PEESIDENT ROOSEVELT'S RAILROAD
POLICY
WELCOME BY MR. FILENE
Gentlemen of the Economic Club : In the absence of
our president, it becomes my pleasant dut}' to welcome
our guests. Why I should have been selected to pre¬
side at a discussion of the President's railroad policy is
a mystery to me, unless it be for what I once beard
Professor Hart call the " canoe reason." According to
this mode of reasoning, the railroad policy is like a
canoe, because the less you know about it, the more you
get out of it.
Seriously, I need not assure our guests of our undi¬
vided attention and our interest in this question. It is
a question that has long since passed out of the domain
of theory here in Boston. Our associations of merchants
have been dealing with the question of railroad rates
and the question of railroad rebates for months, and are
busily engaged in it now, in the hope of saving for
Boston its rightful place in the commercial prosperity
of our country.
Frankly, however, much as I am interested in the
commercial side of railroad policy, my cbiefest interest
comes from another cause. I am most interested in
that side of railroad policy which, through rebates or
other measures, threatens individual possibilities and
1
2 PRESIDENT ROOSEVELT'S RAILROAD POLICY
individual hope in this country. If we see a man want¬
ing in physical energy, wanting in mental energy, mak¬
ing a failure of life, we are filled with pity. It is pitiful.
But to see men full of physical energy, full of . mental
energy, making a failure of life for lack of opportunity,
is a tragedy ; and it is charged against the railroads of
this country that they are gradually, but definitely,
depriving the individual, the small producer, the small
distributer, of his opportunity.
A nation that has lost hope can no longer be demo¬
cratic. What paralysis is to the individual, the list-
lessness that comes from hopelessness is to the nation.
But it has been openly charged, and in some cases
substantiated, that the railroads, by making favorable
—specially favorable—rates to large corporations, have
made it impossible for the small producer, the small
distributer, the small individual, to successfully com¬
pete. It was in recognition of this charge and of the
public opinion that backed up this charge that Presi¬
dent Roosevelt, in his last message to Congress, said
rebates must go, that the law in regard to railroads
must be enforced. Later on, in his speech in Phila¬
delphia, the President said : —
"Neither this people nor any other free people will
further tolerate the use of vast power conferred by vast
wealth, and especially by wealth in its corporate form,
without lodging somewhere in the government a still
higher power of seeing that this power, in addition to
being used in the interest of the individuals possessing
it, is also used for and not against the interests of the
people as a whole.
" And in some such body," the President went on to
say, " as the Interstate Commerce Commission must be
lodged in an effective way the power to see that every
WELCOME BY MR. EILENE
3
shipper who uses the railroads and every man who owns
and manages a railroad shall on the one hand be given
justice and on the other hand be required to do justice."
We are fortunate to-night and congratulate our¬
selves that we have with us as guests three men rep¬
resenting different interests in this great question.
And I take pleasure now in introducing to you
Commissioner Prouty, one of our Interstate Com¬
merce Commissioners.
ADDRESS OF COMMISSIONER PROUTY
Mr. President and Grentlemen: If I had realized
when I accepted the invitation of your secretary that
I was likely to meet this sort of an audience and
speak in this sort of company, I should have pleaded
a prior engagement. Your chairman adds to my
embarrassment by putting me first, which, under the
circumstances, is hardly fair. As I read the news¬
papers there is just one thing in these discussions
about which nobody entertains any doubt — the utter
and complete incompetency of the present Interstate
Commerce Commission. The editors all say that the
Commission has got to be "strengthened." The Presi¬
dent is reported to have declared that if Congress will
only give the Commission some real power, he will
remove the present Commissioners, except possibly the
chairman, and put in their places somebody who is
competent to exercise that power.
Now, under these circumstances I protest that it is
hardly fair to select the most insignificant member of
that insignificant body and set him up as a target for
this distinguished railroad president on my right [Mr.
Willcox], whose effulgence we never venture to con¬
template except through a smoked glass, and this
famous judge on my left [Judge Grosscup], who in
common with the rest of the judiciary has found his
dearest delight in laying out tlie acts of the Interstate
Commerce Commission. Rut I am told that I have
4
ADDRESS OF COMMISSIONER FROUTY
5
the right of reply, and I wish to notify these gentle¬
men that it is a fact in natural history that even the
worm does sometimes turn.
