THE RELATIONS OF RAILROADS TO THE PUBLIC. A STATEMENT PREPARED BY / F. B. TIIUHBER, ESQ., OF NEW YORK CITY, IN REPLY" TO INQUIRIES SUBMITTED TO HIM BY THE CHIEF OF THE BUREAU OF STATISTICS, WASHINGTON, D. C. 1 exüud^ Cíc ^ ■■ INFORMATION FURNISHED BY MR. F. B. THURBER, OF NEW YORK, IN REGARD TO DISCRIMINATIONS IN RAIL RATES AGAINST THAT CITY, THE LINE OF POLICY PURSUED ' BY THE NEW YORK TRUNK LINES, THE OPERATIONS OF THE WEST-BOUND APPORTIONMENT SCHEME OF NEW YORK, TERMINAL CHARGES, AND THE RAILROAD PROBLEM OF THE COUNTRY, WITH A STATEMENT IN REGARD TO THE INFLUENCE OF CAPITAL TOWARDS DETERMINING THE COURSE OF COMMERCE, IN REPLY TO INQUIRIES ADDRESSED TO HIM BY THE CHIEF OF THE BUREAU OF STATISTICS. N. B.—The following inquh-iea were originally addressed to Mr. Thniher in May, 1878, and his reply was dated May 21, 1878. He lias, however, revised the whole and Teturned it to this office under date of June 13, 1879. INQUIRIES ADDRESSED TO AND ANSWERS FROM F. B. TIIUEBER, OF NEW YORK. Question 1. Do you regard the establishment and maintenance of lower rates be¬ tween ports in Europe and points in the interior of the United States than the com¬ bined ocean rate from the foreign port to New York, and the railroad rate from New York to the interior point, as in the nature of an unjust discrimination; and, if so, what measures, in your opinion, should be adopted for preventing it Î Answer. I regard the establishmejit and maintenance of lower rates between porta in Europe and points in the interior of the United States than the combined ocean rate from the foreign port to New York and the rail rate from New York to the interior points as an niij ust discrimination, for the reason that the two methods of transportation are entirely separate and distinct from each other, hulk having to be broken and the goods handled at the end of the ocean voyage in any event. There can be no more economy of transport by making a through rate in Liverpool to Chicago, via Now York or any other port, than there is in making the ocean rate separately and allowing the railroad lines to make the rate from the seaboard to Cbicago. TJiis, of course, is under the supposition that in both cases the goods are transferred from the ship to tho car in the same manner, whether on a through lull ofhidingor not. In 1877, from January until September, through freights from Liverpool to the West ou fourth-class goods were carried at 12 shillings and sixpence net pertou, equal to IJfceuts per hundred pounds, to Chicago, and 14 to 15 shillings net, or 15^ to ICJ cents per hundred pounds, to Saint Louis; while at the same time ocean freight rates to New York alone from Liveri)Ool were 12 shillings and sixpence and 10 per cent, primage for tho same goods i)cr ton; or, in other words. New Y'ork merchants were charged 10 per eeiit. moro for the car¬ riage of the same goods from Liverpool to Now York than Chicago merchants wore charged for taking the same goods (through New York) 1,000 miles further; the ellect of this being to forcibly and abruptly take from tho merchants of New York trade whicli naturally belonged to them and give it to the merchants of Chicago. I do not think that any common carrier has the right to thus abrogate or bo a party to abro¬ gating the natural advantages wliich a commniiity may enjoy. Such practices un- qnostionahly make investments uncertain, disconrago legitimate business enterprise, and should be ])roliibited by law. Discriminai ion of this kind Is a protection of for¬ eign manufactures against home manufactures ; for instance, tho liardwaro manu¬ facturers of Birmingham and cotton niaunractorci s of Manchester can lay down their products ill our Western markets cheaper than the manufacturers of the Eastern Slates can. The former owe no allegiance to our gnvcrnmciit, pay no taxes, and are com¬ mercial "carpet-baggers"; tlie latter are American citizens, and are entitled to fair treatment. Tlic above is an examjile of the constasitly-rcenrriiig anomalies in coin- meree at the jirescut time, resulting from the control of stearn-powcr by largo organ¬ izations of capital, .and wliiclimnst lie rc.giilated in the in tcvest of tho public iinless wo would build up class distinctions and perpetuate a moneyeil aristocracy. I would jiro- hibit siicli practices by State and, if necessary, by national laws, .against charging 1 C 2 APPENDIX. more for the c.arriage offrcight for a less than for a gieater distance, except where the principle of reduced cost entered into the questio]i, and this is not tiie case in the- iustauce ahove given. It must not ho confounded with the pro rata iiriuciple in land transportation, because in this the principle of cost does enter largely into the question. Question 2. Do yon consider th.at the discriminations ahove mentioned li.ave resulted from competitiou between ocean lines in connection vvitli tlie New York Central, the Eric, the Pennsylvania, and the Baltimore and Ohio Kailroads, or that thej' are the result of the eiibrts of those roads to meet rates made hy the steamer lines in connec¬ tion -(vith the Grand Trunk Kailroad, and its connecting line.s from Montreal, Port¬ land, and Boston? Answer. I understand the ahove discrimination to h.ave hccu the result of the efTorts- of the trunk lines to meet rates made by the steamship lines in connection with the Grand Trunk Railroad and its connecting lines from Montreal, Portland, and Boston, Question .3. Is it not true that the average steamer rates which prevail between New York and Liverpool are less than those which prevail between Boston and Liverpool, or between Philadelphia and Liverpool, or Baltimore and Liverpool? Au.swer. Average steaincr rates between New York and Liverpool arc generally lower than between other seaboard ports, the reason for this heiiig that in many respects New York is a more desirable port; the principal reason being, perhaps, that it is more accessible, and freights both ways are more easily obtained. QuesDon 4. Referring to the results of the recent discrimination in rates as against New York and in favor of Boston, which prevailed during the year 1878, leading to a large diversion from New York to Boston, please to state, with as much ])articularity as you may be able, the principal commodities or classes of commoditie.s thus diverted, stating whether they were of domestic or of foreign jirodnction ; if of American pro¬ duction, in what State or States produced, and if of foreign production, of wliat countries they are the product. It is the object of this inquiry to ascertain as nearly as possible the practical effect of such discrirumations against New York. You may elucidate the subject in any manner you may deem i)ro])er, if you do not think a specific answer to the inquiry will properly bring out the facts in "the ca.se. Answer. There has generally been a small permanent discrimination in west-boimd rates against New York andiu favor of Boston, owing to the fact that the Grand Trunk is considered a less desirable route by which to ship goods, and consequently in order to get business it has to offer inducements in the way of a lower rate. When this in¬ ducement has been small it has principally affected the heavier and least valuable class of goods, but when rates are much less, as they have been several times (the last instance being in January, 1878), the difference has been so great that almost all classes of goods have been equally affected, and not only were goods shipped from New York to Bostón andfrom thence to Chicago, by the way of the grand trunk line,/or less ihan half the A'cii) Tork rates, hut goods were shipped from New York to Boston and back again through New York over the Erie road to Chicago at rates far below those ruling from Nery York. As to whether the goods thus affected were mostly of foreign or domestic product, I should say perhaps of about equal amount, foreign goods of all varieties used in the West as well as goods manufactured in New York and all the Eastern Statea being affected. As you state in this question that tlie olqe.ct is to ascertain as nearly as j)Ossible the practical eftect of the recent discrimination against New York, I would add that the damage occasioned bj' these anomalies in our transportation system is not confined to the actual number of tons of tfeight carried out of Boston during the period when rates are less, but there is also a substantial injury done to the prestige of New York as a commercial center, and in the general shaking up and disturbance which they occasion in the settled clianiiels of trade. Question .5. In view of the fact that New York City is practically the trade center of a very large proportion of the manufacturing enterprises of the New England States, do you not consider that the commerce of New York from these sources is largely pro¬ moted by the low rail rates on Western productions over the New York Central Railroad and its connections to the towns of New England, and by the low rates for the trans¬ portation of the manufactured products of the New England factories to all points at the West and Southwest over the same roads? Answer. I thiuk that the business of New York is promoted by equitable rates from the West to the New England Statea and from the New England'States to the West, as, nnquestionahly, New York shares to a greater or less extent in the prosperity of New England ; but I do not think that this is any reason why New England should have a lower rate of carriage than New York, or even as low, because, laying aside the influ¬ ence of distance on through business, the volume of business done at New York entitles her to lower rates of trausportatiou than any other seaboard city. It is well known that the cost of transportation by rail decreases faster as the volume of business in¬ creases than the cost of doing any other business; or, in other words, a large business in transportation can be doné cheaper in proportion than a Targe business in almost any other branch of commerce. -ïchij Umr, ' ' TiiL EEPOKTS OF ÉXFERÏS. 3 Question 6. Please to present such facts as may appear to yon to be of value in order to indicate the nature and extent of the discriminations made in favor of jobbing mer¬ chants at interior points on shipments from New York, and explain how such discrimi¬ nations operate with respect, first, to the interests of small purchasers in the interior; second, to the commercial interests of New Y'ork, and, third, to the interests of the transportation line. Answer. It has been the practice for a number of years for all tbe priuci[ial railroad lines running from New Y'ork to the West to make special contracts with wholesale houses in the interior, at almost all princix'al points, at a rate far helow their printed schedule of rates, which, in the absence of agreement, the pnhlic generally have to IJay. The following are illustrations of the great diflerence thus made, and which is by many believed to he excess!