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from which Congress derives its power over this matter, a short historical review will be useful.
From the date of the treaty of peace, Sept. 3, 1783, which separated the 13 American colonies from the British Empire, to the ratification of the federal constitution and the adoption of our present form of national government in 1788, the 13 states acknowledged only quasi-allegiance to their general government under a loosely constructed agreement called “Articles of Confederation and Perpetual Union.” They continued to be in reality 13 separate commonwealths, and the bonds of their union were so frail and shadowy that there was imminent and constant danger of disruption, and a state of discord and disaffection little short of anarchy prevailed throughout the land. The most prominent cause for these distractions and disagreements between the states was the lack of definite and uniform laws giving freedom of commercial intercourse between the citizens thereof. Some of the states discriminated in export and import charges upon passing goods, as between their own and citizens of adjoining states, and others established retaliatory license charges, and the condition finally became so chaotic and unbearable that in 1786, the state of Virginia suggested by circular letter the assembling of commissioners from all the states, “to take into consideration the trade and commerce of the United States, etc.” Under this call commissioners from few states met at Annapolis, Md., Sept. 11, 1786, but their number was too few to make their proceedings authoritative, and the meeting broke up without attempting anything. General dissatisfaction had, however, become so acute, not only as to interstate commercial relations, but also as to many other governmental functions, that in February, 1787, Congress called for a convention of delegates from all the states to assemble at Philadelphia in May of that year, "for the sole and express purpose of revising the Articles of Confederation.” This finally resulted in an abandonment of the “Articles of Confedera
tion," and the making and adoption in their stead, in 1788, of the constitution of the United States which, with its subsequent amendments, is now the foundation of our national government.
Although the basic reason for all this action seems to have been the necessity for adjusting interstate and foreign trade relations, the constitutional convention disposed of this important subject in the fewest possible words. In defining the various duties of Congress it gave to it, among other things, the power "to regulate commerce with foreign nations, and among the several states, and with the Indian tribes." It also created the supreme court and imposed upon it the duty of interpreting the constitutional power of Congress wherever differences of opinion should arise concerning it. I do not think it has been or can be shown that the makers of the constitution ever had any other thing in mind, in connection with this delegation to Congress of the power to regulate interstate commercial relations, than a well defined intent to forever prevent the erection by any state of any customs, tariffs or other barriers that should be an obstruction
the freest currents of commerce; and there seems to be no evidence that the idea of regulating the market prices or the methods of transporting either freight or passengers across state lines, or to foreign countries, was ever in the remotest way entertained by any of them. The supreme court has since then so broadened by interpretation this meagrely stated power of Congress, and so enlarged its authority over interstate intercourse that it can now exercise, with apparently lawful authority, control over its minutest detail. We can therefore only accept the situation as it now exists, but each one may for himself investigate and form his own opinion as to the extent to which this enormous, and perhaps unprecedented, power ought to be exercised, and in what way individual and general interests are likely to be thereby benefited or put in jeopardy.
For almost a century—just 99 years to be exact-Congress allowed its power to
regulate interstate commerce,
whether those engaged in the business of pubcarried on by private enterprise, or by lic transportation, and of the newspublic service corporations, to lie dor- paper press and the general public, and mant. In the mean time the steamboat has caused more hypocrisy and lying, and the steam locomotive had been per- with less production of intended results, fected, and under state charters and than has any other piece of national authority, and without even a hint legislation that has had its birth since from Congress of its interest in, or the foundation of our government. most remote objection thereto, more It is a law that attempts to place than 147,000 miles of steam railroad had not only the earnings, but the absolute been constructed and put in operation capital privately subscribed and owned in the United States, at a cost of up- and which derives its value wholly from wards of $9,000,000,000, furnished by pri- expected earnings, in the hands of a vate investors and without government politically selected commission which aid, except that in isolated instances is endowed not only with the judicial and in a limited way, for the further- function of passing upon ance of the public interest in opening up may be submitted by complainants in governmental areas of unoccupied lands the usual way, but possesses also a for settlement, or to tie with strong and further, and extra judicial, power of inipermanent bonds of unity the almost in
tiating investigations of cases that it accessible Pacific coast states to their believes may be violations of the law, older and more fully developed sister of hearing evidence thereon collected states of the East, the national govern- by its own agents upon its own instiment had donated portions of its public gation, and then of passing in judgment lands and had loaned its credit in aid upon the facts as thus in part ascer of some railway extension and develop- tained. ment, in the then remote West, that In framing the interstate commerce would otherwise have been found diffi- law it was the purpose of Congress cult, if not impossible, of accomplish- to produce, among others, the following ment.
definite results: First, the continuance Then, in 1887, after all this invest- of competition between the railways; ment of private capital had been made second the prevention of pooling and under conditions that there
other combinations that should reduce to suppose to be other than railway competition, or unduly increase permanent and after 99 years of non- transportation rates; third, to preveni interference, Congress, through the in- the railways from discriminating beterstate commerce law, announced its tween their customers by giving rebates, power and determination to thereafter secret rates or relatively unlike facilities control and regulate all public service for like or similar service; fourth, to corporations that were then engaged, prevent higher rates being charged for or might thereafter engage, in the busi- short hauls than for long hauls; fifth, ness of interstate and, within certain to cause uniform, stable and equal rates limitations, international commerce. to be charged for like or similar service.