Although I am liere to address, not only an eeonomic
club, but the Economic Club of Boston, I am not a
student of economics. I know nothing about the
theories of rate making, or of rate regnlation, and I
am not competent to discuss those theories. I have
been for tbe last eight years, and that is about one
fourth of the active life of the average man, continu¬
ally engaged in the midst of actual railroad operations,
and I desire to present to you to-night some few facts
and some few conclusions which have been suggested
to me by that practical work. Perhaps I can best do
this by considering, not the President's policy as such,
but the attitude of the railways toward this question.
Mr. Samuel Spencer, the president of the Southern
Railway, speaking for himself and most railways in the
Plast and South, stated before the House Committee,
and repeated after the President's speech at Philadel¬
phia, that he desired it to be clearly understood that
he and tlie railways of the country stood with the
President for any legislation that would stop the pay¬
ment of the rebate, but that he and the}' were utterly
and unalterably opposed to any legislation which vested
in any tribunal the power to alter or fix the rate. It
is that proposition that I desire for a minute to examine
with you.
You all know that the act to regulate commerce,
passed in 1887, forbade tbe payment of rebates. You
all know that the railways since that time have con¬
tinually and habitually paid rebates. It is natural for
you to assume that the right to pay a rebate is a tbing
of value to tlie railway. Nothing could be farther
6 PRESIDENT ROOSEVELT'S RAILROAD POLICY
from the truth. The rebate has been and is to-day
the most deadly enemy of the railway. The traffic
manager of the Lake Shore Company testified before
the Interstate Commerce Commission that on much,
perhaps a majority, of his freiglit traffic 10 per cent
of the gross revenue was paid back to shippers in
rebates. The Joint Traffic Association was intended
to stop the payment of rebates, and Mr. George R.
Blanchard testified before our Commission that it had
that effect for about one month. When Judge Gross-
cup first granted the injunction compelling railways
to maintain tlieir publislied schedules, and when it was
seen that tfiis injunction had some sensible effect in
that direction, railroads that were not enjoined came
to ask that they might be placed under the ban of the
court. The Elkins Bill, which has very largely stopped
the payment of rebates as such, was a railroad measure,
conceived by the railroads, passed by the railroads, and
in the interest of the railroads.
Let there be no misunderstanding. The rebate is
a sin. It should be utterly and completely stamped
out. The Elkins Bill was one of the most beneficent
measures touching railway regulation of recent times.
I have no words of commendation too strong for that
measure ; but you must understand that no one thing
in recent times has put iirto the treasuries of the rail¬
ways of this country more money than that same enact¬
ment. When Mr. Spencer says that he stands with
tlie President in stopping tlie payment of rebates, he
gives up no thing of value. He asks the people to do
what he himself has never been able to do ; he asks
the government to give the railroads a protection
against themselves, which they have never been able
to secure by voluntary action. What Mr. Spencer in
ADDRESS OF COMMISSIONER, PROUTY 7
substance says in behalf of the railroads is, "We wish
to be regulated just so far as it is for our interest to
be regulated, and no farther."
Let us go a little farther and examine the second
part of Mr. Spencer's proposition in the light of the
first part, and in so doing let me speak to you in actual
cases. These pleasing platitudes put into elegant
diction delight the ear for the time being ; they really
contribute but little to an actual understanding of
this practical question.
The Interstate Commerce Commission has recently
investigated the operations of the Santa Fé Railway
System in connection with the Colorado Fuel and Iron
Company. It appeared that the Railway Company
had systematically granted to the Fuel Company large
rebates from its published schedules, and that the effect
of this had been to give the Fuel Company a virtual
monopoly of the coal business in those regions under
investigation. Mr. Spencer declares that this should
stop ; and manifestly it must stop if anybody except
the Colorado Company is to engage in the coal business
in tliat country.
