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CONTENTS.
Introductory Remarks.............. .......................................... W
Historical Sketch................................................................
The Future Policy of the Commission..................................
What is Involved in “A Dispensing Power”.......................
Magnitude of the Proposed Power.......... , e s is e s p → ~ ºn e s tº e s is e º e º e s e e º e º º e
Rights of Property Violated................................................
Regulation by Preliminary Judgment ..................................
A Judicial Opinion.............................................................. -
The British Railway Commission..........................................
Commissioner Prouty's Attitude toward the Railroads..........
Antagonism of Interstate Commerce Commission..................
Conclusion..........................................................................
CoPYRIGHTED, 1903, BY Joseph NIMMo, Jr.
CO M P L 1 M ENT s o F
Joseph NIM Mo, JR.
1 33.1 F ST. R. E. ET No RT H W E ST,
W. As H | N G TO N, D. C.
THE REGULATION OF COMMERCE
THROUGH A
DisPENsing Power.
Efforts of the Interstate Commerce Commission to gain
Autocratic Control of the Internal Corm rmerce
of the United States.
THE POLITICAL ASPECTS OF THE 0UESTIOM. .
By Joseph NIM Mo, Jr., LL.D.
For M. E R c + i E F of rº E Bu REA u o F stratistics ru rºi E rºt Easu ny D, E Part an ENT, A N p -
LAT E PR Est D, E N T o F T H E R AT I o N A L sºr ATI stric Ai. Assoc i AT I o N.
war As H 1 R GTo N, D. c. :
TH E R U F U. S. H. DAR BY PRI tº Tº N G CO.
1 9 O 3.
tºº & & Nºssº o–49448

NOTE BY THE PUBLISHER.
This document, in a somewhat extended and revised
form, will constitute one or more chapters of a volume
which Mr. Nimmo has in coarse of preparation on The
Evolution of the American Railroad System.
THE REGULATION OF COMMERCE THROUGH A
- DISPENSING POWER.
T H E PC LIT CAL ASPECTS OF THE CAS E.
In the entire range of current populistic thought it would
be difficult to mention any expedient more seriously fraught
… with danger to the commercial interests or the political
*
i
integrity of this country than the proposition to confer
upon the Interstate Commerce Commission unlimited power
* to prescribe in advance the rates which shall be charged
* for transportation services on railroads and thus to exercise
autocratic control over the internal commerce of the United -
# States. Such delegation of power would necessarily devolve
º upon the National Government full responsibility for both
the absolute and the relative prosperity of the various
localities, States and sections of the country. Besides, it
would overload the government with jurisdiction and in-
evitably beget sectional strife such as that which the Consti-
tution of the United States was mainly intended to arrest.
The granting of the proposed power would unavoidably
involve the creation of a fourth branch of our National
Government, namely, A DISPENSING POWER IN THE UNITED
STATES.” As hereinafter shown this would radically
change the character of our political institutions. It is
not only admitted, but firmly maintained that the rail-
roads should be effectually regulated, in a manner con-
*.
*.
{
*The word dispense is employed in this article as a transitive verb,
signifying to supersvise, to control, to manage, to give out. Its deriva-
tives are used in the same sense.
4.
formable to the exigencies of our civilization and the funda-
mental principles of our governmental institutions. The
sole object of this paper is to prove that the proposed
remedy is fraught with evils vastly greater and more serious
than those which it is intended to correct.
The nature of the proposed change of national policy is
clearly indicated by the history of the administration of the
“Act to Regulate Commerce,” approved February 4, 1887.
The Interstate Commerce Commission was organized in
the month of March, 1887, under the guidance of that emi-
nent jurist, Judge Cooley, its first chairman. In an elabo-
rate opinion, written by the chairman three months later,
the Commission held that it was not invested with any
power to prescribe, in advance, the rates which should be
charged on any railroad, declaring that “a construction of
the statute which should require its performance would ren-
der the due administration of the law altogether impractica-
ble.” (Decision rendered in Louisville & Nashville Rail-
road Case, May I 5, 1887.) In the same case Judge Cooley
declared, in regard to the rates charged, by the carrier, that
“no tribunal is empowered to judge for it until after the
carrier has acted and then only for the purpose of determin-
ſing whether its action constitutes a zizolation of Zaze.” The
correctness of this view was subsequently affirmed by the
Supreme Court of the United States, 167 U. S., 479. It
repels any suggestion as to the creation of a dispensing
power.
The Commission repudiated the idea that it had any au-
thority to apply the law by preliminary judgment. (De-
cided April 16, 1887.) Judge Cooley also stated in an or-
5
der of April 18, 1887, in the matter of the Iowa Barb Steel
Company, that “the Commission has not been given
a general dispensing power to relieve hardship under the
law, but its power in that regard is strictly and carefully
limited.” Again he stated in a letter to J. A. Hanley of
May 18, 1887, that Congress has not granted to the Com-
mission any dispensing power, declaring that this “would
not be consistent with sound principles of government.”
Besides, with respect to the popular demand for informa-
tion in advance as to the application of the law, in the mat-
ter of petition of Traders and Travelers' Union, the Com-
mission declared that “a moment's reflection will show that
no such tribunal could be properly erected.” (Decision
rendered April 16, 1887.)
In a leading case (Thacher v. Delaware and Hudson
Canal Co., decided in 1887) the Commission declared that
it has no power to fix rates in advance, but that “its power
in respect to rates is to determine whether those which the
roads impose are for any reason in conflict with the pro-
vision of the statute,” the decisions of the Commission be-
ing appealable to and enforcible by the courts when judi-
cially sustained.
Judge Cooley affirmed, Zn re Chicago, St. Paul and Kan-
sas City Railway Company case (decided in 1888), that
“holding the railroad companies to strict compliance with
all these statutory provisions and enforcing obedience to
them tends to both reasonableness and equality of rate as
contemplated by the Interstate Commerce Act.” The cor-
rectness of that opinion has been fully sustained by the
experiences of the Commission during the last sixteen years.
6
Thus did the Commission at the very beginning com-
mit itself fully to the doctrine that autocratic governmental
rate-making in any form is opposed to the fundamental
principles upon which our political institutions are founded,
and plant itself firmly upon the solid ground of commer-
cial liberty incorporated in the Constitution of the United
States. At the same time the Commission announced
the important fact that the Act to Regulate Commerce
is fully adequate to the correction of existing evils.
With its power of regulation clearly defined, its con-
clusions made prima facie evidence in the courts and
judicial co-operation with respect to both civil and criminal
procedure fully provided for, the work of the commission
has been eminently successful and in a high degree bene-
ficial.
But a great change came over the spirit and purposes of
the Commission both in regard to its authority under the
law and the method of its administration. Step by step
it relapsed into the vagaries of autocratic rule involving
the exercise of a dispensing power. Having in a certain
case assumed that it was invested with a degree of judicial
authority, Judge Jackson, of the United States Circuit
Court for the District of Kentucky, declared January, 1889,
that the Commission is not a court, that it is not invested
with any judicial function, and that Congress has no power
to invest an administrative body with the judicial func-
tions (37 Fed. Rep., 567). This conclusion stands and
will stand until the power of the judiciary—the guardian
of personal liberty—shall have been overthrown.
The Commission revolted at this decision, maintaining
that with respect to administrative questions “its conclu-
7
sions should be a finality, even though their enforcement
may require judicial aid.” Fourth Annual Report, p. 13.
Subsequently, in its Fifth Annual Report submitted Decem-
ber 1, 1891, at page 21, it recommended that the court should
be confined “strictly to the case made before the Commis-
sion.” Thereupon the Commission drew a bill propos-
ing that Congress should grant to it the desired judicial
authority. This bill (S. Bill 892, 52d. Cong., 1st Session)
was introduced December 15, 1891, but was rejected by
the Senate Committee to which it was referred in view of
Judge Jackson's decision and the inherent absurdity of the
proposition to invest an administrative board with the
functions of detective, witness, party complainant and
judge in the same proceeding. That appeared to savor too
much of the Pooh Bah style of government.