This special and unprecedented na- Later, Congress enacted the so-called tional legislation, which was the first “Sherman anti-trust law,' about which attempt by congress to substitute, in two• interesting facts may be stated: this connection, unscientific and inelas- One, that although named after Sentic statute law for the natural laws of ator Sherman he had little or nothing supply and demand, and to abridge the to do with the details of its making and freedom of private contract rights, has took no special part in its enactmeni now been in force for about 18 years; by Congress; and the other that when and it is perhaps not too much to say it was under discussion by Congress it of it that it has, in its career thus far, was not intended or understood to have occupied relatively more of the atten- any reference to, or control over, transtion of Congress, of the law courts, of portation companies. A third interes:
ing fact about this law is that its first important use was for breaking up the useful and beneficial traffic associations which had been formed by the railways to produce the very uniformity and stability in rates that the interstate commerce law was in part framed to accomplish. It is a fourth interesting fact in regard to this so-called Sherman anti-trust law that in its interpretation the supreme court has laid down the extraordinary principle that under it all combinations in restraint of trade are unlawful even though they may be in themselves beneficial to many interests and harmful to none.
Now let us see to what extent the interstate commerce law and its complement, the Sherman anti-trust law, have produced their intended results. The railroads having in many instances extended their lines in anticipation and advance of the public demand therefor, and being denied the privilege of arranging an equitable distribution of the existing competitive traffic at remunerative and reasonable rates, at once entered upon a fierce and ruinous competition, which made their rates and service unstable, irregular and discriminatory, and, as one of the results of the business panic of 1893, many of the larger, as well as the smaller systems, were forced to take refuge from the claims of their creditors by passing into the hands of receivers; whence most of them have since emerged and, under the process of natural law, have become component parts of greatly enlarged, consolidated and unified combinations, or systems, under whose combined, but lawful, management the possibility of general competition such it was one of the purposes of the inter
law to uphold and maintain, has hopelessly and forever vanished This combination and unification of separately owned and competing roads is still going on at a rate of
progress that will, in the not distant future--and still under the working of natural laws-remove whatever rebating, secret rate giving and other forms of favoritism now exist, and for which the railroad managers have been so se
verely censured, but of which the conscience of an outraged public has never yet prevented it from reaping the uttermost advantage.
These facts would not be called to your attention but for the further fact that the interstate commerce commission is again before Congress with its many times iterated and reiterated request, now re-enforced by presidential recommendation, that it be given the absolute power to prescribe the maximum rate that a railway, or line of railways may make whenever, upon complaint and investigation, the rates currently charged are deemed by it to be unreasonable, and that it be further empowered to put such prescribed maximum rates in immediate effect, to stay until declared by the courts, upon appeal by the defendant railway or railways, to be unlawful.
In support of its claim that it should have the power to fix maximum rates, the statement is put forth in its hehalf that it does not intend to exercise this power except to remedy occasional, and possibly rare cases of injustice on the part of the railways; and that it does not expect or desire to make tariffs for the railways in a wholesale way; one member of the commission is reported as having said that its proposed methods of correcting existing evils will not be likely to appreciably affect the general average freight rate ceived by the railways of the country, or materially reduce their gross or net income. The value of this statement is, however, materially weakened by that of another member of the commission, who is quoted as having recently said that unless this power of rate making is given to the commission, the people of this country will continue to pay at least $40,000,000 a year more for their railway facilities than they ought to pay. If this latter statement is to be accepted as embodying the true intent and purpose of the commission, if it is given the power to fix transportation rates, the question naturally
arises how this $40,000,000 a year in reduced gross and net earnings is to be provided for without correspondingly re
000, amount almost sufficient to make good the year's wage increase. The shareholders received no increase of dividends, and the road's net earnings were practically the same as in the preceding year.
This experience in which you have beneficially participated, illustrates the close and inseparable relation that exists between the average transportation rates received and the possible wage disbursements of a railroad; and I can give no more apt illustration of your individual and personal interest in this rate question, as it inevitably and always mutually affects the finances of the road and the wages of those engaged in its service.
While I shall not permit myself to be drawn into a profitless newspaper controversy with anonymous, and more or less flippant, writers, who credit me with opinions that I do not hold and consequently have never expressed, I shall not, on the other hand, be deterred from giving the freest expression to opinions, based on years of examination and study of the many and intricate problems involved in this great subject, and that I believe are worthy the most careful consideration by each and all of the more than 23,000 persons who share, as their means of livelihood, in the annual payroll distribution by the Boston & Maine system of about $16,000,000, a sum equal to nearly onehalf of its annual gross income.