\'6 : (lYom report of committee on railroad transportation of tbe New York Chamber of Commerce, Febru¬ ary 28, 1878.) "An important discrimination, also, against the jobhing trade, particularly of this city, is in the form known as the special contract system, hy which wholesale houses in the interior are given rates fi'om bfty to seventy-five per cent, cheaper tlian the gen¬ eral public ; and for illnstration on this head we refer to annexed schedule, raarlciid E." Schedule E.—Special Cox'tkacts.—The winter schedule rate from New York to Syracuse is 50 cents per 100 pounds for first-class goods, 40 cents for second-class, 34 cents for third-class, and 23 cents for fourth-class, and these rates the great mass of people have to p.iy ; but a few favored wholesale de.alers in Syracuse are given con¬ tracts hy which all classes of goods are carried for 12 cents per hundred pounds, as against the 50, 40, 34, and 23 which the yrablio generally have to pay, and the same is true of all the other jobbing centers of the State. The same iiriiiciple also holds good in the treatment which the great mass of the peojile of the State of Illinois, and, indeed, all oiher AVestern States, are forced to submit to. The reduced rates of the pooled lines to Chicago are now 75 cents per hundred for first-class, GO cents for second- cla.ss, 50 cents for third-class, and 40 cents for fourth-class (lately .|1, 80 cents, 60 cents, and 45 cents, respectively), while favored parties have been given contracts running through the year at 25 cents per hundred on all classes." This form of discrimination aflccts,— First. The .small purchasers in the interior, virtually jirohibitiug them from buying in the most favorable markets, for they are discriminated against so largely that they are obliged to stay at home. Second. The commercial interests of New T'OIE are unfavorably affected, for its mer¬ chants are thus obliged to sell their goods to the wholesale houses in the interior, who are thus favored in freights, at such xirice.s as tliej' may see fit to give. Fractically the wholesale houses in the interior are subsidized so tliat they may break down tlie wholesale houses on the seaboard and monojiolize the trade of the retail merchants of the interior. Third. The interests of the transxiortation lines are unfavorably affected, for they are virtually concentrating tlie business in the hands of a few wholesale merchants, who pay them very low rates, instead of doing business with a large number of smaller merchants who would be glad to pay them a higher and rea.soiiably remunerative rate, but who are xireveuted from buying their goods ift the seaboard markets, as they used to do, hy the prohibitory rates wbich are maintained. Tlic xiassengcr traffic of the roads is also greatly injured hy this ]iractico, as tlic larger the number of mer¬ chants who do business with the aeabo.ard business ceiitors, the larger would ho the. number of business men travelling, and I therefore believe it not only to be an unjust discrimliiatioTi against the interest of the wholesale mcrclnants on the seaboard, lint also against that of the smaller luircliascrs in the interior, ami of the roads them¬ selves. While I do not think it fe.asible or right to rec|iiire common e.arriers to trans- I>ort a small quantity of goods as chea))ly as Ihcy would a laigcr quantify, yet I be¬ lieve with Mr. Fink, that a car-load shoiild be the niaxinuim qnautity required to secnro the lowest rate, and I believe further, that shippers of less than a car-load should only he churrjcd the additional 7'ate ndiich it costs to transport yoods in smaller qnantiiies. 11 is anqucstionahly true that Iheyreat mass of the people hare hecn charged a much higher pro¬ portionate rate than they should hare hccii charyed, in. order that an unreasonahty low rate could he giren to a few farored individuals. Iheliiwe that the egniiuhle adjustment of this matter is of greater importance than almost any other single defect in our transportation sys¬ tem, audit should receive thcearefnl examination, of experts in order to determine what addi¬ tional rate it costs to recAÙve, transfer, and dctirer i/uaiiUUcs less than a ear-load as compared with a car-load, and then with this light an cqiiitahle acljnstment should he made. Question?. In what manner .and to what extent arc, the interests of trade injnrion.sly aflbcted hy sudden and unad vertiscd changes of tariU'ratriS ? In your opinion, íiow long slioiild any jnoposed change in a tariff slu-et lie advertised jirior to making the changes ? Answer. Sudden and unadvertise,erts, and this additional cost and no more should he charged to such shipijers. The prin¬ ciple of "equality on the 'King's highway'" should be here ax)i")lied as far as possible. The right of the citizen must here limit the operation of the law of wholesale and re- tall; the vote of the small shipper had as much to do with conferring the franchises under which railroads are operated as did that of the large shijiper, and from this point of view he is entitled to as much consideration. Question 10. Eeferring to the second proposition on page 6 of Report of Chamber of Commerce Committee on Railroad Transportation, please to state what general or special remedy was therein contemplated. Answer. That touched upon in answer to question 1, namely, that, if necessary, leg¬ islation must be invoked, not only at New York, hut at all the ports, to remedy this state of things. Question 11. Do yon regard the recent discrimination in rail rates in favor of Boston as a measure intended by the railroad managers to he inimical to the interests of New York City, or do you regard such discriminations as the result of a contest by New Y'ork roads for the purjiose of forcing rival roads out of Boston to a conformity with the established New York rates ? Answer. The recent (1878) discrimination, in rail rates in favor of Boston was un- qnestionahly not intended to be, by the railroad managers, inimical to New York City, hut they were the result of atteraxits by the pooled trunk lines to force the Grand Trunk Road into jnaintaining a higher schedule of rates than the managers of that road saw fit to maintain, or, looked at from a New York railroad manager's standpoint, it Avas occasioned by attem jits to meet the com}3etition of the Grand Trunk Road. Tliis, however, is not in all resxjects a fair statement of the case, because the extreme low rates which ruled for a time were fir.st made by the ijooled lines as a jAunishment to the Grand Trunk Road for having carried at much higher rates, hut which rates were somewhat lower than those established by the pooled lines. Question 12. Please to xu'esent a statement showing the relatirm terminal charges at Boston, New York, Philadelphia, and Baltimore, with reference to certain specific commodities. By this is meant the terminal charges as they affect particular kinds of commodities in their passage through New York, first in the course of trade, and second, by direct transsbipment. In this connection xilcaso to present two illustra¬ tions or sets of illustrations going to show the relative terminal expense at Boston, New l'York, Philadelphia, and Baltimore. First, on commodities imported from Europe and to be shipped directly to interior points; second, on commodities xrlaced in ware¬ house at New York xu'ior to shixnnent ; third, on commodities rvhich pass through the New York market. Answer. This question is, perhaps, the most difficult of all those asked to answer Intelligently, and it is almost impossible to answer it comxrreheusively, as it involves not only rvhat is known as terminal charges, hirt the whole routine of commerce at the four principal seaboard cities, both in import and exiiort business, and in order to give a correct idea, it would have to embrace all the principal items of merchandise. I have,^however, consulted Avith a large number of prominent merchants in different REPORTS OF EXPERTS. 5 l>ranclies of trade, ^vitli tlie following general result : as regards ships, wliile tlie spe¬ cific cliarges of pilotage, towage, wharfage, supplies, &c., vary in some degree at the difierent ports, there are corresponding advantages and disadvantages which about equalize each other. As regards the terminal charges on merchandise, New York has in the past been at a disadvantage as regards grain and other jn'oduce arriving from the West by rail and destined for export, and also on the heavier kinds of imported goods route to the west, for the ecouoinical handling of which it Avas necessary to bring cars and ships together ; bnt, as stated elsewhere, these have been and are being remedied. The foregoing ai^plies more especially to the second division of the ques¬ tion, viz, where goods have direct transshipment from ship to car, or vice versa; hnt as regards those charges upon commoditiesin their passage tiiroiigli New York in the regular course of trade," the question of merchants' profits is involved, and this is of far more importance on the great miscellaneous class of goods than the mere at¬ tendant expenses, such as cartage, storage, labor, &.c., wlilcli do not differ materially in the different seaboard cities, aiid in the aggregate amount to an exceedingly small percentage upon the cost of valuable products. On this great miscellaneous class, which comprises a thousand and one items. New York possesses substantial advan¬ tages. Mo.st of the large manufacturers, both foreign and domestic, maintain agen¬ cies here for the sale of their goods, which is thus done upon the least possible margin of profit; varieties are more extensive, afibrdiiig the best possible- selection, and here new and attractive styles are first shoAvn. These advantages, Avith the aggregation of capital which has settled here, have resulted in attracting hnyers to this market and holding in a much greater degree than could have been expected the trade of the na¬ tion, in the face of the persistent discriminations which have been made against Np-av York by her railroad lines. This discrimination has, of course, resulted greatly to the detriment of her distributing merchants, avIio haA^e had to relinquish a portion of their legitimate profits in order to make up for these discriminations and to offset the in¬ ducements offered by competing cities. In conclusion I AA^onld say, as in the ansAvcr to question 16, that there has been some