After the retirement from the Commission of Judge
Cooley, and of two other able lawyers—Judge Schoonmaker
and Hon. Aldace F. Walker, all now deceased—the Com-
mission aspired to autocratic power unfettered by judicial
restraint. During the year 1894 (53d Congress) it con-
ceived the idea that, by necessary implication of law, it is
invested with the power to prescribe, in advance, both the
absolute and relative rates which shall be charged on rail-
roads throughout the United States. The first conspicuous
attempt to set this assumed power in motion was in the
case of rates between Chicago, Cincinnati and other points
in the Western and Northwestern States and points in the
States south of the Ohio River, as such rates are related to
corresponding rates between Boston, New York, Philadel-
phia and Baltimore at the North and the aforesaid Southern
8
points. The Commission issued an order prescribing both
the absolute and relative rates which should prevail in the
case stated. This was a manifest usurpation of authority.
If such attempted exercise of power had been sustained it
would have devolved upon the National Government full
responsibility for determining the relative commercial and
industrial prosperity of towns, cities, States and sections,
throughout the country, and the course of its commercial
and industrial development. The exercise of a dispensing
power such as this would have gone directly in the face of
elementary principles of liberty and have aroused political
strife regarding the regulation of commerce which the
National Constitution was mainly designed to prevent.
The case was carefully considered by the Federal judiciary,
being perceived to be of the highest commercial, judicial
and political significance. The Commission’s view was
rejected in the lower courts and the Supreme Court of the
United States in its decision rendered May 24, 1897, em-
phatically denied that the Act to Regulate Commerce con-
fers upon the Commission any such power as that claimed
for it, either in terms or by implication. (Maximum Rate
Case, 167 U. S., 479.)
At the same time the court announced the following rule
of constitutional law : “It is one thing to inquire whether
the rates which have been charged and collected are reason-
able—that is a judicial act; but an entirely different thing
to prescribe rates which shall be charged in the future—
that is a legislative act.” The significance of this, as ex-
plained, was that if the Commission should be invested
with the rate-making power the courts could not review
9.
any decision of the Commission unless it should violate the
constitutional limit forbidding the taking of private prop-
erty for public use without just compensation, or the taking
of private property without due process of law. (Articles
V and XIV of Amendments to the Constitution of the
United States.) But even this limitation would leave
abundant room for injustice and the exercise of autocratic
power.
In the case just mentioned the Commission again asserted
its claim to the exercise of the judicial function, but again
this was denied by the Supreme Court.
This signal defeat was exceedingly distasteful to the Com-
mission. Accordingly it decided to join issue with the
Supreme Court before Congress. In its next annual report
(submitted December 6, 1897) it recommended that Con-
gress should confer upon it the absolute power to prescribe
rates; authorize it to issue self-executing administrative or-
ders, and final administrative orders—a strictly judicial func-
tion---and compel the courts to sanction such orders. The
Supreme Court, as before stated, had declared the power
of rate making to be not a judicial function, and one over
which the Federal judiciary could not and would not exer-
cise any authority. The views of the Commission were
subsequently expressed in a bill introduced in the Senate,
January 22, 1898 (S. 3354,55th Cong., 2d Session), which bill
provided that the courts shall be required to review the
rates, fares, classifications, &c., prescribed by the Commis-
sion, and further that “the case as certified from the Com-
mission, together with any additional testimony taken by
the courts shall be the record upon which it shall be heard,”
IO
thus, for the third time claiming the right to exercise
judicial power. This absurd bill also proposed to confer
upon the Commission absolute power to decide cases in-
volving long and short haul rates, and to prescribe the
rates and the conditions under which transportation shall
be conducted throughout the United States. It also pro-
vided that the Commission should be authorized to issue
administrative orders and final administralize orders. If
enacted into law, it would have subjected the commercial,
industrial and transportation interests of this country to
the absolute control of a bureau through the exercise of a
dispensing power. The bill failed to secure serious atten-
tion in either branch of Congress, and apparently produced
no other effect upon the legislative mind than of aston-
ishment.
The Commission, however, refused to abandon its purpose
to acquire dispensing power. Again in the 56th Congress,
March 2, 1899, to March, IQoI, it approached Congress, but
this time with a bill intended to evade the rule of govern-
mental policy announced by the Supreme Court in the
Maximum Rate Case, and thus to circumvent the judiciary.
This bill was introduced December 12, 1899, as Senate
Bill 1439, 56th Congress, 1st Session. It provided that the
companies shall first make their rate sheets, which, having
been made, the Commission shall, upon complaint made
either by itself or any other competent complaitlant, have
power to revise and change the rates which have been made,
thus conferring upon the Commission the right to recast
every sheet in the country. The fallacy and artifice in-
volved in this provision consisted in the pretense that it
II
avoided the objection of the courts that rates made in ad-
vance of being charged and collected, even if authorized
by statute, are not reviewable in the courts, as to their
reasonableness, from the fact that they are legislative rates.
An ingenious argument in favor of just such an arrange-
ment had been made in the Maximum Rate Case, but was
utterly discarded by the Supreme Court in the following
terms: “The vice of this argument is that it is building
up indirectly and by implication a power which in terms
is not granted.” The Commission ignored that declaration.
Rates thus made would be legislative rates, and therefore
not reviewable by the courts as to their reasonableness.
The reasoning of the Commission in this matter was too
inconsequential for serious consideration. Congress also
did not fail to see that the real rate maker, in the first
Žnstance, is he who finally determines the rates before they
have been actually charged and collected. The bill just
mentioned also proposed to confer upon the Commission the
power “to prepare and publish the rules, regulations and
conditions for freight transportation,” a proposition which
clearly involved the creation of a dispensing power.
See Section 3 of the Bill.
Like its predecessors this bill gained no favor with the
national legislators. Congress was not prepared to subor-
dinate the Federal judiciary to the Interstate Commerce
Commission. Nor was it prepared to institute in this
country a bureaucratic imperialism endowed with “that
great anomaly known as the dispensing power,” which in
all ages has been an attribute of tyranny and oppression.
Such the proposed expedient was clearly perceived to be at
I 2
the beginning by Judge Cooley and his associates, who
repudiated it absolutely.
During this Congress (56th) the Interstate Commerce
Commission engaged in a reprehensible scheme. It allied
itself to a propaganda fully committed to the object of in-
ducing Congress to grant to it autocratic powers over the
internal commerce of this country. That propaganda is
still in existence and militant. * At the same time the
Commission had recourse to an astounding expedient. On
December 8th, 1899, by formal vote it instructed its secre.
tary to propagate among the trade organizations of the
country its ideas as to Commission rate making “by dis-
tributing among them such reports, papers and documents
as are designed to accomplish that purpose, and to devote
himself assiduously to such duty.” In pursuance of this
order the Secretary of the Commission issued to the com-
mercial bodies of the country a circular letter dated Feb-
ruary 3, 1900, requesting them to urge upon Senators and
Members of Congress the importance of passing Senate
Bill I439. The glaring impropriety of this movement was
evident to the national legislators and was instrumental in
preventing any legislative action whatever upon the Com-
mission’s anti-American and impracticable bill.
During the 57th Congress—March 4, IQOI, to March 4,
1903—the Commission stultified itself glaringly before
Congress. Until March, IQO2—fifteen years after its organ-
ization—the Commission had neglected to employ the civil
remedy provided in Section I6 of the Interstate Commerce
* At the present time it is endeavoring to mislead the com-
mercial bodies of the country into the folly of endorsing its appeal to
Congress to confer upon the Commission autocratic power.
I3
Act. Early in that month, however, the Commission had
recourse to that provision of the law for the prevention of
rate-cutting—a misdemeanor under the Act to Regulate
Commerce. On March 24th, at the instance of the Com-
mission, Judge Grosscup, of the Northern District of Illi-
nois, issued an order granting a temporary injunction in an
important case pending at Chicago, and in so doing
expressed the opinion that “the expedient might turn out
to be the vitalizing of the Act.” That expectation was
realized. The injunction proved effectual in greatly abat-
ing, if not in entirely arresting, the evil complained of.
But the successful application of this provision of the Act
to Regulate Commerce ran counter to the scheme of auto-
cratic rule which for years the Commission had had in
mind. Within one month after Judge Grosscup’s order
was issued, the Commission Stultified itself by appearing
before the Committees on Interstate Commerce of the Sen-
ate and House of Representatives in earnest advocacy of a
bill providing for the repeal of so much of Section 16 of
the Act to Regulate Commerce as embraces the effectual
civil remedy just mentioned, and proposed to substitute in
lieu thereof an amendment providing for obedience to
the autocratic authority of the Commission. (S. 3575 and
H. R. 8337, 57th Congress, 1st Session, the same being
identical.) This attempt to emasculate the Interstate
Commerce Act was exposed and failed utterly.