On the same day that this investigation was begun
we heard another complaint at the same place touching
the same general subject-matter. From Trinidad,
Colorado, to El Paso, Texas, is five hundred miles by
tlie Santa Fé Line, and between those two points are
tlie Raton and Glorietta passes, each seventy-five
hundred feet above the sea and twenty-five hun¬
dred feet above the surrounding country. San An¬
tonio, New Mexico, lies one hundred and fifty miles
north of El Paso upon this line from Trinidad, with
a gradually descending grade nearly all the way
from San Antonio south. The actual rate charged
8 PRESIDENT ROOSEVELT'S RAILROAD POLICY
from the Trinidad region by tlie Santa Fé Company
for the five-hundred-mile haul over those two moun¬
tain ranges was f2.90 per ton, while the published rate
from San Antonio had been 11.25 per ton. Under this
adjustment of rates a coal operator at Carthage whose
product reached the iron of the Santa Fé at San
Antonio had been able to compete with tlie Colorado
fields, and had entered into a contract for furnisliing
the Mexican Central Railway Company with its fuel.
While that contract was pending the Santa Fé advanced
the freight rate from San Antonio to El Paso from
$1.25 to $1.50. By this action the operator at San
Antonio was forced to give up his contract and go out
of business.
Now, I ask you to carefully observe that it is of
precisely the same concern to tlie coal operator at Car¬
thage whether the published i-ate from San Antonio is
raised twenty-five cents per ton on the printed schedule
or the published rate from the Trinidad region is
secretly reduced twenty-five cents per ton by the pay¬
ment of a rebate. In either case his mine shuts down.
It is a tiling of exactl}' the same consequence to the
consuming public, for in either case the public is de¬
prived of that competition. Yet Mr. Spencer says, as
I understand him, that yon should stop the rebate by
law, but that you have no right to touch the discrimi¬
nation in a published tariff.
Why is it, my friends, that you should stop the
rebate? Because the Santa Fé Railroad is a public
highway. Because the Santa Fé Railroad is engaged
in the performance of a public service. Mr. Spencer
as an individual has a right to sell his time to whom
he lists at his own price. Mr. Spencer the individual
has a right to sell any commodity which he has to
ADDRESS OF COMMISSIONER PROUTY
9
whomever he desires at his own price. Mr. Spencer
can sell that commodity to one person for one price
and to another person for another price ; but Mr.
Spencer's railroad, or any other railroad, must sell its
commodity to all people for the same price, and it
must sell its commodity to all people for a fair and a
just price. There is absolutely no reason which justi¬
fies the government in interfering in the first case
which does not equally justify the government in
interfering in the second case.
You hear much talk in these discussions about the
confiscation of property. What confiscation could be
more complete than the confiscation of that coal mine ?
Just here, as I understand it, the President and Mr.
Spencer part company. Mr. Spencer asserts that he,
as the owner of the Santa Fé Railroad, should be
entitled to say what that rate shall be, and that his
say-so must stand. The President affirms that before
that coal mine is confiscated its owner shall have some
tribunal where he can go and try the question of the
reasonableness of that rate. This is the issue between
the President and Mr. Spencer.
Now, gentlemen, that is a single illustration. I
could stand here all night and multiply illustrations
of just that sort. Did the time suffice, I could go
further. I think I could convince you that this kind
of discrimination is more dangerous to-day, and likely
to be more dangerous for the future, than the rebate
itself. Our railroads are fast falling into the hands
of great trust magnates and the monopolies of this
country. Go down to-night on to the New Haven
road and you will find that the Standard Oil Company
enjoys a virtual monopoly of that territory, not by
reason of any secret rebate, but by virtue of the infiu-
10 PRESIDENT ROOSEVELT'S RAILROAD POLICY
ence that that monopoly exercises in the construction
of the published tariffs. And that same process is
going on all over the country. But I have not the
time to further discuss that phase of this subject. I
must pass on to another phase of the President's policy
which is, to my mind, of equal or greater consequence,
and that is the reasonable rate itself, the monopoly
which the railroads have formed, and the danger which
the public faces from that monopoly.
In 1872 a committee of the Senate, called the Win-
dom Committee, investigated transportation conditions
from the Middle West to the Atlantic seaboard. A
report was made, a very intelligent document, and if
any of you are interested in this subject, you cannot
do better than read the Windom report. That com¬
mittee arrived at the conclusion that the great menace
to this country was combination and the unreasonable
rates which would flow from that combination. In
those days the right to regulate rates had not been
established, and that committee recommended the con¬
struction of one or more government railroads from
Chicago to the Atlantic seaboard and the improvement
of our waterways.