misapprehension and too broad an applica¬ tion of the agitation by the citizens of New-York for improved terminal facilities, as it was designed principally to secure improved facilities for the handling of grain arriving by rail, and other heavy goods for Avhicli direct transshipments from shlt> to car and from car to ship were a necessity. Question 13. Please to state generally those defects in the terminal facilities of Ncaa-" York City Avhich injuriously affect it, in so far as relates to trade in which New York competes with Boston, Philadelphia, and Baltimore. Answer. I know of no defects in the terminal facilities of Ncav York, except those heretofore resulting from our inability, or more properly neglect, in-hringing cars and ships together ; this aj)plie8 principally to the handling of grain airiving from tlio West by rail designed for immediate- export, and to the heavier class of imported goods destined for consumption in the West ux»on aa'hicli it is also necessary to make direct transfer from the ship to the car. We do not feel the first during a great ))art of tlio year, owing to the superior facilities enjoyed by NeAv York iti having tlie Erie Canal, the carial-hoats bringing this staiile being at once toAvod alongside ships by Avhich it is to be sent abroad. And as regards imported goods destined for the AYest, tlio recent authorization of the use of the Belt Line of railroad wliich runs along almost the entire Avater front of the city has already enabled a beginning to be made in loading tliese a'arieties of goods directly from the .s]iix>s n^iou the cars without cost of transfer, and the full utilization of these facilities will xdacc Ncav York upon an equality Avith all competing cities. Question. 14. In your oiiiuion, has not the rajiid diffusion of commercial informa¬ tion by means of railway postal service and the telegrapli, in connection witli the pos¬ sibility of raind traiiK|)ort.atiori afforded by railroads, rendered it necessary that tlicro should he at every city on the seaboard an imiiKidiute contiguity of tlie railroad, the warehouse, and the sea-going vessels, and the cstahlislimcnt of such faeilities in the way of mechanical ayipliances and husinesH arrangeinents as Avill insure the lowest possible cost of transfer from one veliiclc to auoMicrf In this connection Avill you Jilease to state hoAv far, in your oiiinioii, the facilities fimiished at New York fail to meet this refyuirment Î Answer. Unquestionably the rajiid diffusion of commercialinformatiou tends greatly to equalize values In different commercial centers, and in connection Avith the jiossi- bility of rajiid transjiortation jirevents the realization of huge jirofits to the distribu¬ tor and greatly reduces prices to the consumer. In consequence of this it lias become necessary to reduce to the miuirnuiu all charges ujiori commerce, and the most ajiproved ayqilianccs and facilities are also necessary. As to the defects in the facilities furnished at New York, they have unquestionably been unduly magnified. In eniiincrating the defects in the New York railway system many persons have entirely overlooked the great natural advantages enjoyed by New York in lier magnificent luirbor and exten¬ sive stretch of water front, which, takcm iii connection Avitli that great source of wealth, the Eric Can.al, lias sustained the commerce of New York iimler the discrim¬ ination of her railroads, the burden of bad municipal government, and the enterprising 6 APPENDIX. compétition of otlicr seaboai'd cities. There has been a great cry that what New York neiMleil was elevator.s; Ijiit so far as the agit.atioii l)y the citixeu.s of New York waa concerned it was simply for elevators at the termini of the different railroads in con¬ nection witli tlie Western system of grading grain. It may not be generally known that New York has more elevators than any other city in the Union, but they consist ]irincii>ally of stationary elevators at the varions grain storage warelionses and float¬ ing elevators for the transfer of grain from canal-boats into sea-going vessels, this lat¬ ter variety moving about the harbor from i)oint to ])oiut by their own steam and con¬ stituting a most effective instrumentality in onr terminal facilities. The New Y^ork CentraTEoad has also one first- class elevator for receiving and storing the grain trans¬ ported hy that road, and aiiotlier is in j)rocess of construction. With these and the system of grading grain, which has hut just fairly come into general use, New York cannot be said to be deticieut in terminal facilities, at least those for the handling of 'grain. Question 15. What has been the general effect of the west-bound apportionment scheme from New York upon the commercial interests of that citj', with special refer enco to those interests in which it competes with rival seaboard cities, and what, in your opinion, will ])rohably he the effect of this apportionment sciieme upon the future commercial interests of New York City? Answer. I believe that the. general effect of the apportionment scheme out of Now York, commonly known as the pool, upon the commercial iutere.sts of this city, with special reference to those interests with whicli it competes with rival cities, has been unfavorable ; not that an apportionment scheme is liad in all its features, but the rates at first established were so high that circuitous routes could cut largely from the ])ool rates and still make inoiiey, notwithstanding their unfavorable location; second, owing to the number of lines in tlie apportionment scheme it involved the transfer of some i'reight from one line to another without the coiicnrreuce of shippers. This, in some cases, resulted in delay and inconvenience to the receiver of the goods, and savoring as it does somewhat of arbitrary control over matters which had heretofore been directed by shippers or receivers of goods, it was an clement of dissatisfaction which dealers in rival cities did not fail to magnify and make the most of. (As an illustration see letter clipped from the York York " Shipininj Lint.") "E.vilway jiismaxagemext. "Editors Shipping axd Commerclvl List; "Gentlemen: As yon represent, as well as any New York joiirn,al I know of, the bnsines.s men of New York, I desire to call your attention to a matter that is driving the trade away from jour city f.aster than anything I ever heard of. It is the 'pool¬ ing' system of the trunk railroads out of your city. The Western buyer now has no choice, of the way his goods shall come. The superintendent of the ' pool' directs and divides freight to suit himself. Now, if all railroad companies did their business with equal promptness and dispatch, and in a business-like manner, there would he no com¬ plaint. But they do not. Some lines will liring goods from New York to this point in four or five days, and settle any loss for damages promptly, while others will take as long as three weeks, and it is a hopeless case to attempt to collect a cent of dam¬ ages from them. Some lines have ple;isaut, affable gentlemen for agents; others are represented by some blocklioad of a relative of a high official, who leaves his business to a boy, and is hardly ever to bo found in his office, or when found knows nothing of what he is hired to attend to. Now, to he forced to do business with such linos is an outrage. They were always forced to cut rates to get any business, and even then not get a fair proportion. We would rather pay more and do business with reliable lines. It is just the same with one of these freight lines as it is with a business house. A man would rather do business witli a first-class reliable firm, and pay their price, than deal ■with one of those 'snide' concerns that is always playing sharp and selling inferior goods. I have always given the preference to the Merchants' Dispatch Lino, and can safely calculate on getting good.s in four days from New York. If we have any losses they settle them promptly. There are several other lines th.at do just as well—the Star Union for instance—but we started with that line, and as long as everything was satisfactory we made no change. Now we send an order by letter or telegraph to our merchant in New York to ship us so and so by Merchants' Disiiatch. The mer¬ chants obey orders, but the Merchants' Dispatch gets more than their share of freight, according to the 'pooh' The Superintendent of the 'pool' directs that my goods with others, be taken over to the Baltimore and Ohio, or Erie or some other road, and instead of getting my goods in four days I am out of them one, two, or three weeks. I have jnst received a lot of goods three weeks out, and damaged at that. I don't believe I will ever lecover a cent of damages. Now this ' |)ooling ' arrangement does not exist in Boston or Pliiladelphia, and we can order goods from either and des¬ ignate tlie line we want them shipped by, and get tliem as ordered. We intend, tliere- fore, to go to these places and buy onr goods as far as possible. I sent orders for over ,ti5,ÜOO worth of goods this week to Boston, rather than buy in New York where I have always bought my goods, rather than be subjected to the outrage that is now being REPOETS OF EXPERTS. 