Thus did the Commission express to Congress and to
the country its determined purpose, through a desperate
expedient, to expunge from the Interstate Commerce law
the power of the judiciary to participate in commercial
I4
regulation and to acquire for itself an autocratic dispensing
power over the commercial and transportation interests
of this country.
In this attempt the Commission went so far as to deny
the truth of the published record of its own experiences.
Four members of the Commission appeared before the
Committee on Interstate and Foreign Commerce of the
House of Representatives and declared that Congress ought
to grant to it the power of rate making in order to prevent
unreasonable rates and unjustly discriminating rates, at the
same time asserting that rates were advancing. These state-
ments were proved to be absolutely incorrect. It was shown
that during the fifteen years of the existence of the Com-
mission not a single case of exorbitant rates had been
proved in the courts, that on the average only one case of
unjust discrimination had been proved in each two and a
Half years of the life of the Commission and that rail rates
had been constantly falling for thirty-five years. In this
connection the following historic facts were adduced :
(a) The average rates charged on the railroads of the
United States fell from 1.99 cents per ton per mile in 1870
to O.7O cents per ton per mile in 1890. This reduction
upon the basis of tons carried in 1890 would have amounted
to a saving to the people of the United States of nearly
two thousand million dollars a year.
(b) Data furnished by the Bureau of Statistics of the
Treasury Department, clearly prove that from 1894 to
1901—the latest year of official data—the railroad freight
traffic of the country increased 81 per cent, railroad receipts
increased 61 per cent, railroad operating expenses increased
I5
41 per cent, while the average rate charged decreased
II 7% per cent.
(c) Forced to concede this record of reduced rates in
years past, the Commission sought to show that there is a
present tendency toward an undue advancement in rates.
But in this, also, it signally failed. The official record of
the Interstate Commerce Commission shows that from
1899 to 1901 the railroad freight traffic of the country in-
creased 17 per cent, railroad receipts from freight traffic
increased 22 per cent, operating expenses increased 20 per
cent, while rail rates increased only 4 per cent. This ad-
vance in rates was much less than the advance in material
required for railroad operation and much less also than the
advance in wages of labor employed on railroads during a
period of unprecedented prosperity marked generally by
advancing wages and prices. The President of the Phila-
delphia & Reading Railroad has recently declared that the .
increase of wages on that road amounted to $1,2OO,OOO
during the preceding year. In various parts of the country
recent advances in wages of railroad employes range
from 12 to 16 per cent. It is estimated by “The Railway
News” that $100,000,000 represents the increase in pay
rolls of the railroads of the country for the year 1892. It
seems reasonable to admit that the railroads which feel the
advance of prices and wages so keenly on the expense side
should share at least to a limited extent on the side of
receipts.
(d) Mr. Knapp, Chairman of the Commission,
sought to convince the House Committee on Commerce
that the apparent decrease in rail rates since the year 1890
I6
was caused by the inordinate increase in the tonnage of low-
priced freights such as coal and ores, but official data of
the Government were adduced showing that the reverse
was true, the tonnage of coal and ores having increased
only 74 per cent while that of other freights increased
about 86 per cent.
(e) The Commission then had recourse to a misleading
and fallacious statement. In order to inculcate the grossly er-
roneous idea that the railroads of the country are habitually
violating the provisions of the Act to Regulate Commerce,
certain of its members declared that during the three pre-
ceding years, 807 complaints of all sorts, or 269 a year,
had been made to the Commission. This num-
ber of complaints, however, was utterly insig-
nificant in comparison with the total number of
freight transactions, amounting to many millions a year.
Besides, it was shown from the records of the Commission
that 784, or 97 per cent, of the 807 complaints were dis-
posed of by the Commission informally and without a
Hearing, the complaints having been withdrawn, or the
matters complained of having been corrected by the
companies without subjecting the Commission to the
trouble of a trial and the issuance of formal orders. Of
the 23 cases heard and decided, or only 3 per cent of the
complaints instituted, not a single case of unreasonable
rates or of unjustly discriminating rates has been proved
in the courts. This clearly demonstrated the correctness
of Judge Cooley's declaration that the “Act to Regulate
Commerce” tends to both reasonableness and equality of
rate.” Thus instead of proving to the House Committee
I7
that the present law is inadequate, Mr. Knapp's statement
was the means of bringing to the attention of that Com-
mittee the undeniable truth that the railroad companies
are, in a remarkable degree, conforming to the require-
ments of the Act to Regulate Commerce, and that the ad-
ministration of the law, even in the hands of a commission
bitterly opposed to its vital provisions, has proved to be
not only adequate, but highly successful and beneficial.
Furthermore, autocratic rate making, as advocated by
the Commission, has been shown to be inapplicable to
the cure of the evil of rate cutting; and therefore misdi-
rected.
With all its statements fatally wounded as to facts the
Commission utterly failed to impress the 57th Congress
with the correctness of its assertions or the soundness of
its arguments. The bill which it advocated did not reach
the first stage of legislation in the House of Representa-
tives or in the Senate, and the status of the Commission
before Congress was impaired.
At various times the Commission has recommended that
it be endowed with the power to order an increase of rates
in order to maintain what it may regard as the proper re-
lation of competition rates. No argument is needed in
order to prove that such an exercise of the rate-making
power would be exceedingly obnoxious to the people of
this country.
In another particular the Commission has repeatedly
attempted to usurp authority and to override the law. The
Act to Regulate Commerce declares that its provisions
shall apply only to connected lines of railway “under a
I8
common control, management or arrangement for a con-
tinuous carriage or shipment.” But in defiance of this
plain limitation of law, in the Maximum Rate Case, and
in other cases, the Commission has attempted to adjust the
rates on one line with reference to the rates on other lines
in other parts of the country. This shallow attempt to
exercise a dispensing power has been sternly repelled
by the courts. An order of the Interstate Commerce
Commission 111 regard to rates from Chicago and St.
Louis to Wilmington, North Carolina, as compared
with rates to other points in other States, has recently
been reversed by Judge Thomas R. Purnell in the U. S.
District Court at Raleigh, N. C. Any attempt to set in
Inotion this attempted assertion of power would inevitably
clash with the constitutional provision that “No prefer-
ence shall be given by any regulation of commerce to the
ports of one State over those of another.”
Since January 1, 1892, when Judge Cooley retired from
office, the Commission has neglected to avail itself of the
powers of regulation conferred upon it by the Act to Regu-
late Commerce, and as hereinafter shown has sought to
gain autocratic power. It has denied that it is in any
special manner responsible for the prevention of rate
cutting ; it has opposed an amendment designed to
strengthen the penal provisions of the act, and it has been
derelict in the discharge of its duties with respect to rate
cutting. All this was fully set forth in an argument which
I had the honor to make before the Senate Committee on
Interstate Commerce on June 6, 1902. In a word, during
the last twelve years the Commission has persistently op-
I9
posed the method of regulation prescribed in the Act to
Regulate Commerce, and has as persistently advocated the
adoption of an autocratic method of regulation through
the exercise of a dispensing power.
Thus far the Commission has signally failed before the
courts and before Congress to secure the power to prescribe
rates, to exercise a general dispensing power over the
conduct of railroad transportation, to secure a part of the
judicial function and to circumvent the judiciary. It has
also completely failed to prove that the experiences of the
country with respect to railroad rates justify its preten-
sions. On the other hand, its own record proves beyond
question that the regulation of the railroads provided in
the Act to Regulate Commerce has been highly beneficent
and successful. The Commission seems to have been
misled by the mere frictional resistances and incidental
evils of the grandest and most beneficent system of trans-
portation that the world ever saw.
THE FUTURE POLICY OF THE INTERSTATE
COMMERCE COMMISSION.
Notwithstanding its repeated failures to acquire auto-
cratic power, the Interstate Commerce Commission is ap-
parently as determined as ever to prosecute its claim before
the 58th Congress when it shall convene in December next.
This purpose was clearly indicated by Hon. Charles A.
Prouty, Interstate Commerce Commissioner, in an address
delivered before The American Economic Association at its
last annual meeting. On that occasion Mr. Prouty declared
in favor of a scheme, the effect of which would be to create
a fourth branch of the National Government—“A Dispens-
2O
ing Power in the United States.” This power, as he clearly
indicated, would be as independent of the legislative, exe-
cutive and judicial departments of the Government as
those departments are of each other. His argument is
based upon the following attempted syllogism—There is no
negulation of raž/roads in the Onited States, since regula-
tion 7mplies contro/, there 2s no control of raz/roads—
hence there is no regulation.