That investigation was in the early days of the rail¬
road pool. The Missouri River pool had just been
fairly launched and was in full operation, and the com¬
bination which this committee feared was of that kind.
It did not materialize. There broke upon this country
an era of railroad building. Railroads were constructed,
not to operate, but to sell. Out of the multiplication
of these railroads grew up an unreasoning and relent¬
less competition, and that competition forced down
rates to an extremely low, and in very many cases, an
unreasonably low, figure.
ADDRESS OF COMMISSIONER PROUTY
11
Along with the low rate came discrimination ; for
competition always will produce and always must pro¬
duce discrimination. The investigations which led to
the passage of the act to regulate commerce showed
that in some instances where any considerable quantity
of merchandise was transported by rail, it went under
a special contract, each person having a rate of his own.
The act of 1887 was undoubtedly aimed first of all at
discrimination.
Since 1887 conditions have changed once more.
That sort of competition produces but one result, and
that is combination. The very fierceness of this com¬
petition hastened the combination. The railroads of
this country, as the price of continued existence, parted
with their individuality. Such combination can only
mean the disappearance of the competition which pro¬
duced it, and these combinations have proceeded along
one line and another until they have practically reached
that point to-day where there is no longer competition
in the rate which is worthy of the name. We have in
this country 200,000 miles and over of railway, and of
these 200,000 miles 120,000 miles are controlled by six
or seven men.
Me. Willcox — Who are they?
Commissioner Peouty — Well, I have mentioned
them, Mr. Willcox, and I could again, if it were worth
the while. You know who they are. They have been
mentioned everywhere.
Me. Willcox — No ; I never heard them mentioned.
Commissioner Peouty—I gave them in detail in
my testimony before the House Committee some two
years ago. I won't undertake to do it off-hand now,
but it can be easily done. Six or seven systems con¬
trol 120,000 miles of railway, and they control a much
12 PRESIDENT ROOSEVELT'S RAILROAD POLICY
greater proportion of railroad business. Not only do
they dominate this mileage, but their combinations have
been made with great skill and for a definite purpose.
I will give you one, Mr. Willcox.
When I first became an Interstate Commerce Com¬
missioner the sorest traffic spot in this counti-y was tiie
bituminous coal situation. You had the Norfolk and
Western, the Chesapeake and Ohio, the Baltimore and
Ohio, the Pennsylvania, and to some extent the New
York Central, and other lines. These lines all carried
soft coal to the Atlantic seaboard, not from the same
fields, but the same quality of coal which answered tlie
same purpose and sold for substantially the same price.
To-day the Pennsylvania Railroad Company controls
the whole of it. It owns the Baltimore and Ohio, the
Norfolk and Western, the Chesapeake and Ohio, with a
little assistance from its partner, the New York Cen¬
tral. To-day Mr. Cassatt can say at what price every
pound of bituminous coal shall be transported from every
mine to tidewater. What this means to the revenues
of those roads you will understand when I tell you that
.50 per cent of their entire traffic, or thereabouts, is coal.
I will not undertake to estimate the millions of dollars
which New England pays as a result of that com¬
bination.
Let me give you another illustration, Mr. Willcox ;
this time from your own business. You are engaged
in the sale of anthracite coal. When I went on to the
Interstate Commerce Commission another tender spot
was competition in the price of hard coal. To-day the
Pennsylvania and the New York Central, through their
ownership of the Reading stock, are virtual masters of
the anthracite coal situation. I don't mean that they
own the whole of it, but they absolutely dominate it.
ADDRESS OF COxMMISSIONER PRüUTY 13
They have not advanced the freight rate, because there
has been no need to do that. They own the coal itself,
and they have advanced the price of the coal.
I might use up my entire time in giving illustra¬
tions of this sort, but I will not. All this has become
elementary knowledge. Every intelligent man knows
what these combinations are and the power of these
combinations. Don't misunderstand me. I have been
quoted as saying that these half a dozen men could
impose on this country whatever freight rates they saw
fit. I never said anytliing of the kind. No statement
could be more ridiculous than that. There are com¬
petitive conditions and there are commercial conditions
which absolutely fix many freight rates. If one man
owned every railroad in the United States, he could
not impose whatever freight rate he saw fit. When
wheat is once at Duluth, the water determines the rate
at which it shall go to New York, and the rate to New
York fixes that to Philadelphia, to Boston, and even to
the Gulf. Our industries here in New England cannot
prosper unless they have extremely low rates on the
raw material in and the manufactured product out.