7. jierpetrated by the railroad lines centering in your city. "We sball avoid Now York aa much .as possible until her merchants see fit to stand up and fight for their rights and That of their patrons. Why don't the lines ' pool! their passenger traffic the same w.ay Î Suppose a man was to go to the Erie Railroad and ask for a ticket to Indianapolis or Saint I.oui.s, and be told they had disposed of their quota for that d.ay, and ho must go via the Baltimore and Ohio, or the Cliesapeake and Ohio, or through Canada ; it would not be long before people would give your city a wide berth. If the railroad lines want to combine and keep up freights, lot them 'pool' their earnings, and give "the shipper the privilege of sending his goods as he may choo.se. Whether the New York merchants know this or not I am not aware, but as it has been going on nearly a year, and they are apparently taking no steps to break it up, the only recourse a Western buyer has is to let New York severely alone. I bought over $50,000 worth of goods in New York last year—a small amount—but there are moro like me, and New York will get as little as possible this year. "Very respectfully, "SUBSCRIBER. "INDIANAPOLIS, Marché, 1878." Had the rates of the pooled lines b(>en fixed on a basis which would yield but 10 per ■cent, on the capital actually paid in by the stock and boud-lioUlers, ami .all speci.al con¬ tracts been abrogated, the apportionment scheme might have proved a substantial benefit, but there has been a strong feeling in the commercial community that it was ail eftbrt to abrogate by the power of a monopoly the ordinary laws of commerce, which laws, if left to work, would decree the failure and liquidation of these roads, tho same us a merchant with an unduly inflated business would have to fail and liquidate. It is uuquestionably true that production and commerce in this country i.s being taxed in the way of exorliitant rates for transportation to a far greater extent than tlie onli- nary taxation for the support of government, and tliat while straiuiug at tho gnat of ■ordinary taxation wc have swallowed the camel in the shape of taxation for traiispor- ' tation. This is illustrated by the revenues of the r.ailroads of the St.ato of Now York, which exceed by more than twelve times that of the entire revenues of tho State derived from taxation, and the New York Central Roail alone lias in ten years paid dividends upon the watered stock which was put into that road in tlie years 1867-'68; dividends upon the watered portion alono, whicli in ten years, with compound interest, amount to more than fifty-two millions of doll.ars. Tlie Racific railroads have during the bast ten years .also ex.actcd from the public many millions of dollars over and above what would have been required to liave paid liberal inter¬ est and dividends upon tlie actual cost of those roads. TJio report of tho investiga¬ tion into the management of the Credit Mobilier Construction Co., of the Union Pa¬ cific Road has sliown that the directors of tlie Union Pacilio Road presented them¬ selves, as directors of the Credit Mobilier Construction Co., with $'J4,C50,'¿87.'¿4 in casli, stock, and bonds, of wbicb they acknowledged .Ç4à,92'J,328,24 were profits. It is be¬ lieved by many that tlie $27,'236,000 received as the jiroceeds of bonds issued to ' them by the government would, if honestly expended, have been sufficient to con- stnict the entire, work; and yet the commerce of this country is being taxed, .and jirobably will continue to be for all time, to pay dividends upon tlio entire mass of obligations tlms issued. In view of such fact.s as tliese, .any .apiiortionment solicmo which involves the cliarging of rates higher than would be necessary to pay a fair return upon caiiital necessary to honestly construct tlie roads of wliich tlio eombina- ' tion is couqiosed, must prove detrimental to tlio interests not only of New York City hilt tlie whole eoniitry. Question 16. Please to mention tiio particular branches of trade whicli have boon to any consiilcrablo extent deflected from New York to otlier Atlantic seaportij during tlui last five years, .and .state the opinion generally entertained .among the leading mer¬ chants of New York as to the cause or causes wliicli have led to such changes in tho course of trade. Answer. In export trade barge quaiiHties of linsiiioss, principally grain, liavo boon diverted from Now York to Baltimore and Plilladclpliia during the winter season when the great natural advantages whicli New York enjoys are ncutrali/iCd by canal navi¬ gation being closed, and it is at this timo of tlio year tliat tho ilistanco allowance in favor of Baltimore and Pliiladelpliia, togetlior with their heretofore somewiiat clicapor terminal charges on goods arriving by rail and destined for export, operate greatly to their advantage. Tliat tliis ilistanco ailowance is uiijii.st is proved by tlie opinion generally entertained by experts, that, owing to tlio voiiiiiic of biisliies.s done, it ac¬ tually eiists tlie railroads less to do New York iinsiiiess tliaii it does eitlier Pliiiadciiilila or Baltimore Imsincss, and tins is virtually conceded by all tho roads iii.aking uniform rates on imiiort and cxpoitfreigiillVomand to Ibreigii countries through all the ))ort.s. It is disproved also hy giving to Boston equal and in some instances lowcrrate.s, not with¬ standing lier distance to principal Western cities is greater. Tlie ibrcgoing relatos priiici- paily to cxjiort trade, lint tlio (liscriminaliou against Now York on lier importiim and distributing business is jieriiaps tlic most important and flagrant of tho two. Goods 8 APPENDIX. Lave Leen îiaLitually carried on special contracts, to jobbing points in New York State and beyond, for a fe^v favored vLolesale merchants, at prices ranging from one-]ia,lf to one-third those charged to the general public. This practice has had the cftect to forcibly take from "wholesale merchants on the seaboard and give it to wholesale merchants at interior jobbing points. This is notably true of the dry- goods trade, aud all branches of trade have thug been more or less injured. But for the great advantages enjoyed hy New York in having the Erie Canal a great part o-f the year to swell its export bnsinc.ss, audits preponderance of capital, these eifects would doubtless have been more seriou.s than they have been. Question 17. Have tlie railroads terminating at New York entered into any arrange¬ ment with ocean steamer lines designed to meet special advantages aftbrded at other Atlantic seaports ? Answer. It is generally understood that the railroads terminating at New York have agreed with the Baltimore and Philadelphia lines that rates from and to interior Western cities on export and import trade shall be uniform through all the ports, and that these roads accept their pro rata portion of the through rate. Rates from Liver- i>ool to Chicago hy way of Boston, at tliis time, April, 187Ö, are some two shillings per ton lower than through the other ports. This is probably attributable to the cut¬ ting of the railroad rate by the Grand Trunk Line. Question 18. Are the steamer lines running out of New York to any extent pur¬ chasers of grain for the purpose of completiug their cargoes to Europe ; and, if so, what is the ox)iuiou entertained hy the grain merchants of New York as to the effect of sucli purchases ui>on trade ? AnsAver. I am not aware and cannot ascertain that any of the regular steamer lines runniug out of New York are in the habit of purchasing grain for the purx)ose of com¬ pleting their cargoes to Europe. Some time since this was done to some extent by The Anchor Line, but it gave such dissatisfaction to the merchants who were in the hahit of shipping by this line that the practice Avas relinquished. It is manifest if such a practice were tolerated on the part of common carriers, that at times, Avhen freight room was scarce and profits on shipments large, the temptation would be great for said carriers to monopolize the carrying capacity of their steamers and rule out the general public. The opinion entertained bymerchants is that this practice is unfair to the commercial community and imcompatible with the functions of a com¬ mon carrier. Question 19. AVhat is the present number and capacity of grain elevators at New York, and where are those elevnitors located? Answer. The number of stationary elevators at the port of New York is seventeen, with a storage capacity of 16,420,000 bushels; the number of floating elevators is thirty-four, AAÚth a transfer capacity per hour of 279,800 bushels. The location and other details in connection with these elevators, taken from the official list of the Pro¬ duce Exchange, are hereAvith submitted. Floating and stationary elevators at thejfort of Xeio York. STATIOXAPvY. Names of owners or managers. Names of elevators. Location. ^ I The GrainWarehonainirCom- pany, AtlanticDock, Brook¬ lyn, office 5 iloore street, ÑeAV York, L. B. Shaw, president ; P. H. Laimbeer, treasui'cr. Hazeltine &. Co., 31Pearl street B.irtlett &, Greene J. P. S¿ G. C. Pobinsoa, of&ce 14 Coenties Slip. New York Central and Hud¬ son Eiver Railroad Ele¬ vator, "Whitney &■ Twom- blej, lessees. 43 Whitehall street Stores Nos. 2 to 28 inclusive # Stores Nos. 6 to 11 inclusive Stores Nos. 70 to 92 inclusive ( Columbia Stores 1 Kelsey's Stores Central J. P. Sc G. 0. Robinson's... Nov York Central and Hud¬ son River Railroad. Commercial Wharf, Atlantic Dock, Brooklvn. Cliut')n \Vharf, At¬ lanticDock, Brook- lyu- South Pier, Atlantic Dock. Brooklyn. Foot Atlantic street, Brooklyn. Foot Irving street, Brooklyn. 150 to 162 Furman street, Brooklyn. Erie Basin, Brooklyn.. Foot Sixtieth street, North River, New York City. 6, 000, 000 1, 500, 000 1, 000, 000 COO, 000 2, 800, 000 1 500, 000 25, 000 8,000 8, 000 5, 000 8, 000 60, OOO REPORTS OF EXPERTS Floating and stationary elevators at the port of JVtii! Yorlc—( STATIOH"ARY. -Continued. 9 Xames of owners or managers. ; Names of elevators. Location. « o J «2 'F.'Woodruff«fe McLean, office 103 "Water street. United States Warehouse Company, office 6 iVout street, Ira Ketchnm vice- president; U.S. Mathews, secretary. Francis 13. Pinto, 37 Pearl street. Lawrence's Stores, foot First street, East Kiver, ottice 3 Stone street. Tripp, Rogers «fe Co., foot "\Ve8t Thirty-fonrth street. W. H. Payne, foot East One hundred and twenty-ninth street. E. M. Yan Tassel, Pier 39 North River. ' E. M. Van Ta.ssel & Co., Pro¬ vost and Twelfth streets, Jersey City. Fellows xiortionmcnt scheme has practically no effect niion special contracts ma.de to x>oints east of Buffalo, Dunkirk, Pittsburgh, Wheeling, and Parkershurg. As regards princixial points west of these named it theoretically abolishes special con¬ tracts, and if conscientiously lived up toit would be a redeeming feature of the whole REPORTS OF EXPERTS. 