The infirmity of Mr. Prouty's syllogism lies in his prem-
ises. The American Railroad System is thoroughly regu-
lated and controlled by an all-pervading and effective
system of self-government, which is amply supplemented by
strenuous and effective State and National governmental
regulation. There is no business in this country which is
more completely the subject of legal restraint than is that
of railroad transportation. “The railroads are regulated
by States, by cities, counties, towns, village boards of trus-
tees, school districts, and by almost every other political sub-
division of the State.” The law of the common carrier
and of the public highway and the decisions of the courts
embrace volumes of regulation applicable to the conduct
of railroad transportation, while the Act to Regulate Com-
merce amplifies, extends and particularizes the regulative
principles of the common law in its application to the rail-
roads. It has been asserted by an eminent lawyer that
“the railroad is held to a more rigid responsibility in the
courts than any other litigant.” The judicial records of
the country afford abundant proof of the correctness of this
assertion. Besides, the published reports of the Government
afford abundant evidence of the fact that the American
2I
Railroad System is a most admirably regulated system of
transportation. In the light of these facts the assertion
of Mr. Prouty that there is no regulation or control of the
railroads in this country is manifestly absurd. Mr. Prouty
exposed his deep-seated aversion to any interference in the
work of railroad regulation by the judicial authority—at
once the protection of civil rights, the defense of public
order and the palladium of liberty. He declared with re-
spect to governmental regulation generally that “it cannot
be done through the courts,” and expressed the belief that
“any system of regulation—which give the Federal courts
power to suspend and finally set aside the Orders of a com-
mission must be of doubtful value.” So he proposed to
eliminate the Federal judiciary from any participation what-
ever in the work of regulation.
Furthermore, Mr. Prouty would eliminate the legislative
and present executive powers of government from any
actual participation in the work of railroad regulation and
assign the function exclusively to his proposed Dispensing
Power in the United States. This he states as follows:
“It is earnestly insisted that the freight rate is a com-
mercial proposition which must be left to the laws of com-
merce, with which the Gozerzzment cannot safely meddle.”
In this he seems to have distinctly in mind a scheme
which, in effect, would supersede the present powers of
government. He recommends, therefore, that “the 1aws
of commerce’” shall be administered by means of a duplex
autocratic dispensing power completely outside of our
present system of government. -
Mr. Prouty then proceeds to explain the organic features
of his plan as follows: It is to embrace first—the Com-
22
mission endowed with the autocratic power of prescribing
all the interstate rates in the country. Referring to the
“suggestion, to permit the Federal courts to review and
set aside, if found unreasonable, the orders of the Com-
mission ” he says, “it is very doubtful whether any such
system can ever give satisfactory results,” and adds, “these
questions are not of a judicial nature and cannot be intel-
ligently passed upon by courts.” In this connection he
says:
“A court administers the law as it is laid down in statute
or in precedent, the jury decides the fact upon the testi-
mony of witnesses. Not so the Commission. Here is no
precedent to be administered. No dispute generally arises
as to the facts. The question is, what under these ad-
mitted conditions shall be done? and this question is largely
one of judgment.”
And again :
“Such a commission is an expert body, * * * its con-
clusion must still rest in the good judgment of its mem-
bers. Its decision is the act of an expert body.”
He labors to prove that the work of the Commission
should be purely that of a body endowed with dispensing
power and not subject to the restraint of statute or pre-
cedent or court. In all this he clearly begs the whole
question.
Having excluded any sort of judicial interference with
the work of the Commission, Mr. Prouty proceeds to ex-
plain the second part of his dual scheme of regulation.
Conceding that the conclusions of the Commission ought
to be subjected to some sort of review, he proposes a tri-
bunal “in the nature of a commerce court” a tribunal
23
fully endowed with judicial attributes:–namely, the
power “to make decrees and execute process,” to “hold
office for life and to possess all the independence of judges.”
Besides, its decisions are to be final. Mr. Prouty earnestly
protests that his proposed commerce court shall not be in
any manner subject to or related to the Federal judiciary,
for he maintains that the matters to be reviewed by the
proposed court are “not properly law questions,” but “the
judgment of a quasi legislative body,” and, therefore, that
“the review of such a judgment is not a judicial func-
tion” and its proceedings “are not lawsuits,” the question
to be decided in each case being “largely one of judg-
ment.”
Thus he proposes to create an administrative board, bear-
ing the name of a court, and fully endowed with judicial
attributes in the face of the constitutional provision that
“the judicial power of the United States shall be vested in
one Supreme Court, and in such inferior courts as the
Congress may from time to time ordain and establish.” It
goes without saying, that Mr. Prouty's proposed “Com-
merce Court” would be simply an administrative bureau
endowed with an autocratic dispensing power, and there-
fore similar in character to his proposed commission.
It is difficult to imagine a more glaring political solecism
than the proposed commerce court endowed with judicial
attributes, but without a judicial function or a legal duty
to perform. Besides, as hereinafter indicated, the whole
scheme is in a political sense revolutionary.
Referring particularly to the questions which will come
before this non-judicial court, Mr. Prouty says: “These
24
questions are not of a judicial nature and cannot be intelli-
gently passed upon by courts”—meaning the Federal courts.
He adds:
“Federal judges are not selected for that purpose. Most
of them have absolutely no experience in such matters.
Their time is fully occupied with their proper duties, and
the very nature of those duties in a measure unfits them to
appreciate these questions.”
The absurdity of this assumption is apparent. Commer-
cial law—especially the law of the common carrier—has
for many centuries engaged the studious thought of the
judicial mind. Andyetitisgravely proposed by Mr. Prouty
that all this knowledge which by a process of evolution has
been incorporated into the very fibre of our civilization
shall be set aside in favor of the emanations of the inner
consciousness of a set of commissioners and of judges with-
out judicial function, guided solely by their own introspec-
tions as to the fitness of things. The peculiar misfortune
of Mr. Prouty's reasoning, in this regard, consists in the
historic fact that so many of the decisions of the Commission
Have been overruled by the courts for manifest error in re-
gard to commercial and economic considerations, which
mark the particular function of the Commission.
In defense of his theory Mr. Prouty says:
“As well might it be provided that (the Federal) courts
shall enforce the laws enacted by Congress, if such laws are
in their judgment reasonable and just,” as “to permit the
Federal courts to review and set aside, if found unreason-
able, the orders of the Commission.”
In this he clearly suggests that the orders of the Com-
mission should have the same authority and dignity as the
laws of Congress. The Supreme Court has declared that
25
public policy in certain cases is what the law directs, but
presumably, it will be a long time before the people of this
country will consent that public policy shall be what the
Interstate Commerce Commission directs. -
In a word, the dual organization which Mr. Prouty
recommends consists of an autocratic administrative board
supplemented by an autocratic reviewing board forming a
duplex bureaucratic attachment to our present form of
government and constituting a full blown DISPENSING
Power. IN THE UNITED STATES. All that Congress and
the Chief Executive would have to do with this new
branch of the National Government would be to create
it and grant it plenary power.
According to Mr. Prouty's own description of his
scheme it would scorn both the substantive and adjective
provisions of the science of law and of government and
convert this country into a vast commercial and industrial
autocracy. Such a scheme would have as its most strik-
ing historic parallel the form of government proposed by
Jack Cade—“My mouth shall be the Parliament of Eng-
1and.”
The substantial agreement between the views expressed
by Commissioner Prouty and the official utterances of the
Interstate Commerce Commission as hereinbefore noted,
raises the presumption that the Commission fully approves
the views expressed by him.
As the proposition to create a dispensing power on the
lines suggested by Mr. Prouty and according to ideas
urged by the Commission during the last ten years will
probably command the attention of the Chief Executive
26
and of Congress at its next session, it seems proper to con-
sider the subject somewhat carefully upon its merits.
WHAT IS INVOLVED IN THE PROPOSITION TO
CREATE A DISPENSING POWER IN THE
UNITED STATES.
