we can find none. The dift'eience is entirelyi/l of degree.» a greater degree of general benefit observed, as 11 well as a lesser degree of injury to the other competing|i shii^pers. _ ' Specific legislation, moreover, would here be just as dan¬ gerous as we have seen it is, in all of these cases in which principle cannot be divorced from commercial methods. To treat this one i)art