11 plan; otherwise it is tlie most unequal and onerous form of class t.axation of which we have any record. Question 24. Please to describe the Belt Line, stating the rules and regulations gov¬ erning its use by day and night. Answer. The Belt Line of railro.adin New York, more properly known as the Central Park, North and East River Raih'oad Company, is a Iiorse railroad running along West and South streets, comprising the water front of the business part of the city; thence along v.arioiis streets and avenues on the east side of the city to Fifty-ninth street, where it crosses the city, skirting the lower boundary of Central Park, to Tenth avenue, and down that avenue again until it again strikes the water front on the west side at West street. A portion of its route in West street above Canal has lieretofore been occupied by the track of the Hudson River Railroad, leading to tbo freight depot at St. John's Park ou the west side of the city, and this track has been jointly used by the Belt Road and the Hudson River Railroad uuder a working arrangement for that pmrpose. Recently, however, at the solicitation of the mer- chant.s, our municipal autliorities have granted pcrrai.ssion to use the track of tlio Belt Railroad for the movement of freight-ears during certain liours of the niglit, and has gi%-en power to lay switches to tlie various wharves and warehouses along its route. It is believed tliat this is ar. important step toward improving the terminal facilities of New York, and bringing the cans and ships together, as is done in the other principal seaboaril cities. It will, to a consideraiile extent, remove the excuse which New York roads have urged with some force, that New York did not extend to them the same facilities wiiich other seaboard cities extended to their roads; and it is to be hoped that it is only the forerunner of a more complete and comprehensive system of terminal facilities worthy of tlie princii)al .seaport of a great nation. Question 25. You are requested to add to the foregoing inquiries any statistical or other facts which yon may deem of interest, either with ]esp<'ct to the commercial interests of New York or with reference to the movements of or the conditions afl'cct- ing the iutenial commerce of the country. Answer. In accordance with the request to add any facts with reference to the con¬ ditions affecting the internal commerce of the country, I desire to call attention to the facts set forth in one of the reports of the committee on railroad transportation of the American Cheap Transportation Association, froin wiiich I liavo made tlio follow¬ ing extracts. The array of defects in the management of our modern highways there set forth is quite remarkable, and the remedies proposed seem eminently conserva¬ tive and just. Beginning with abuse.s in construction, it s.ays: "The reckless and unprincipled manner in which some railroads are built would a.s- toniiSh many persons, and wo give the following as a sample: A charter is obtained and a few ine.n get togetlier without a dollar in ready money, form a company, issue construction bonds ' secured by mortgage n]ion the road,' and a committee of directors is sent to New York to 'place' the bonds. The committee enter into negotiations with some prominent hanker to undertake the placing of the bonds, he to get what he can for them and allow the road 70 cents on tlio iloilar, the road to pay the advertising hills. If the eomiiiitteo are honest the road ultimately gets 70 cents less the adver¬ tising hills, but many committees are not iioiiest, and as soon as they have found a hanker to, undertake the joli at 70 they communicate with the hoard of directors at home, .stating that the best they can do is CO, and ask for aiuliority to place tlic iionds at that figure. Having tlieir confederates at liomo in tliis inside ring, the aiithorit.y is easily obtained, and by arrangement with tlie banker he settles with the road at CO, and X'uys 10 jicr cent, over to this syiidic.afe for their personal use and henciit. If t.hcro is a happy conihinatioii of circumstances, sncli as aliseiico of financial disturbances, snsponsioii of the liaiiker, &c., and if they got all tlic counties, cities, and towns along their route to issue bonds liberally, tlie road may bo liiially Imilt and fiiniishcd with rolling stock ; then our wortliy friends of the board of management divide the stock between themselves without equivalent, fix tiie rates for freight and passengers liigh eiiongii to pa,y interest on tlio face value of the lionds .and par value of the stock, iinil tiieii, after voting themselves fat s.ahiries, proceed to foist the stock oil' upon an nnsns- pecting jinhlic. As soon as tlie iiicmhers of the ring manage to sell most of tlicir stock the.y go to work and organize a ' Fast Freight Line,' or other Credit Mobilier institu¬ tion, to whicli they give a contract whicli soon im|ioverishcs tlie roail and ciiriclics them, so tliat wlien the road passes into hankni|itc,y they are enabled to buy it in, issue new stock, and repeat tlieir little iiiiaiicial arrangement over ag.ain. In sketcli- ing tlie coiiipletion of this road wo forgot to sa,y tliat tliere was a ' coiistruetion ' ring ; this ring iiad their sliee i'roiii every contract iiiaile, and not a mile was graded or tio laid, not a rail or engine or car xiurehased, not a doiiot erected or nail ilrivcn, but a Iiercentage went into tlie jioeket of the ring. "As for the hanker, h.y .a free use of the press (who lend the weiglit of cditori.al col¬ umns to tlie, project), he succeeds in 'iilacing' the bonds at 'JO, 9.5, or pai', among the widows, oriihans, and other nnsophisticateil jie.iwiiis of small means who have coii- ildeiice. In tlio hanker and editor tliat reeoniineiid flie conversion of goveiiiiiiciiit 12 APPENDIX. lionds into tlio ' equally relialdo and better paying railroad securities.' ETorything goes ou sinpotlily until some niorning the, railroad stops ])aying interest upon its bonds, p.isses into bankruptcy, sells for little or nothing, and that is the end of it, so lar as the hanker, the editor, and the person of small means are concerned. In the mean time the managers of the road find it necessary to buy the usual number of legislators, and retain all the best legal talent along the line of the road, in order ' to protect tlicir rights from the encroachments of the people,' who have languished under extortion¬ ate freight charges, and who have been groping blindly ahout to find a way to remedy the evils which, notwithstanding that they labor early and late, and raise crops which are the admiration of the world, are making them poorer each year. Now, while wo are far from desiring an indiscriminate war upon railways, we claim that public opin¬ ion must he awakeucd to these abuses, and that they must he eliminated from our present railway system. The people of this country are beginning to find that these defects in our transportation system are the ' Old Man. of the Sea' upon the shoulders of the cojiimcrce of the country, aud when they realize that the watered stocks and other swindles in this line are a greater burden than our entire national debt, we may be sure that they will in some way work out a remedy. " The foregoing relates principally to the defects in the manner of construction, hut they are none the less prominent in the operation and management of railways. Prob¬ ably the greatest abuse in the present system of railway management is the practice commonly known as 'stock watering,' or the capitalization of surplus earnings, the most usual form of which is accomplished by charging high rates of freight and ac¬ cumulating a large surplus fund, putting it into improvements and then issuing stock to lejireseut the value of these improvements j or, in other words, exacting money from the public, aud then forever after making the public pay Lntereat on the money so exacted. It is argued by the apologists for these practices that it is current among manufacturing and other corporations, but they ignore these essential points: that a railroad is endowed with the right of eminent domain, the right to take private prop¬ erty ftecaase ii is/or paJiio use, and railroads therefore owe some duties to the public which manufacturing companies do not. Again, manTifacturing corporations are not like railroads, natural monopolies by the very nature of their construction, and no one is obliged to patronize tbem, as is the case with the railroads. tVe cannot better illus¬ trate the practical operation of this ahiise than by comparing the management of the ' Baltimore and Ohio ' aud the 'New York Central and Hudson River' railroads. Both of these are trunk lines, connecting the interior with the seaboard and operating nearly the same extent of road. The policy of the former company has been to invest its surplus earnings in the improvement of its road, and carrying forward their cost upon their hooks as .a sur])ln8, while that of the latter company has been to make the same investment of earnings, hut to issue stock representiug the same. " This plan appears to h.ave been initiated with the formation of the New York Cen¬ tral Railroad in 1853, by the consolidation of the ten separate corporations owning the route between the Hudson River aud the Lakes. The comhined amount of sh.are cap¬ ital and convertible bonds of these separate organizations was then f23,235,000, hut a considerable portion of the share capital had not been paid in. The equalizing process of the consolidation was that the Schenectady and Troy Company—tliat being the least productive of all—should come in at par, while the holders of stock or convertible bonds of the other roads received a premium in consolidated 6 per cent, debt certifi¬ cates ranging from 17 to 55 per cent., making an issue of these certificates amoiintliig to $8,894,500, or over 30 per cent, on the true share capital of the company. From this time down to 1867 there had been no material change in the total of stock and debt of the New York Central Company other than what could he nearly accounted for by actual value received, aud its capital account was then represented by $28,537,000 of stock aud $12,069,820 of bonds, a total (including the 'water' of 18.53) of $40,606,820. The Hudson River Railroad Company at the same time had a share capital of $7,000,000 and a bonded debt of $7,227,000; total, $14,227,000; making tbese two companies, which in 1860 were consolidated, stand in 1867 as follows : Stock, $35,537,000, and bonds, $19,296,820, or a total capital account of $54,833,820. "During 1867 the Hudson River Company presented its stockholders with $3,500,000 stock, or a dividend of 50 per cent. ; and again, at the time of consolidation, another one of 85 per cent, on the then oiitstauding stock of $16,000,000, making an issue of $13,625,000. The New York Central Company had, in 1868, presented its stockholders with $23,036,000, or 80 per cent., followed by one of 27 per cent., $7,775,000, at the time of consolidation. Thns in the space of two years the now New York Central and Hudson River Railroad Company added to its capital the sum of $47,936,000, created out of nothing hut the wlB of its directors and the mixture of pajier and printers' ink. From 1870 to 1872 the bonded debt was increased each year by from one to two millions of dollars, since which it has been increased some $20,000,000 for purposes of coiistruc- tiou. Who shall say if any, or how much, of this has been additional 'water' to make up the necessary amount of $7,200,000 for annual dividends ? It will he seen by the EEPOETS OF EXPEET3. 