The nature and effects of a dispensing power, such as
that proposed by the Interstate Commerce Commission, is
not conjectural. It is historical. In all ages such power
has been the antithesis of judicial authority and a concom-
itant of tyranny and oppression. The exercise of the dis-
pensing power through a bureaucratic despotism, in the
age of Justinian, was an effective cause of the downfall of
the Roman Empire. The political struggle in England
over what Macaulay styles “that great anomaly known as
the dispensing power” began with Magna Charta in 1215
and continued four hundred and seventy-three years. Dur-
ing that period the people of England were divided upon
the vital question which it involved. The idea of a dispens-
ing power of government was finally blotted out for the
English-speaking people by the “Declaration of Right”
which terminated the British Revolution of 1688. In
that document it was declared “that the dispensing power
lately assumed and exercised had no legal existence.”
(Macaulay's History of England, Vol. 2, p. 525.) This
declaration constitutes a fundamental feature of the British
constitution and is deeply engraven in the hearts and con-
sciences of the people of England.
The beheading of Charles I was an incident of the po-
litical struggle just mentioned. Lord Coke, taking the
extreme monarchical view declared that “absolute despotic
27
power in all governments must reside somewhere.” A
hundred years later, however, Montesquieu clearly proved
that such power is utterly incompatible with personal
liberty.
De Toqueville, in speaking of the administrative despot-
ism involved in bureaucratic government says: “Such a
power compresses, enervates, extinguishes and stupefies a
people’” (American Democracy, Vol. 2, p. 333). A recent
writer of ability in describing the evils of bureaucratic rule
in the nations of continental Europe declares that “Re-
publicanism and bureaucracy are incompatible existences.”
(Greg, Miss., Essays, 2d Series, p. 55.)
The idea of creating any sort of a governmental dispens-
ing power in the United States was spurned by the men
who formed the Constitution of 1787. In speaking of the
disposition of the people of this country at the time of the
framing of the National Constitution, Hon. Joseph H.
Choate, our Ambassador to Great Britain has recently said :
“But all agreed in a supreme dread of arbitrary power,
whether it should be exercised by the executive, the legis-
lative or the judiciary.”
The framers of the Constitution were greatly influenced
in their opposition to any sort of despotic exercise of govern-
mental power by the utterances of Montesquieu in “Esprit
des Lois” which Mr. Justice Holmes has characterized as
“an epoch-making book.” Therein the vital importance
of an independent judiciary was clearly explained. This
view was highly commended by Hamilton and also by
Judge Story. By way of illustration, Montesquieu
pointed to the fact that certain monarchical countries of
28
Europe which respected the independent judicial authority
were conservators of personal liberty, whereas the
republics of Italy which governed through a body of magis-
trates unrestrained by an independent judicial power were
cruel despotisms. This is the particular type of dispensing
power which Mr. Prouty proposes to have established in
this country.
Our own political history is full of instruction upon this
subject. Under the Confederacy which existed prior to
the year 1789 the power exercised by the States over the
the internal commerce of the country embraced not only
the power to regulate, but even the power to interdict inter-
state trade. This led to commercial disorder and was fast
tending to disunion. Hence there arose a coercive public
sentiment in favor of depriving the States of that power.
This sentiment, in turn, created a demand that the internal
commerce of the country should be absolutely free, and that
its foreign commerce should be impartially administered.
Hence strenuous objection arose in the Constitutional Con-
vention of 1787 to granting to the Congress of the United
States any power whatever for the regulation of the internal
commerce of the country. In the course of debate this ob-
jection was modified by a proposition to grant such power
by a two-third vote of both branches of Congress. But at
last the limitation to the power of Congress to regulate
commerce as expressed in the fifth clause of Section 9 of
Article I of the Constitution was agreed to. That limita-
tion reads as follows: “No preference shall be given by
any regulation of commerce or revenue to the ports of one
State over those of another.” It then became possible for
29
the convention to agree that Congress shall have power to
pass laws regulative of commerce by a majority vote. And
thus it stands in the Constitution. (Madison’s Journal of
the Constitutional Convention).
Besides there was at that time a prevalent and control-
ling political sentiment in opposition to any attempt to de-
volve upon a National Government any sort of responsibility
for the commercial prosperity of the country or for deter-
mining the course of its development. In the competitive
struggles of life men submit to the results of their own
interaction as to the inevitable, even unto death, but when
the Government becomes openly and unmistakably the arbi-
ter of their destinies and the author of their misfortunes,
then murmurs of discontent will be heard, and unless the
cause of discontent is removed will inevitably culminate in
public disorder. This was clear to the men who founded
our governmental institutions.
The founders of the Republic also clearly saw that the
attempt to control and direct the course of the development
of the commerce of the country would fatally overload the
National Government with jurisdiction. Besides, their oppo-
sition to any form of autocratic authority over the business
affairs of the people was supplemented by an abiding faith
in the conservatism which inheres in the untrammelled
interaction of forces. That faith, in connection with the
constitutional provision and limitations just mentioned de-
fines the policy of commercial liberty which has escorted
this nation from the beginning and ever since has consti-
tuted a muniment of our national character. Mr. Jefferson
was the most conspicuous apostle of that faith and policy.
3O
In his first message to Congress as President, transmitted
December 8, 1801, he said:
“Agriculture, manufactures, commerce and navigation,
the four pillars of our prosperity, are the most thriving
when left most free to individual enterprise.”
If Mr. Jefferson could return to the scenes of this world
he would undoubtedly add to the above enumeration RAIL-
ROAD TRANSPORTATION as being by far the most con-
spicuous exemplification of his noble faith in the con-
servatism which inheres in the untrammelled interaction of
commercial and industrial forces.
From the foregoing, it clearly appears that the founders
of our Government were radically opposed to anything in
tle 11ature of a dispensing power or arbitrary power of any
sort over the commerce of the country, and that the policy
of free internal commerce which they established on this
continent and which has ever since been firmly maintained
repels any such scheme as that proposed by Mr. Prouty and
his associates. Undoubtedly the people of this country, if
again brought to the test, would as decidedly pronounce
against any form of despotic rule as they did in 1787.
As before stated, recourse to anything in the nature of
a dispensing power was distinctly repudiated by Judge
Cooley and his able colleagues who constituted the first In-
terstate Commerce Commission. In the spirit of the
founders they declared it to be “not consistent with sound
principles of government,” and that such power has not
been given to the Commission. Manifestly it conflicts with
elementary principles of our civilization.
But in the face of the world's experiences and especially
3I
of our own history the Interstate Commerce Commission
proposes to establish in this country a dispensing power
under bureaucratic rule, its most objectionable form.
Certain general observations suggest themselves in this
connection :
(a) Opposition to adherence to the fixed policy of the
country, frequently finds expression in the declaration that
new conditions demand new governmental expedients.
This is freely admitted. That constitutions and laws and
public policies should respond to the evolution of society
may be regarded as an axiom of our aggressive civilization.
But the admission does not justify the adoption of anti-
quated bureaucratic methods, involving a dispensing power,
which belongs to the dead past, which more than two-
hundred years ago became archaic under constitutional
government in Great Britain, which for more than a thous-
and years has been the political antithesis of the judicial
function, and which in every age has been a concomitant
of tyranny and oppression.
The use of the word dispensing, as here employed in its
political sense, like the words /orestalling, regretting and
engrossing, has so fallen into disuse that its original sig-
nificance in that sense is almost forgotten. The revival of
the expedient as an expression of the spirit of populism
and of state-socialism justifies the revival of the designa-
tion.
(b) The idea is advanced by advocates of Commission
rate making, that in addition to the power to condemn a
particular rate on the ground of unreasonableness (which
power the Commission now possesses) it should also be
32
authorized to declare what that rate shall be, or its maxi-
mum limit, in the future. Whether the Commission does
or does not now possess that power or may or may not
constitutionally be endowed with that power, subject to
judicial approval, need not here be discussed. But the
advocates of Commission rate making go further and as-
sume that such judicial sanction of a particle/ar rate
ordered by the Commission would carry with it the de-
termination of all other like charges—in a word that it
would, or that by some statutory provision or legal pro-
cess, not yet fully explained, it might be made to pro-
ject that rate to the entire schedule of which it is a part.