But what these men can do is to advance the rate
enormously on many commodities. What they can do
is to increase the rate here and increase the rate there
and take in that way millions of dollars annually from
the people of this country unjustly. What they can
do is to create billions of dollars, I might say out of
nothing, by giving value to those stocks which have
no actual value. I have said they could create this
out of nothing. That is not true. You cannot make
something out of nothing. Ex nihilo, nihilo fit.""
Mr. willcox [correcting'] —Nihil ßt.
Commissioner PiiouTY—Nihil fit; that is right. I
14 PRESIDENT ROOSEVELT'S RAILROAD POLICY
should have known better than to attempt to impose
an ablative for a nominative upon a Boston audience.
I say, my friends, you cannot create something out
of nothing. The other day I was discussing this sub¬
ject with a gentleman, who said to me : " My neighbor
receives $1.50 a day, and be has a family of six children
to support. Isn't that, rather than your rates, the real
problem after all ? " And I replied : " My dear sir,
the two things are one. It is the fellow with the half-
dozen children and the $1.50 per day who is paying
the freight that creates these billions of dollars."
One thing more. It is sometimes said that rates in
this country ought to be advanced ; that they are too
low. I am not denying that. I think myself that the
general average of rates in this country in 1897 was
perhaps too low. I think myself that many rates might
with perfect propriety be advanced. The cost of oper¬
ation has advanced, which in some cases may be an
excuse for an advance in the rate. What I say is this,
that these men, having created this condition of mo¬
nopoly, ought not to be allowed to impose whatever rate
they see fit without some sort of government super¬
vision over that rate. Let me give you an illustration
once more, showing the practical application of all this,
and for that purpose I will take the last case upon
which a court has passed, the one we call the Hay
Case.
For many years previous to Januaiy 1, 1900, hay
had been carried in Official Classification territory as
sixth-class freight. On that date it was advanced to
fifth class. The claim was made by shippers that this
action was unreasonable, and the Interstate Commerce
Commission, after an extended investigation, decided
that it was. The case went to the court, and the Cir-
ADDRESS OF COMMISSIONER PROUÏY
15
cuit Court lias just handed down an opinion, which is
this, that no matter wliether the rate was reasonable
or unreasonable, as the law now stands the Commission
has no power to reduce that rate.
It transpired in this case that the advance from
sixth class to fifth class had cost shippers of hay in
Official Classification territory #2,000,000 a year.
The traffic managers of those railroads had sat down
and agreed together to make the advance. If one
single one of them had declined, it could not have
been done. What those gentlemen did was simply
to lay a tax of #2,000,000 a year on the shippers and
consumers of hay in that territory. My friends, you
established down here in Boston Harbor a good many
years ago the principle that there should be no snch
thing as taxation without representation. And I say
to-night that before the railroads of this country are
allowed to impose a tax of that sort on the people of
this country some tribunal must be provided which can
inquire into the justice of that tax.
They tell me there are no complaints of unreasonable
rates in this country to-day. I have some curiosity to
know by what sort of mental process these gentlemen
have arrived at that conclusion. Everybody knows
that the Interstate Commerce Commission has no
power to reduce a rate. It can simply investigate and
recommend. The complainant who establishes before
it his case has no assnrance of relief, and still there are
pending before the Interstate Commerce Commission
to-day cases in which the only question is upon the
reasonableness of some advance which involves millions
of dollars.
An advance in freight rates adds to the net income
of the railroads, since the cost of operation is the same
16 PRESIDENT ROOSEVELT'S RAILROAD POLICY
under whatever rate is charged. If maintained, it adds
to the value of that railroad, upon a 5 per cent basis,
twenty times the amount of the annual income from the
advance. Take the cases now pending before the
Commission, or which have been decided by it within
the year, together with those which are before the
court upon some recommendation of the Commission,
where the only question is upon tlie reasonableness of
an actual advance — not cases like your Hearst case,
Mr. Willcox, which may have been brought for politi¬
cal effect, not cases where somebody merely complains
that the rate is too high, but only those cases which
involve an advance, often a second or a third advance
— and I say to you that the money value of the right
to make and maintain those advances on a 5 per cent
basis would build and equip every railroad in New
England. And yet, gentlemen, you are told that there
is no complaint of the advances which have been made
in railway rates.