13 foregoing tliat the known fictitious capital of this company, including the issne of 185;?, is some $10,000,000 greater than the real capital ■which had been invested down to 1869. '^In the one case the iiahilities represent about $40,000 per mile of road, and in the other about $130,000. Both pay about the same dividends, and it certainly requires no mathematical ability to comprehend the fact that, in order to do this, the latter road must on the same traffic charge the public a much higher rate of transportation. The roads mentioned ha've been selected only because they az'e conspicuous examples, and, to our shame he it said, that aside from the Baltimore and Ohio there is not another trunk line of railroad in the United States to hold up as an example of honest railroad management. The entire railroad system of the United States is tainted ■with the same practice, and it is estimated that about one-half of the stock of the entire body of railways in this country has been thus manufactured. There are other abuses connected with the management of railroads, such as fast-freight lines run by outside companies, the stock of •which pays enormously, and is owned by their directors, superintendents, and other employés. These fast-freight linos now do much of the business of the country, and although within the qzast few years many of them have, in deference to qjublic opinion, been changed from the non-co-operative to the co¬ operative system, yet those of the old style which remain are gradually sapping the life of the railroads over which they run. They should he driven out in every case, and their business should be done exclusively by the railroads themselves. The palace and sleeping-car and express companies are another excrescence upon the railroad sys¬ tem of the country ; and from the fact that they now own from ten to twenty million dollars' worth of cars, bought mostly from profits, they should he bought out by the railroad companies, so that the profits would go to swell their general revenues. Many railroad managers, superintendents, and other officers, are interested in coal mines, saw-mills, farms, and manufacturing e.stablishment3, and give themselves lower rates when other people are paying higher rates for the same accommodation. These gentlemen and the ma.ster mechanics are frequently iizterested in patent boxes, patent lubricators, patent ventilators, patent brakes, and patent fastenings, and are thereby induced to use their own when they could get che.aper .and better ones with advantage to the roads and their stockholders. Their road-masters are interested in jzatent frogs and ero.ssiugs^ patent joints, and patent tr.ack-tools. General freight agciit.s are inter¬ ested in equipment companies and fast freight lines, and make money by giving rebates, drawbacks, and special rates, or by furnishing cars to shippers who will pay a bonus and denying them to such who will not, or do not, know theropics. Passen¬ ger agents share the spoils of the ' scaljicrs.' I'lirchasing agents exact and pocket com¬ missions on all the sniiplies and materials purchased and used in the various dejiart- ments. Paymasters have been known to levy a tax upon all orders accepted and paid by them. "And, in addition to all this, lavish and extravagant cxiicndituro by the managers has been the rule rather than the exce]ition. The money paid by the public fortrans- portation, instead of being carefully Jinsbaiided and apjilied to tlie payment of the propier dividends to stockholders, has been used to liiiliieuce legislation, and much of the corruption among men in public life may be traced directly to this source. The history of the Credit Mobiler is yet fresh in our minds, and in the report of a committee ajipohited by the legislature of the State of New York, in 1872, to Investigate the affairs of the Erie Eailroad, we lind the following : 'It is further in evidence that it lias been the custom of tlie maiiagens of the Erie Eailway, from year to year in the past, to spend largo sums to control elections and to influence legislation. In the year 1868 more than $1,006,000 was disbursed from tlio treasury for ' extra and legal services.' For interesting items see Mr. Watson's testimony, pages 336 and 337. "Mr. Gould, when last on the stand and examined in relation to various vouchers shown him, admitted the jiayment, during the three years prior to 1872, of largo sums to Barber, Tweed, and otliers, and to influence legislation or elections; those amounts were charged in the ' Iridia-rnliber account.' Tlie memory of thi.s witness was very defective as to details, and he could only remember largo transactions; but could distinctly recall that lie had been in the habit of sending inoiicy into the numerous districts all over the State, either to control nominations or elections for senators and members of assembly. Considered that, as a rule, such investments paid better than to wait till the men got to Albany, and added the significant remark when asked a question, tliat it would he as im]ióssil>le to specify the iiumeroiis instances, as it would to recall to mind the numerous freight cars scut over tlie Erie road from day to day. (See te.stimoiiy, p. .556.) "It is not reasonable to siip]insc that the Erie Eailway has hecii alone in the cor¬ rupt use of money for the purposes naimsl; but the sudden rovolntioii in thodirection of tills company lias laid iiare a c)ia|)te,r in tlie secret history of railroad maiiagcmciit such as hasriot heeii permitted liefere. It ex jioses the reckless and prodigal use of money, wrung from tlie people to pureliase the election of the people's representatives, and to hribo tliem wlien in olfieo. According to Mr Gould, his o¡i(!ratlons cxtoiidod into!.foiir dif- 14 APPENDIX. fereiit Stati'H. It w.is Iiis custoin to coutributo money to influence both nomination.^ autl eicctious.' "Tiie foicgoing will serve to indicate the defects and abuses of our present system of railway niaungcnicnt, altbough tlio,se we bave cumuerated are by iio means all of them. may now, bowever, properly i>roceed to consider the remedies. "Thus open.s up a wide range of discussion, but we propose to confine ourselves to tbo.se remedies wbicli experience lues demonstraTod to lie practicable. State regula¬ tion of railways by making laws wbicb fix rates i.s, as a whole, impracticable ; the moment you attempt to regulate the details of railwa,y management by specific enact¬ ments, tliat moment you fill the .statute-books with a mass of laws wbicb benefit only the members of the legal profession. " There are, bowever, certain general laws wbicb work well in practice, and wbicb every State should enact for tbo regulation of railroads which are exclusively within its borders. " Under this liead wo may enumerate the follow ing : " 1. A law providing a board of railway commissioners, with jiowers similar to those po.ssessed by the railway coniuiissioners of Massachusetts. "2. A law to xirevent stock inflations similar to tbo one now in operation in Massa¬ chusetts. "3. A law providing for the publication at every point of shipment of rates and fares, embracing all particulars regardinj^ distance, classifications, and rates, which sbonltl be the same to all persons under simikar conditions, and prohibiting the increase of such rates above the limit named in the publication without giving the pubbc reason¬ able notice. "4. A law prohibiting otficers or directors of railways from either directly or in¬ directly owning or becoming interested in any non-co-operative fa.st-frcigbt line or car company, or from being interested in any manner in the furnishing of supplies to any coiniiauy with w bich tlioy may have official connection. "5. A law prohibiting railway companies from acquiring or holding more real estate than is necessary for the operation of their roads, and prohibiting railroad companies or officers of companies from engaging in mining or any business other than that of transportation. " 6. A law making it a penal offense for any public official to accept or use the free pass of any railway company, and prohibiting railway companies from granting snch passes to any but regular employés of such railways. "7. A law providing that all common carriers shall receipt for qiiantitij, whether it be of grain or other commodities, and to deliver the same at its destination. "8. A law prohibiting representatives of the peojile who belong to the legal pro¬ fession from tieing retained on either side in cases where the public interest is involved. " Of these all but tbo first should also be national laws, and in addition Congress should also provide a dex^artment or bureau of commerce, for the purpose of obtain¬ ing and xire-serviug statistics relating to our internal commerce, to the end that intel¬ ligent conclusions may be arrived at in matters x^ertaining to this great interest. There is no one thing that strikes the student of the tiansx>ortation problem so forcibly as the amazing carelessness and neglect that has left a commerce so great without the ordinary facilities for obtaining even a correct idea of its extent. The total of the exports and imports constituting tlie foreign commerce of the United States for the year 1873 were under five hundred millions of dollars, while it is estimated that the value of products transported on all tlie railways of the United States for the same period was ux>w.ard of ten thonsand millions. The commerce of the Ohio River was estimated at sixteen hundred millions ten years ago, and at this rate the entire do¬ mestic couimerco of the country would at this time x^robably not be less than fifteen thousand milliou.s of dollars." That such an onormons commerce as this is worth attention, and that the ahiises enumerated require regulation in the interest of the xuiblic, no one can deny. Tliat the varior.s States possess the xiower to regulate the roads exclusively within their resxiective borders, and that Congress also has the power over inter-Stalecorxiorat ions, is generally conceded. These x^owers were sxiecifically defined by the United States Senate Committee on Transxiortatiou Routes as follows: "First. Tiiat the x^owers of Congress whatever they may be, are derived directly from the iieox^le of the several States, and not from the States themselves. "Second. That every important word in the clauses which confer the 'power to regulate commerce among the several States,' and to 'make all laws which shall be necessary for carrying it into execution,' has received legislative, executive, and judicial construction, and under such construction the X'ower of Congress to regulate inter¬ state transportation by railroads, and to aid and facilitate commerce, is clearly estab¬ lished. "Third. That in the exercise of this power Congress is authorized, irnder the grant of auxiliary xtower, to emxiloy such means as are appropriate and xfiainlj' adaxitcd to their execiition. REPORTS OF EXPERTS. 