The assumption is clearly hypothetical. A fatal objection
to such exercise of the judicial power arises. A particu-
lar rate prescribed by a railroad company in a schedule
applies to commodities and localities under a great variety
of circumstances and conditions. Such application is dis-
cretionary with the company. It is in the nature of a
levelling process, not only justified, but enforced by com-
mercial and economic conditions, and is highly promotive
of the material interests of the country. But considera-
tions of this sort cannot possibly control judicial procedure,
for that would involve the exercise of the legislative func-
tion by the courts, which is inadmissible under our form
of government. Any unjust discrimination which might
arise from the discretion exercised by the railroad com-
panies can be corrected readily under provisions of the Act
to Regulate Commerce which are strictly in accord with
the rules of the common law.
33
THE MAGNITUDE OF THE WORK WHICH WOULD
BE INVOLVED IN THE EXERCISE OF THE
PROPOSED DISPENSING POWER IN THE
UNITED STATES.
The magnitude of the work which would devolve upon
the proposed dispensing power in the United States is a
consideration of the highest importance. It would be
enormous. In its seventh annual report (1893) the Com-
mission declared at pages IO and II, that it Ought to be in-
vested not only with the power to determine rates, but also
with the power to determine the relative commercial status
of the various towns, cities, sections and industries of this
vast country. This was expressed as follows:
“To give each community the rightful benefit of location,
to keep different commodities on an equal footing, so that
each shall circulate freely and in natural volume, and to
prescribe schedule rates which shall be reasonably just to
both shipper and carrier is a task of vast magnitude and
importance.”
This evidently would be an enormous power.
In its eleventh annual report (1897) the Commision de-
clared that it ought to possess the power “to determine”
rates, fares, charges and classifications, privileges, facilities
or regulations,” and to “order schedules in accordance with
the decision of the Commission.”
In the same report (1897) at page 26, the Commission
said in regard to the magnitude of the proposed work:
“The amount of money involved would be much greater
than that involved in the decision of any trial court in the
United States. The results would usually be of more con-
sequence to the litigants than those of any such court.”
34
There can be no doubt as to the correctness of this state-
ment. The value of the property thus exposed to auto-
cratic appraisement and determination in one year, might
exceed the total value of all the property rights adjudi-
cated by the Federal courts since the adoption of the Con-
stitution.
In the Maximum Rate Case the Supreme Court of the
United States characterized the single proposition of Com-
mission rate making as “a power so vast and comprehen-
sive, so largely affecting the rights of carrier and shipper,
as well as indirectly all commercial transactions.” The
court also spoke of it as “the difficult problem of just and
reasonable rates for all the various roads of the country.”
In his recent address before the American Economic
Association, Mr. Prouty stated that the organization in-
vested with the dispensing power “would necessarily ren-
der very many decisions.” This is undoubtedly true. He
also proposed that it shall “deal with monopoly in other
branches of interstate commerce,” which signifies that it
should have control of the general anti-monopoly movement
which now engages the attention of the country.
Mr. Prouty also clearly indicated that the exercise of
the proposed power would exclude the legislative, ex-
ecutive and judicial branches of the Government of the
United States from any actual participation in the work of
regulation, and that it would admit no limitation upon the
exercise of its authority except the personal judgment of
the men; composing the two proposed “expert bodies' as
to “conditions,” unfettered by court or law or precedent.
In a word, his proposed method of regulation would con-
35
stitute an exclusive and inclusive autocratic dispensing
power.
A dispensing power in the United States which should
embrace the functions and the scope of authority already
indicated would manifestly carry with it the enormous task
of supervising and directing the entire internal commerce,
the transportation interests and indirectly the industrial in-
terests of the country.
The magnitude of the work of regulation thus involved
would not be entirely discretionary with the exercise of
the proposed dispensing power, but to a degree would be
inaudatory upon it; for the existence of the power would
carry with it an inevitable duty. The correctness of this
assumption is clearly indicated by the experience of the
Interstate Commerce Commission during the first two
months of its existence. The Commission was then for a
brief period led to admit tacitly that it was invested with
the power to determine, in advance, under what circum-
stances and conditions the right to charge more for the
shorter than for the longer haul could be admitted. The
demands upon the Commission for the determination of
such questions proceeded alumost entirely from railroad
companies. It was assumed by certain attorneys that me.
glect to secure in advance the permission of the Commis-
sion to make such changes would subject the companies to
heavy penalties. These demands upon the time and
attention of the Commission became exceedingly onerous.
In denying the authority of the Commission to exercise
such power, Chairman Cooley, speaking for the Commis-
sion, declared on Julie, 15, 1887, that the assumed duty
36
was “superhuman,” adding that “a construction of the
statute which should require its performance would render
the due administration of the law altogether impracticable”;
a conclusion which led that eminent lawyer and jurist, and
his able coadjutors, to declare that “such a construction of
the statute could not have been intended by the law-maker.”
Therefore all thought of exercising any sort of dispensing
power was utterly repudiated.
Beyond all question, the sort of governmental regulation
now urged for this country by Mr. Prouty and the Inter-
state Commerce Commission would exert over its commer-
cial, industrial and transportation interests an authority
vastly greater than that ever exercised by Congress, by the
President of the United States, by the Federal judiciary,
or by all combined. It would, besides, reverse the commer-
cial policy of non-interference with the interaction of com-
mercial and industrial forces which was established at the
beginning, which was strenuously upheld by Thomas Jeff-
erson and his compatriots and which has safeguarded the
material interests of this country ever since.
As remarked in the beginning and as indicated by his-
toric facts, the political evils which would result from the
establishment of a dispensing power in this country would
vastly outweigh all economic and commercial causes of
complaint which now exist or which could be expected to
arise as the result of a policy so impracticable and revolu-
tionary.
It is believed that if the office of the Commission in
Washington were so enlarged as to enable it to perform all
the functions which would devolve upon it under the pro-
37
posed dispensing power, it would be equal in magnitude
to all the other offices of the present administrative gov-
ernment of the United States.
THE RIGHTS OF PROPERTY VIOLATED.
In order to defend his scheme against the charge of vio-
lating established principles of civilization in regard to the
rights of property, Mr. Prouty was impelled to make the
following admission: -
“The railway rate is private property. Any unjust re-
duction of that rate is an unjust taking of private pro-
perty.”
And again :
“Such a commission should not make interstate railway
rates. So long as railways are private property they
should have the right to name their rates in the first in-
stance, to determine what competitive conditions they will
meet, what industries they will foster, what will be, in
general, the policy of the road.”
But immediately he proceeded to deny all this by declar-
ing that the Commission and the proposed non-judicial
court should be invested with plenary power to change
all rates at will before they haze been charged and collected,
thus making the Commission the actual rate maker and
the dictator of the policy of the road in the first instance,
through the exercise of a dispensing power which has no
place in our governmental system, which, as before shown,
excludes the Federal judiciary and which has no semblance
of “due process of law,” thus violating a clearly expressed
provision of the Constitution of the United States, and
running counter to established principles of our civiliza-
38
tion regarding the rights of property. This monstrous
proposition was emphatically negatived by the Supreme
Court in the Maximum Rate Case, and has repeatedly been
repelled by Congress. And yet this is precisely the power
which the Commission, and the propaganda acting in its
interest, now asks Congress to confer upon it.
The glaring solecism involved in Mr. Prouty's professed
respect for the rights of property and his concurrent proposi-
tion to violate the rights of property suggests the importance
of noting the broad line of distinction between regulation
by preliminary judgment, involving the exercise of a dis-
pensing power and regulation by an administrative board
subject to proper judicial review.
REGULATION BY PRELIMINARY JUDGMENT.
At the beginning, the Commission, speaking by Judge
Cooley, declared that it is not endowed with the power to
administer the law “by preliminary judgment,” but now
it asks Congress to grant to it the power to prescribe rates
and to exercise certain administrative functions in regard
to railroad transportation upon the ground of Inere appre-
hended evils, and for the prevention of what it regards as
dangers threatened by changes in economic and commercial
conditions assumed to justify such action, but which, as
hereinbefore demonstrated, have exhibited no tendency
towards such dire results. In a word, the Interstate Com-
merce Commission proposes to apply a hypothetical remedy
to the cure of prospective evils revealed by its own intro-
spection, but not verified by any actual result of experience.