Last Monday the Supreme Court of the United
States handed down an opinion in the Northern Se¬
curities Case, and thereupon was closed a chapter of
high finance. I have had occasion recently to look
into the details of that transaction. I wish to give
you in a single word a summary of it. The proposed
merger involved three systems — the Burlington, the
Northern Pacific, and the Great Northern. It was
completed in 1901. Treating the stock of the North¬
ern Securities Company as worth par, the market value
of tlie capital stock of those three systems over and
above the average market value in 1897 had increased
more than 1320,000,000 ; and 1820,000,000 would have
built every mile of railroad embraced in those three
systems.
ADDRESS OF COMMISSIONER PROCTY
17
It is said that railroad stocks were low in 1897, and
they were. They were in 1901. Since 1901 Northern
Securities stock has advanced f60 to f65 per share.
That means a further advance in the market value of
the capital stock of the Northern Pacific and the Great
Northern of over $200,000,000 — money enough, once
more, to construct those two railroads from the head of
Lake Superior to the Pacific Coast.
On the 1st of January, 1901, those lines, in conjunc¬
tion with other transcontinental lines, advanced west¬
bound transcontinental rates, in many cases 10 per
cent. And they tell you that it is confiscation even to
inquire into the reasonableness of tbat advance. Y ou
remember tbat Tiiomas Jefferson said, just before the
breaking out of the French Revolution, when some¬
body suggested tlie possibility of bloodshed, that in his
oi)inion a little bloodletting, if judiciously done, would
not hurt the French nation. If that is confiscation,
which I utterly and absolutely deny, a little judicious
confiscation would not be a bad thing for the railroads.
A little confiscation of that sort to-day, ni}' friends, is
likely to save a great deal of confiscation of a different
sort later on.
. But, say these railroad objectors, the government
cannot do this. The making of rates is a complex
thing, which can only be done by an expert traffic
manager. Should the government undertake it, it
would make a botch of it, and it is much better to
endure what few transportation evils there are, than to
attempt to correct them.
Let me particularly call your attention to the fact
tliat the President's policy does not propose to divest
the railways of the right to make in the first instance
whatever tai-iffs they see fit. In many cases tariffs are
18 PRESIDENT ROOSEVELT'S RAILROAD POLICT
HOW made by the state governineiits. While it may
be found necessary to so finally construct interstate
tariffs, there is no proposition of that kind before the
country to-day. The President's policy simply siiys
that, when the rate has been made, some tribunal shall
have the right to inquire into the reasonableness of that
rate, and to correct it if found wrong.
But let us look at the position of the railways upon
the proposition that the government cannot revise their
rates. If I understand it, it is this : The making of
a rate is a delicate process, which requires a peculiar
kind of mental,ability ; that mental ability is only pos¬
sessed by an occasional specimen of tlie human species.
The railroads have already taken up the entire supply
at extremely high figures. Hence the government
could not, if it would, and would not if it could, pro¬
cure that form of genius wliicli is necessary to make or
revise a rate schedule. If this be the actual condition,
if the railroads of this country can make and keep in
effect any sort of an unjust rate for the reason that it is
impossible to intelligently supervise that rate, this
nation is virtually in extremis. The matter should be
promptly referred to the Agricultural Department. It
is conceivable that it may be possible to breed that sort
of genius. Perhaps the infant at birth may exhibit
some distinguisliing mark so that we may be able to
preempt it and rear it at the public expense for the
public use, as the Spartans of old did their soldiers.
If nothing better can be done, we must exercise the
power of eminent domain over some of these peculiar
specimens.