15 "Fourth.. That in the selection of means by which inter-State commerce shall be regulated, Congress may— "1. Prescribe the rules by which the iustruments, vehicles, and agents engaged in transporting commodities from one State into or througli another shall be governed, whether such trausportatiou is by land of water. "% Tbat it may appropriate money for the coii.stniction of railways or canals, when the same shall he necessary for the regulation of commerce. • "3. That it may incorporate a company Avith authority to construct them. "4. That it may exercise the right of eminent domain within a State in order to provide for the con.strnction of such railways and canals; or, "5. It may, in the exercise of the right of eminent domain, take for the public use, paying just compensation therefor, any existing railway or canal owned by private persons or corporations." And these opinions have since been snbstantially confirmed by the decisions of the United States Supreme Court in the "granger cases." In vieAv of these broad princi¬ ples of equity, so authori tal i vely defuied, it is, periiap.s, not too much to hope for a gradual elimination of the abuses in our tran.sportation system which have so long been a bur¬ den upon the industries of the people. Siatementprepared Ji/ Mr. Thvrher, in r'pltj io an inquiry touching the influence of capital, upon the course of trade, and the relative power of capital and of the economies of trans¬ portation upon prices and uqion the course of trade. Sin: In answer to your supplementary question in regard to "the influence of c.api- tal upon the course of trade," and in Avhich you request an expression of iny views upon "the i)ersistent power of the capital of New York City toward maintaining her commercial supremacy," I would say that it is manifestly impossible to condenso within a few pages a satisfactory answer to a question which ox)ens nji more or less directly a wide range of politico-economic questions, but I may summarize tliem a.s follows: First, while capital undoubtedly docs exercise a considerable influence as hereinafter shown, it is entirely subordinate and secondary to otlier e.sscnti,al condi¬ tions. Great commercial cities are dependent upon geographical iiosition, upon cli¬ mate, upon harbors, upon accessibility to the soiuces of siqiply of the products which make commerce, and in later yeara, perhaj)s more than all, .are dependent upon trans¬ portation facilities Avhich are most j)oteiit in attracting or repelling commerce. Of course capital has much to do Avith providing transi>ortation facilities; and cafiital controlling the xiower of steam lia.s done much to change tlie channels of trade Avhlcli half or even a quarter of a century since Averc thought to be fixed and iniiiiovable. It is in this direction, iierhaxi.s, that the power of capit.al in controlling trade, is most noticeable. English capital invested in ste,ainslii]is has reached out to the four quarters of the globe, attracting the coiimiorcc of the world to English markets. In thi.s conn- try the capital of the seaboard Stato.s, .and to a considerable extent tlnat of F.urope, InA'Cstcd in railroads, bas carried tlie ])rodnctions and supplies of the gre.at West over mountains and rivers along our jiaralleis of latitude, Avhen it Avonhl seem by ail the natural laws of trade they Avonid have songlit the seaboard by means of the great rivers Avliich xicnetratc tlic'coiintry longitudinally ; aiidcaiiital eniboilied in the labor- saving, Avealth-creating, Avonderful steam-engine lias revolutionizod tlie entire com¬ mercial, Iiolitical, and social organization of tiie Avorld. But tliis xiowcr lias become so Avideiy difl'nsed, and is so generally used by all tlie gre.at eoninierciai cities, tliat it inny be said tiie greater capital which New York controls does not, in tlie, way of transxiortiition facilities, give lier any advantage. Indeed, as reg.ards lailroiids, slio may bo said to be at a disadvantage, for her railroads are controlled by xiei sons avIio selflslily (.and I believe sliortsiglitedly) operate them without regard to tlie commercial interests of Ncav York, and tliuH abrogate, to a considerable extent, tliii advantage wliich New York h.a.s long enjoyed of having during .seven iiioiitlis of the year Avator transportation Avliich lias, proi'alily more tlnan anytliing else, eontritnited to her commercial sii])reiiiacy. Tliere can xirolialfly lie no more striking oxamplo of the power of capital invested in traiisjiortation tlian Avliat lias lieeii accoiiixilisiied liy the few iiiiliions Aviiicli the peoxiio of tlie State of New York Avisoly invested in the Erie Canal. But I have perliaps said eiiongli iqion tlio xiower of e.axiital in¬ vested in traiisjiortation facilifios controlling trade, and Avill now jiroeeed to con¬ sider how far tiie iiilliienco of cajiital controls trade at eertaiii eeiiters and upon certain lines liy capitaliMng commodities in morcmenl. In your coiiimunic.ation you say: "I have seen it stated tlia't tlic eajiacity of cajiitaliziiig cominodltics in iiioveiiient iiy draAviiig against a fixed time in transit, and delivery, upon tiie basis of tlie value of tiie commodity, exercises .a stroiiger infiiience, over x>rices and over the course of tr.ade than does tlio economy of traiisjiortation." So far as tlie iiiliiie.iice over xuiees is con- oenied, this may be, correct, ll'tiiei'o lie not, siifiicient oajAital to move tiie eominodities produced, tiiey naturally decline In value, or, in otiier Avords, moro would liavo to bo given for a dollar than if (t lio supply of capital Avas in larger proportion to tiio supjily 16 APPENDIX. of coramoditica to be moved. This truth is doubtless at the root of the popular demand in many parts of the country for more currency, but when we consider how iuliuitesi- mal is the proportion of the exchanges effected by the gold, silver, and paper currency of the country as compared with checks and hills of exchange, the importance of this issue sinks out of siglrt, and I cannot hut conclude that it has assumed undue impor¬ tance among the public questions of the day. How large the exchanges effected by other mediums than the paper and metallic money of the country it is impo.ssible to say or even to estimate, but we may catch a glimpse of its immensity in the transac¬ tions of the New York Clearing Hoiisc (which, as is well known, is a contrivance to simplify the dealings of New York banks with each other), and which were during the year of'1877 $24,663,240,003, nearly all of which was in the form of checks and drafts, and it is not perhaps too much to say that all the currency in the United States could not have effected these exchanges wliich were so quietly and easily done by these bits of paper. The idea has gained a wide circulation that bank capital is employed in grinding the face of the poor and cheating the producer out of the proceeds of his labor, but I think a careful examination will show that the efforts of railroads to earn inter¬ est and dividends upon their watered securities by charging exorbitant rates of freight is a greater burden upon all classes of citizens than the interest paid by bor¬ rowers upon the capital borrowed. In the latter case, at least, the borrower pays only upon what he receives, and he has the option of whether he will borrow or not ; in the former, the public arc obliged tou.se the accommodation furnished by the railroads and to pay the amount demanded for the service. I cannot better illustrate the services performed by bauk capital than by quoting the words of Professor Sumner, who says that " banking capital renders very im])ortant services in that it throws the burden of waiting between producer and consumer on the idle capital of the country and releases the capital engaged in production so that it can be at once re-employed. Modern commerce cannot be carried on without bank¬ ing facilities ; they are part of the modern system. The economy is obvious and enor¬ mous, banking capital making commerce move many times more rapidly than it could without banks." I might pursue this branch of the subject into commercial credits, which still further increa.se the facilities of exchange. They are of course founded on capital, but depend largely on other considerations, and can be anipliffed many times beyond the amount of the capital upon which the credits are based; but to return to the proposition "that the capacity to capitalize coinmoditios in movement exercises a stronger influence over the course of trade than does the economy of transportation," I must say that I do not think it is borne out by the facts. The reasons for this are given so concisely and forcibly in a paper by Mr. A. E. Orr, a merchant of this city, that I quote them as an e.xpression of my own views, as follows : "The proposition that the persistent power of the capital of the city of New York will maintain her commercial supremacy is, in my opinion, a fallacy, and one which if persisted in as being the major element in maintaining supremacy will in time surely rob New York of her legitiraate commercial birthriglit, because in holding this delu¬ sion closely in view she will continue blind to those influences which in the past few years have been so busy and of late so terribly energetic in competing with her for a large part of her foreign and domestic commerce. " It is said the ostrich when closely pursued by its pursuers will bury its bead in j the sand, and in this position imagine itself safe from harm. New Yhrk is not alto¬ gether free from the resjionsibility of having practised the foolish confidence of tho ostrich. While Canadahas been actively enlarging the Welland Canal, Boston boring througli the Hoosac Mountain.s, Philadeíphia and Baltimore opening up new paths to the granaries of the great West, whilst even sleepy New Orleans has been deepening the delta of the Mississippi and awakening to the importance of attracting to herself the commerce of those States bordering on her great river aud its tributaries. New York has done little else to retain her commercial acquisitions than study the records of the past, and when cautioned against the aggressive action of her seaboard sisters, point to her bauk balances and laugh at their attacks. " I do not wish you to suppose that I fail to appreciate the importance of capital in relation to the course of trade. It is a very necessary auxiliary, aud in a country where comparative poverty is the rule and means of transit limited and defective its sway may be all important to control and dictate. But in a country like the United States, where wealth is diffusive, where mercantile productions are'^almost limitless, where means of transportation are superior to those of any country in the world and constantly increasing, and whose surplus productions are sought at her own seaboard by almost every civilized market, capital is not the controlling element that will local¬ ize commerce, but on the contrary the place that will present the inost remunerative trading will be sought by capital. "New York was not always the financial center of the United States. In the early days of American commerce, when she could only count her wealth by thousands, other cities could point to theirs in tens of thousands. It was not until a producing REPORTS OF EXPERTS. 