While it is a beneficent and necessary function of the
39
judicial power to enjoin threatened violations of positive
law, the judiciary can never acquire the right to adjudicate
prospectively upon what it may regard as probable economic
results of commercial or industrial interaction. That
would be undisguised judicial legislation which is not per-
missible under our form of government. Time and again
the lessons of experience have proved that such action
would be unwise and grossly repressive of the ever chang-
ing demands of a progressive age. In a word the evolution
of economic and political conditions has not proceeded far
enough in this world for judicial decisions based upon ap-
prehended commercial and economic evils. Such power
could not be entrusted to the courts without imminent
danger of trespassing upon the fundamental principles of
personal liberty; much less can an administrative board be
allowed to project the adjustment of personal rights by pre-
liminary judgment involving the exercise of a dispensing
power. That also would conflict with fundamental princi-
ples of our Government.
The power exercised by administrative authority in the
case of fire, famine, pestilence and war, the pardoning of
criminal offenses, the deportation of objectionable immi-
grants, also the prevention of the transportation of diseased
animals and infected goods in obedience to the provisions
of the police power of government is responsive to estab-
lished rules of public policy. Such exceptional exercise of
administrative authority bears no semblance whatever to
the exercise of a discretionary power which would em-
brace the essential attributes of legislation and expel the
exercise of the judicial function with respect to the direc-
4O
tion and control of the peaceful and lawful industrial oc-
cupations of mankind amid the conflict of commercial, in-
dustrial and financial forces, whose interaction involves
those conservative elements of regulation, which for lack
of more definite knowledge we designate as the law of
supply and demand and of competition.
This marks the substantial delimitation between the
commercial power and the police power of government,
however perplexing to the courts the distinction between
the operation of these powers may be in concrete cases.
Onited States z. A. C. Knight Co., I56 U. S., 13.
The difference between prescribing rates in advance and
correcting unreasonable charges after they have been
charged and collected is the difference between attempting
to direct men how to proceed aright in the conduct of their
business affairs and punishing them after they have vio-
lated express provisions of law. The former is paternal-
ism—the latter is the administration of justice. The
former is governmental imperialism—the latter is liberty
regulated by law. This distinction is vital to our system
of free government, for it discriminates between judicial
authority and delegated legislative authority. As such it
sharply defines the line of cleavage between ordered liberty
and despotic rule. There is One Above who prejudges
and predetermines, but that attribute does not pertain to
mortal man. These elementary propositions appear to
have been disregarded by the Interstate Commerce Com-
mission in its struggle for autocratic power.
4 I
A JUDICIAL OPINION QUOTED.
Mr. Prouty attempts to defend his theory by quoting Mr.
Justice Bradley who in speaking of the right to control
railroad charges said:
“But a superintending power over the highways and
the charges imposed upon the public for their use always
remains in the Government.”
To assume for a moment that Mr. Justice Bradley enter-
tained the idea that the governmental power of regulating
commerce should be exercised as a dispensing power or in
any manner not subject to judicial review as to the justice
and reasonableness of rates charged would be to impeach
the common sense of that eminent jurist, and to cast a
blight upon his memory.
Moreover it appears safe to say that it would be difficult
to find a railroad manager in the United States who does
not cheerfully admit the correctness of the above declara-
tion of Mr. Justice Bradley. The “Artificial Man,” as the
corporation is sometimes styled, is always subject to the
law of his creator; and must humbly submit to the guid-
ance and to the restraining and protecting care which
such control implies. The fundamental question at issue
is shall that control be exercised by virtue of a dispensing
Aozo'er, or in accordance with the principles of our estab-
lished system of triune government, which makes the ques-
tion of right or wrong, of justice or injustice, of reason-
ableness or unreasonableness depend at last upon the
determination of “The Judicial Power of the United
States,” that branch of the National Government which in
point of wisdom is pre-eminently “Heir of all the ages, in
the foremost files of time.”
42
THE BRITISH RAILWAY COMMISSION.
Mr. Prouty declares that his proposed scheme is similar
in character to the British Railway Commission. In this
he is wide of the mark. The British Railroad Commission
is a branch of the national judiciary, and its conclusions
are strictly judicial decisions, such as the Interstate Com-
merce Commission persistently repels and diligently seeks
to avoid, in favor of the exercise of a dispensing power.
Besides, the delimitation of legislative, administrative and
judicial powers is not so closely drawn under the unwritten
British Constitution as it is under the Constitution of the
United States. The assumed analogy is without force.
COMMISSIONER PROUTY'S AT TITUDE TOWARD
THE RAILROADS.
Mr. Prouty's attitude toward the railroads of the coun-
try is hostile. In his address before mentioned he disre-
garded all facts as to the enormous growth of the Ameri-
can Railroad System—from 70,000 miles in 1873 to about
200,000 miles in 1893—its greatly increased efficiency, the
reduction in the average charge to nearly one-third the
average charge imposed thirty years ago, involving a total
reduction in freight charges of nearly two thousand million
dollars a year, the fact that in the sixteen years of the life
of the Commission it has not been able to prove in the
courts the existence of a single exorbitant rate and only
one case of unjustly discriminating rates in each two and
a half years, and that of the complaints made to the Com-
mission 97 per cent are settled through its mediatorial
offices, whereas only 3 per cent come to a formal hearing
before the Commission. Ignoring all these guiding facts,
Mr. Prouty adopted the expedient of referring to certain
43
particular rates which , appear to him to be unreasonable,
because they have been advanced in a constant readjustment
of rates throughout the country, ignoring concurrent re-
ductions in rates. From the exceptional cases which he
Selects he predicts danger. He declares that combination
has destroyed competition, and that therefore rates must
become exorbitant, whereas it has been demonstrated time
and again that the restraints which have been placed upon
competition during the last thirty years, by association, by
compact, and by actual combination or merger of interests
have been compelled by the necessity of maintaining order
in the conduct of the internal commerce of this country.
Besides, such restraints have secured efficiency in railroad
transportation and just and reasonable rates. These re-
straints upon destructive competition have almost invariably
been accompanied by a fall in rates.
Not satisfied with the foregoing statements Mr. Prouty
expresses himself in the following outburst of feeling :
“The railroad, the railroad combination is one of the
most subtle and dangerous instrumentalities in effecting
an unjust distribution of wealth by taking from the poor
man wrongfully and giving to the rich ; ” “railway trans-
portation is to-day a monopoly ;” “with respect to inter-
state transportation the public has no safeguard against
railroad monopoly;” the country is confronted by “the
danger which always attends monopoly, the exaction of an
unreasonable rate;” the only way to control monopoly is
to “control the charge which it exacts.”
This is hysteria. It exhibits a spirit which expels the
semblance of fair dealing. Such language is without the
shadow of excuse in actual experience and is utterly
44
repudiated by facts patent to the general observation, Some
of the more important of which have herein been noticed.
The railroads of the country from the beginning have
been to the shipper and the traveler, as free as are the
natural highways of commerce. The common law, the
laws of every State, the laws of the United States and the
usages of railroad transportation maintain that freedom.
The pretense of Mr. Prouty that the railroads are able
to defy the law and the public sentiment of the country re-
garding established principles of right and justice is with-
out afly foundation in fact. Time and again the allegations
of Commissioner Prouty and his colleagues as to unreason-
able rates, or the apprehension of unreasonable rates, have
been absolutely refuted. During its existence the Com-
mission has been unable to sustain its declarations in this
regard before the courts or before the committees of Con-
gress. There is also on all sides abundant proof that the
railroads have been forceful and efficient agencies in the
development of the natural resources of the country, in the
creation of new and far-reaching elements of competition
in industry, in trade and in transportation ; in the distribu-
tion of wealth ; in furnishing occupation to labor; in the
enhancement of wages, and in promoting the general wel
fare.
THE INTERSTATE COMMERCE COMMISSION
ANTAGONIZES THE FEDERAL JUDICIARY.
In its various attempts during the last ten years to ac-
quire dispensing power the Interstate Commerce Com-
mission has persistently antagonized the Federal judiciary.
Notwithstanding the fact that the law creating it does not
45
require that any one of its members shall be a lawyer, the
Commission has not hesitated to assert its opinions as
against that of the great lawyers of the Supreme Court,
both in regard to questions of fact, and to legal and con-
stitutional questions, as well as in regard to questions of
public policy which especially concern “The Judicial
Power of the United States.” In twenty cases adjudicated
since it was organized the Commission has resorted to the
courts for judicial aid in the enforcement of its autocratic
and un-American pretentions and in such instances it has
been overruled not only on legal and constitutional grounds,
but also on commercial and economic considerations. The
orders of the Commission which have failed to secure the
approval of the courts have been clearly proved to be
illegal orders—completely outside the powers conferred
upon it by law. It is for this reason mainly that its various
appeals to Congress for additional powers have been dis-
regarded.