Nothing could be more absurd than the claims of
railways in this respect, and let me say that no one is
really farther in his own mind from the making of
ADDRESS OF COMMISSIONER PROUTY 19
these ridiculous claims than the able traffic official
himself. That kind of talk is the monopoly of railroad
lawyers and railroad presidents who testify before
Senate and House committees. If I had one of these
high-priced officials here to-night and could examine him
for a moment, I could show you very clearly the fallacy
of the statement. We have in the past repeatedly
examined them. The other day we examined the chief
traffic officer — I think he is second vice president — of
one of the trunk lines, a great authority on railroad
matters. This gentleman, when pressed with the con¬
sequences of certain answers he had made, said, " We
make rates vei-y much as a honeybee makes its cells,
by a sort of instinct." And when you look at some of
his rates you are inclined to agree with him. Some
time ago we examined another one of these gentlemen
who is to-day, it is said, receiving f50,000 a year. He
was testifying as to the reasonableness of his grain rates,
and having been asked question after question, finally
said, "To tell you the truth, gentlemen, we get all we
can." That is a literal statement of a sober fact.
That is what the #50,000 traffic official is for — to get
all he can. Sometimes he gets it by the legitimate
development of traffic on his own line ; oftener he gets
it by diverting traffic from the lines of his competitors.
Since I have known anything about it in a practical
way, the principal function of the #50,000 man has been
to pay just as small a rebate as he could and obtain the
business.
Now, once more don't misunderstand me. Rate
making is a delicate process. To make rates requires
expert knowledge, and it requires ability of a high order;
to revise rates requires expert knowledge and ability of
a high order and judgment of the very highest possible
20 PRESIDENT ROOSEVELT'S RAILROAD POLICY
order, and any attempt to revise them without those
qualifications is likely to end in injustice and disaster.
But that knowledge can he acquired by people habitu¬
ally engaged in the business, although they are not and
never have been traffic officials. The present chairman
of the Interstate Commerce Commission has been hear¬
ing these questions for fourteen years. He has heard
them from all parts of this country, presented in all
kinds of ways, and from all points of view. He has
enjoyed a training for the decision of these questions
which no traffic man could by any possibility have.
And I may add that I know no one who possesses in a
higher degree the mental and moral qualities which are
essential to the fair decision of these questions than my
long-time associate. There is not the slightest difficulty
in providing a board which can treat these matters
intelligently.
Having very earnestly asserted that railroad rates
can only be made by the rarest kind of expert knowl¬
edge, these railroad gentlemen tell you in the next
place that their rates are not made at all; that they are
fixed by the laws of trade and commerce. You will
notice that "trade and commerce" is the headline in
most newspapers on the railroad side of this question,
and that trade and commerce is the thing dwelt upon
before the Senate and the House, more than anything
else. The laws of trade and commerce will be inter¬
fered with if you touch the freight rates! I utterly
deny that the freight rate is in any way a matter of
trade and commerce. It is not a commodity which is
bought and sold in the open market. The freight rate
is a thing which you must pay, and you must pay
exactly what the man who runs the railroad charges
you. There are instances where he can only get so
ADDRESS OP COMMISSIONER PROUTY 21
much ; but if you will run that instance down to its
basic fact, you will generally find that it depends, not
on any commercial condition, but on some other freight
rate from some other point, and when you raise both
these rates you have not disturbed any commercial
condition.
I cannot discuss this question, but I am talking in
the concrete and I will give you just one concrete
illustration. On the 15th of April, 1903, Mr. Spencer's
railroad, which leads from the pine forests of Alabama
to points north of the Ohio River, in conjunction with
all other lines leading from southern forests to that
territory, advanced tlie rate on yellow pine lumber two
cents per hundred pounds, equivalent to seventy-five
cents per thousand, a fair profit on the handling of that
commodity. Some mill owner, who ten years ago had
consti-ucted the mill upon the line of this railway, who
since then had seen his rate to market twice advanced,
conceives that this last advance ought not to have been
made, and he applies to Mr. Spencer to correct it.
Thereupon the president of the Southern Railway
makes answer : " My dear sir, why do you apply to
me? Your rate is determined by the laws of trade
and commerce. Go home and thank God that you live
in a country where commercial activities are still
untrammeled. "
It is urged that this proposed regulation of railway
rates is an exhibition of base ingratitude toward the
owners of these properties. Behold the magnificent
system of American railways ! Think of the pluck ;
think of the energy; think of the money it has taken
to build these railways ; think of the men who have
spent their energies in the development of this system.
Siiall the people, being the beneficiaries of their efforts.
22 PRESIDENT ROOSEVELT'S RAILROAD POLICY
now turn and rend them? Your representative, Mr.