17 country became her tributary tbrougb the means of cbcap transit facilities tliat Now York began to assert Iior financial and commercial ascendancy. Then it wa.s tliattlio surplus of our home products sought her in trade, because tiiey could be placed here cheaper than at any other market ou the coast, and then it was that llio products of the foreign looms were landed at her wharves, because they could be marketed in tho interior to better advantage than by the. more expensive routes ntVered by oilier sea- bo.ard cities, and because (and this is a very important item in the calculation) the ves.sel which brought the foreign luxuries or nece.ssaries was assured of a return cargo of home-grown surplus production by coming to lier port. If the Erie Canal liad ter¬ minated at. Eoston instead of at New York, which city to-day would have been the re¬ cognized eommereial metropolis of the United .State.s? If eopital can maintain eoni- mereiai supremacy, from whonce did New York obtain her commerce ami iier capital Î I do not know, but if tlie query is ]mt in tlio negative the answer is very plain. Slie first secured transit i'acilities with the interior superior to tliose of a.ny oonipel ing point, then the surplus )iroducti(m of the country sought her as a nia.rket, and then the trade tliat she liad to offer (he c.apit.alist attracted to lier Iiis capiíal. "Let me give you a practical illustration of this law of trade- wliich ea.mo lo my notice only a few day,s ago. Two liundred thoirsand bushels of corn in Chicago was seeking a market at the .seaboard. The question eontrolling its destination was not the ilmine.ial strength of the city to he selected, but wiiich market on the Atlantic coast would yield tlio largest retimi to the shipper. An application eanie to a firm in New York in these wonls 'Will yim advance on two liundred tlion.sand bnsliels of corn to be shipped to lialtimoref They an.swered, '¡Yc.s; but wliy to lialtimore In preference to New York i' Tiie riqdy eame, 'Transporta I ion to lialtimore is lialf cent jier bnsbel less tlian to New York.' And so the corn went to lialtiiooio; ami Jii-sl .so mneli was added to her (■oniniercial strength by New York ciqiilal. I'liis l oni was not controlled liy capital, it could select its own niaiket, .and having .solocled ISallimore, because tlie. sum of one tiionsand dollans coiilil be saved in transportation eiiarges, New York capital followed it therefor the. rea-son that it. was idloaiiil liait imore oll'ered it cinployiiieiit. "Follow this transaction .a little fnrtlier. .Six vi'ssel.s will lind in lialliiimre six c.'U'goe.s of corn awaiting tiieio ; and .she will receive the. inward cargoes of those six vessel.s hceairse she can sniqily them with return fn iglit.s. Now wlial. tliiiik you ? Was it l'aitiioore's cheaper tian.sportation eiiarges, as against eiinipctlug iioiiits, or New York's idle eiqiital that jireeiired for the lorioer all tlie. advantages arising out of this corn shijiniejit.? "Having shown that capital is imiiotont to attract, trade when o]i|iii.sed by (ho magnet of chea]ier trans)iortatioii, let me first jioiiit out as nearly as ])o.s,slide the iiieasiiie of loss which New York sustained in tills single transai tioii, and I lien suggest the remedy. "If the corn in question had come to New York at, the same, rate of fraiisiiorlatioii as charged to lialtimore, six and a half cents jicr hii.shel (iiiclnding the lermiiial charges ill New York), or thirteen thousand dollars would liave been I lie a el nal aiiioiiii t coiitrihiited for traiisjiortation wilhiii the horders of our .Statu. Of this aiiioiiiit tlio .State of New York would have received I'or tolls .S'f.OUII, anil the liidiislrial poi tioii of tlie pO]iii]ation .Sil,000. 'i'lie.se figures only repre.seiit the measure oC the )i(.sltivii known loss. Tho hiss arising from the non-arrival ol' the six vessels at oiir ]iorl, wllli their incoming eargoe.s, the. liaiidliiig and stiirliig of liiese. ciirgo.'s, anil their final sale and transportation in great measure into the,inlerior eau only lieiiia.tler of eonjeetiire, but liiiist al.so be taken into tlie, I'sti mate of tlie total lo.ss smslaiiied. Nor i.s tills all. Jiill- linioro baving demoiistraled the fact that she. can give, rel uni eargoe.s to lliese. six ves¬ sels, will hiiliice a letiirii on their ]iart to lier port with six aildifioiial cimipaiiion.s, 1,o the contiiined detriment oftiie foridgii eoiiiiiiei'ce of New York. "It has been shown finit one-half eeiit lier hiisliid or lIio iSiim of .fl,(«lll liinied this corn from New York t.o lialtimore. It is also shown that the lax llni.l, voiildhave been claimed by the .State of New York, if this corn had passed through her eaiials, was íl'.¿,')On. It. is thereroreeviileiit that it was t.lie toll eliarge, iiui.de ]iy l.lie .Sta.le, that turned the, coiai from Ne.w York to l!a.Itiiiiore., and t.liat tliroiigli that ileiiiaiid, not, only did file. State fail to reeeive any toll wha tever, hut the iiidiislrial e.la.s.ses of the .sítate failed to receive the sum of $11,0(1(1, wliii li olherwi.se would have come iiilo (lioir pos¬ session, " In 1870 the toll ehargo of the State was i-ediieed to t.lireo eeiils per hiisliel ; in 187.') it WÍI.S J-ediiced to two cents lier loishel ; in 1H77 to one, cent, IVIiy ? I'.eea.iise western lirodilctioiis were seeliiiig other routes t.o t.ho soahoa.rd wliieh wore, elieaper tlnrii by the Erie Canal. Tliis toll charge stimiilaled (he. eonsl.riiel.ioii of I,hese roiil.es Jost a.s niihcaUhy ]irotection, by means of largo ta.rill diilies, st.iiiiiila.tes over production ol home iiia.niirae.tiire.s. If a liberal policy bad been e.xle.iide.d to (.lie eil.y and State, by making tlie eanals free, tliese ciinipel.itive, routes would iiover have liisui e.oiistriie/.eil ; .and New York to-ilay wmihl iindonhtedly ho, as she yet elaims (o he, (lie eoiniiiercial metropolis of the United States ? 2 I C 18 ArrENDix. "Why not then lunko the canals free anil try thereby to retrieve what lias been lost by the s'hort-sishteil policy of past le^'islation. Is this too much to ask for a city which,, with its (lormitories (Brookly)! and Westchester County), contributes more than half of the taxes collected for the support of the State ? " I will not tax your time with discussing this subject. "There is a grci'it moral involved, and it behooves the city of New York to .study it carefully. Commerce cannot be, localized by capital ; that is certain. But tliat place in the linited States tliat can loc.alize commerce through the advantages of position and transit facilities, hoth foreign and domestic, will attract and retain capital." Tliere is, however, another ph.ase of the question, which has not been touched upon by Mr. Orr, and that is, the advantage whicii large capital gives New York in her im¬ porting and distributing trade ; ami thhs is precisely the advantage which an old es¬ tablished firm with .aliundant, capital posses.ses over a younger hou.se with iu.snffieient capital. The former usually oilers its enstomcrs a better variety, e.specially in good.s of fine qn.ality, requiring large capital to carry them, and it is also able to give more liber.al t'ernrs and thus induce a larger patronage. The larger the volume of business tbe more clicaply it. c.an be done, and it ,gain.s a ecrt.ain "good wlU" after a time wliich continuou.sly attracts and increases the volume of bu.siness. There is no question hut that New York doe.s enjoy snhst.anti.al advanta.ges over all competitors in this respcnt, and especially over the larger distributing cities of the interior. New York lias not only the advantage of her own capita,1, but also, to a considcr.ahle ex¬ tent, of the capital of foreign mannfacturer.s who establi.sU tlieir branch hou.ses or agencies in New York as the leading commercial emporium of the United States, licre tlieso manvifactnrcd goods .aw.ait purchasers ; here new and attractive goods are fii;st shown and tlie largest. v,a.TÍety i.s to he found. C.apital is also cheaper in New York than in western distribnting cities, and the différence in the r.ate of intere.st per¬ haps fairly illusti-atos the relative adv.antages of difterent places as distributing points. Tlierefore I think it may safely he .said that the capital of New York, in .so tar as its importing and distribnting trade is ooncerned, does confer substantial advantages, .and cxorcise.s " a ]iersistent power toward inainla.iuing her commercial supremacy." But for the fact that the railroads have pcrsi.stciitly, and most nnjnstlj*, discrim¬ inated against tlie retail merchants of the interior in favor of wholesale merchants of tlie. interior liy giving tlie latter special rates of freight out. of all irroportiou to the difference in tlio cost of trans]iortiiig a large and a small quantity, much of the whole- •sale trade which is now done in the interior would be done .at. the .seaboard, which is midonhtcdly the natural distributing point. In short, as stated in my answers, to questions bearing more, particularly upon the transportation problem, the policy pur¬ sued by the railro.ads previous to the adoption of the present iiooling system was a direct subsidy to the interior wholesale, mereha.iit,, .and had the effect to forcibly take hn.sines3 a.way from the ae.ahoa.rd distributing nierchant.s, and give it to tho.se in the interior, a.t the same time iufriugnig u|iou the I'ctail merchant's right, as a citizen, of choosing in what markets he will buy his goods. This has undoubtedly, to ,a coiisidcrahle extent, neutralized the advantages enjoyed, by New York, and if long continued must inevitably li.ave proved that the advantages of capital are siibordiuate to other conditions, chief among which are transportation faeilitic.s. It 13 to be liopcd, however, that this system, so unjust hoth to the retail merchants in tlie interior and the wholesale merchants on the seaboard, is a thing of the ]i>ist ; and tliat the iutiire will develop a permanent system in the management of our transportation lines alike equitable to all classes. O