The Commission has also strenuously attempted to usurp
the powers of the judiciary, to override the judiciary and
to circumvent the judiciary. On the other hand the
courts have patiently pointed out the excellent and benefi-
cent features of the Act to Regulate Commerce and the
powers of the Commission for good, and have manifested
an earnest desire to co-operate with the Commission in
effectuating the exercise of its undoubted authority in the
direction of beneficent regulation. But the Commission
has been persistent in its efforts to secure autocratic dis-
pensing power and to free itself from judicial restraint.
In reply to a resolution of the Senate dated April 23, 1900,
46
the Commission explained that the principal cause of its
ill-success in the courts had arisen from the difference of
views entertained by the Commission and by the Supreme
Court of the United States on a fundamental principle of
government. (Senate Document No. 319, 56th Congress,
Ist session). The charge of undue modesty, as against
the Commission, has never been sustained in the courts or
elsewhere.
CONCLUSION.
It was stated at the beginning that the proposition to
invest the Interstate Commerce Commission with the auto-
cratic power to prescribe rates for transportation services
in this country, is an expression of current populistic
thought, fraught with danger to the commercial interests
and the political integrity of this country. It was also
premised that the evils which would thus be incurred
would greatly exceed in magnitude any real or imaginary
evils which the proposed expedient is intended to remove.
An attempt has been made to prove the correctness of
these statements.
At first the Commission, guided by Judge Cooley, de-
clared that the creation of a dispensing power “would not
be consistent with sound principles of government.” Sub-
sequently the Commission repudiated that doctrine, and
has repeatedly asked Congress to confer upon it such
power. This proposition has been steadily refused. The
history and present status of the American Railroad Sys-
tem as a public utility constitutes the most striking refuta-
tion of this conception whether it be called populism,
47
paternalism, anti-trust, anti-monopoly or state-socialism.
With its 200,000 miles in length, a traffic of over one
thousand million tons and over six hundred million pas-
sengers carried annually, there has not been proved in the
courts a single case of exorbitant rates during the sixteen
years of the existence of the Commission, and only one
case of unjust discrimination in each two and a half
years. At the same time the facilities for transportation
have been wonderfully improved and rates have been
greatly reduced. This indisputable record affords a splen-
did vindication of the faith of the fathers in the conserv-
atism which inheres in the untrammelled interaction of
forces. It is a faith which may appear shadowy to the
populistic mind, beguiled by the idea of governmental
omniscience, but it is conformable to the unalterable and
potential laws of trade which governments must protect,
and with which they cannot safely interfere without tres-
passing upon human rights.
The subject of governmental rate making involves im-
portant constitutional questions, which cannot here be dis-
cussed, but may be mentioned :
I. It is inconceivable that a power of government so
enormous that it could eliminate the “Judicial Power of
the United States” and practically supersede any actual
participation by the legislative and executive departments
of the Government in the work of regulating the internal
commerce of the country, as has been seriously proposed,
could possibly be brought into being except through a
radical change in the Constitution of the United States.
2. It is inconceivable that the delegation of legislative
48
power, so extensive as that proposed by the Interstate
Commerce Commission, could possibly be conferred except
by constitutional amendment. The rule of constitutional
law that Congress has no power to delegate its legislative
authority is a recognized political axiom. This was clearly
enunciated by Mr. Chief Justice Marshall in Weyman vs.
Southard, Io Wheaton, p. 42.
In the face of the outcry against monopoly the fact
stands that we live in an age of unparalleled material
prosperity due to the accomplishment of great things
through great agencies. The most marked success of the
National Government has been achieved through its com-
mercial policy. In the light of these irrefutable facts, the
representations of populistic advocates of reform in this
regard are a jeremiad on prosperity, and a satire on benefi-
cent results. They tend to disturb a faith in the be-
neficence of our political institutions which should be as
an anchor to every patriotic soul.
It is not denied, but is strenuously maintained, that evils
affecting our transportation system should be arrested by
means of wholesome and efficient governmental regulation.
As stated in the beginning, the main object of this paper
is to oppose asserted remedies which are deemed to be
revolutionary, grossly excessive and prejudicial to the
public interests. Ample power exists under our present
form of government for the correction of evils incident to
our transportation system, which may be properly the sub-
ject of governmental concernment. This has been proved
by the experiences of seventy years.
The wild theory of conferring autocratic power upon
49
an administrative board, and the affiliated idea of confer-
ring judicial authority upon administrative bodies, sets at
defiance the fundamental principle of democratic govern-
ment. Such propositions, as a rule, involve the expedient
of depriving the judiciary of the power to determine the
reasonableness of contracts in restraint of, or regulative of,
trade, a power which lies at the basis of all commercial
law, and is essential to the maintenance of the orderly
conduct of the business interests of the country. A11
schemes of this sort involve the creation of a dispensing
power of government which is antagonistic to our political
system. This would constitute a recrudescence of the
impracticable. As already shown, a dispensing power,
not only vitiates, but extinguishes the very essence of free
government. It has been repeatedly tried, and in all ages
has been proved to be incompatible with the exigencies of
liberty, and the protection of human rights.
And yet the spirit of populism and of state-socialism is
abroad in the land and finds expression in favor of govern-
mental supervision of the commercial and industrial affairs
of the country. Such un-American and revolutionary ideas
constitute an assault not only upon the structural features,
but upon the very genius of our governmental institutions.
To a greater or less extent they pervade all parties and all
classes of our citizens, and apparently for the reason that
the antiquated character of the expedients proposed and
their proven impracticability have not been properly con-
sidered.
The revolutionary idea of governmental supervision and
administration of the commercial and industrial affairs of
5O
the country involving the creation of a Dispensing Power
pervades the entire anti-trust and anti-monopoly pro-
gramme of the present day, in the face of the fact that the
country has enjoyed an unprecedented degree of prosperity
under the government as now constituted.
The people who advocate such impractical theories seem
to lose sight of Hamilton’s exalted conception of human
government, namely, that it should not only be able to
govern the people beneficially, but also that it should be
able to govern itself. This was a problem of the ages, to
the solution of which the men of 1787 added the finest
contribution. Their conclusion was firmly based upon the
incontrovertible fact that human law and human govern-
ment is essentially a science of adaptations, wrought out
by human experiences, and not the product of any assumed
eternal fitness of things.
In treating of the important questions to which this
paper relates, attention has been directed particularly to
their political aspects as indicated by commercial and eco-
nomic conditions. Such considerations naturally precede
the legislative and judicial questions involved. As re-
cently remarked by Judge Coit of the Federal judiciary
before the American Bar Association, “society in progress-
ive nations is always in advance of the law. The evolu-
tion of law follows and never precedes the evolution of
society.” In this view the consideration of the political
effects of the revolutionary proposition to establish a dis-
pensing power in the United States is of vastly greater
importance than any or all of the political issues upon
5T
which the people of this country are now divided. It
overshadows all other political questions which agitate the
public mind. Hence it appears that in a country like
ours, where great questioning is determined in the light of
reflective judgment, the first step toward the philosophical
consideration of the proposition to establish a dispensing
power in the United States is to make the whole matter
the subject of a thorough and impartial congressional in-
vestigation, having regard particularly to the commercial,
economic and political questions involved.
This article has been prepared for the purpose of indicat-
ing certain questions involved in the broad field of inquiry
to which it relates, with special reference to the American
Railroad System and our internal commerce. If it shall in
any degree tend to promote such investigation as that sug-
gested the object had in view will have been fully accom-
plished:
No. 1831 F St. N. W.,
Washington, D. C.,
October 17, 1903.
ist,
1831 F ST RE ET N. W.
W. As H ! N. GTO N, D. C.
d Econorrh
IC 1&l Iſl alſh.
lATE PRESIDENT OF T H E N AT ON AL STAT I STICAL association.)
Statist
(FoRMER CH EP OF BURE AU OF STAT ISTICS N THE TREASURY DEPART ME NT AND
$ PEC E A L A TT E R T o N G IV E N TO Q U E STI O W, is N. W. E. G. & A D T ©
JOSEPH NIMMO, JR.,
LONG IS LAN D, N. Y.
C O M M ER CE, TRAN SPC RTA Ti O N, NAV 1 GATE O N A N D : N D USTRY.
H U NT IN GTO N,

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