McCall — he was in college with me, and I still think
of him as Sam — delivered an eloquent oration in the
House the other day, in which he touched with much
force upon this branch of the subject. I read that
speech with profound interest, and as I saw mirrored
forth in Sam's eloquence the self-denial of these men
and the atrocity of the present proposition, I was filled
with indignation for those who were responsible for it,
and profoundly disgusted with myself among the rest.
To tliink that these men who would lay down their
fortunes for the good of their country should be so
treated ! And then I shut the Congressional Record,
and the glamour of Sam's oratory began to fade away,
and I said to myself: "How is this, after all? Did
these men lay down their fortunes there, or was that
where they picked up their fortunes?" It makes a
difference, you see. And then I thought of the mag¬
nificent mansions I had seen on Fifth Avenue, which
have been erected as a result of these railroad opera¬
tions. I thought of the great fortunes that had been
founded out of these railroad operations, of the gentle¬
men who are to-day multimillionaires and who a few
years ago were ordinary stockjobbers, and I said,
" After all, the obligation may not be entirely on the
side of the people."
My friends, our railroads were built as a business
proposition for filthy lucre. So far as my observation
goes in recent years, the railways of this country have
not forced industrial development ; industrial develop¬
ment has forced them. The Canadian government is
to-day building a railroad from ocean to ocean, because
no private enterprise will undertake that task. The
fact tliat these railroads incidentally contributed to the
ADDRESS OF COMMISSIONER PROUTY 23
development of this country is no reason why they
ought to discriminate ad libitum or extort ad infinitum
— if that Latin is right.
Once more do not misunderstand me. I do not say
and I do not believe that the railway managers of this
country desire to discriminate or to extort. I know
my Brother Willcox would not intentionally discrimi¬
nate or extort. But railroad men are not all alike ; and
this I do say : The law of human nature is the same the
world over. It is natural for a man who has the power
to take more than belongs to him. He may do that dis¬
honestly, but he may do it with perfect honesty. The
President's proposition is that there must be a tribunal
under existing conditions to-day which can judge be¬
tween the people and the railroads.
It is the fashion to regard this movement as an
assault on the railroads. I utterly deny it. I utterly
deny that the President of the United States, so far
as can be judged by his spoken utterances, is engaged
in any attack on railroad property. The bill which
passed the House, and was understood to be in a way
an administration measure, provided that these ques¬
tions should be left first to a commission — not the pres¬
ent Interstate Commerce Commission, but a competent
commission. From that commission an appeal lay to
a specially constituted court, and from that court to the
Supreme Court of the United States. When the people
of this land get ready to confiscate its railroads, they
will hardly use just that machinery.
I say another thing, and I say it in no spirit of hos¬
tility to the railroads : If the people of this country are
not in a frame of mind to oppress the railroads, it is not
altogether the fault of the railroads themselves. For
the last eighteen years these gentlemen, who now insist
24 PRESIDENT ROOSEVELT'S RAILROAD POLICY
that they are above control, have willfully and continuj
ously violated the statute law of this land, and hav^
built up by the rebates which they have paid thosi
trusts and monopolies which present to-day the mosi
difficult of all social problems. They have filled thei]
published schedules with discriminations in favor ol
these same trusts and monopolies. They have them^
selves become the greatest of all monopolies. Thej
have used the tremendous power which they possess
not only to prevent all action, but to prevent all fail
discussion. What is their attitude to-day ? Stiff-
necked defiance; utterly and unalterably opposed tc
all control over tlieir rates. Ill does it become mer
with that record to accuse a long-suffering people of dis¬
honesty when it demands at last regulation which shal'
in fact I'egulate.
If the railways were ready this day to say to th(
President of the United States, " The courts havi
decided that our rates are subject to legislative contro!
and the people demand that such control shall be exer¬
cised ; we admit the principle ; let us confer as to the
means by which that supervision can be made just tc
us and effective to the public " — think you this prob¬
lem would be difficult of solution ? That I do not
expect. Whatever is done will be in the face-of the
most bitter opposition to the last, but it will be done.
It is right. Because it is right the President has de¬
clared for it, and the people are with him.
Your chairman reminds me that my time is up. 1
thank you for your abundant patience.