I differ with the interstate commerce commission, and with those who advocate increasing its powers, only upon the one point that I believe to be of vital interest, namely, the power to make rates. I am heartily in favor of such carefully thought out additional legislation as may be found needful for ending and forever preventing railways from conspiring to give, or their customers combining to exact, any favors or facilities that may not, under like circumstances and conditions, be given to and received by all; but I am fully convinced that the power to fix the price at which railway transportation shall be sold can be left with safety only in the hands of those who must
ducing the at present low average dividend returns of the railways, or relatively reducing the cost of their operation.
As the average return paid to the railway shareholders of the United States in 1903 was less than 3 per cent. upon the par value of their holdings, and as a four per cent. annual return upon investments of this nature is not considered an extravagant income, will it not be possibly and naturally necessary for the railways to attempt finding some method of reducing their cost of operation so that the interests of their shareholders shall not be unfairly affected? And if a reduction of $40,000,000 a year, or any considerable portion of that sum, in operating expenses must be provided for by the railways at large, is it not probable that the payrolls of those in their employ, which now amounts in total to nearly one half the gross income received from railway operation, will be expected to contribute their proportion of this necessary reduction in the cost of operation; and, if this prove true, will not the individual workers in the railway service be called upon to bear each his proportion of this reduction in income, and is this not, therefore, a question of paramount interest to the million, or so, people who are engaged in the railway service and live upon the income they receive in payment for their labor?
To offset the extraordinary advances in the general cost of living, those engaged in this company's service, in 1903 insisted that material and general increases in wages
a necessity that could not longer be postponed; and general adjustments
thereupon mutually agreed upon, with a resultant total increase of payroll disbursements for the next ensuing fiscal year of over $800,000. For that same year the company fortunately received an increased average rate of 47-100 of one mill a ton to a mile upon its total freight movement, a sum in itself wholly insignificant and inconsequential, but which, when averaged over the year's freight tonnage, became a total of nearly $800,
assume, and have no way of escape to the railways then, and, therefore, from, the care and expense of producing would not hurt them now. that transportation; and that legislation ment fails to state the whole case. The tending to separate these two indis- railways did indeed submit for a time solubly connected and paramount re- to the exercise by the commission of sponsibilities is communistic in its this power, but it soon became so pertendencies, and in contravention of the vasive in its spread that they found natural laws of supply and demand. cause for alarm as to the final outcome,
Is it not one of the unalterable work- and they therefore took the matter into ings of natural law that whoever exer- court where their contention that the cises the power to fix the maximum commission's power over rates ended price at which a product shall be sold when it found them unreasonable, and must likewise fix the minimum price, that it had not been given the power to and must also ultimately assume and substitute and make effective other control the cost of making that prod- rates that it considered reasonable was uct? As no workable plan has yet been sustained. devised for equitably dividing the pro- The present widespread and somewhat ducer's responsibility of fixing the price inflammatory discussion of the railroad at which his product may be profitably rate question would lead one not fasold or of guaranteeing its cost, and as miliar with our great and unprecedented the only product of the railway com- national prosperity to suppose that by pany is transportation, will it not un- the arbitrary enaction of unwarrantably alterably follow that when government high railway rates, our industries and takes the first long step of using its commerce must be, as a whole, in such power to fix the maximum price at a state of prostration and decadence which that product shall be sold to the that radical and even violent legislative public it must also fix the minimum means of relief ought at once to be apprice, and then, sooner or later, take plied. But what are the facts? From the next and much shorter steps lead- 1893 to 1903 (1904 statistics not being ing to government ownership and op- yet available) the freight moved one eration of the railways, and thereby mile by the railways of the United assume and control the cost of making States had grown in volume from as well as the selling price of this trans- 90,000,000,000 to 171,000,000,000 tons, portation product? And if this be an increase of 81,000,000,000 tons, or true, is not this the method which the about 90 per cent., while the railway Socialist has, in season and out of sea- mileage during the same period inson, insisted should be applied ?
ereased only 17 per cent.
The average For the members of the present inter- freight rate received by all the railways state commerce commission, collectively in 1893 was 8 93-100 mills per ton per and individually, I have the greatest re- mile, while in 1903 it had fallen to spect. They are able and honorable 7 81-100 mills, a reduction of 1 12-100 gentlemen, and I have no doubt of mills. Now the
average rate for their willingness and ability to use just- 1903, which was less than one-half that ly any power that may be committed to received by European railways, does not their charge; but neither they nor any seem to be so excessive as to become one else can give assurance that their an arbitrary and insurmountable barpolitically elected successors will be rier to the free and profitable moveproportionately well fitted, mentally or ment of our domestic and foreign comotherwise, to satisfactorily carry on the merce; and when we further find that work.
this reduction of 1 12-100 mills in the It is argued by some who favor giv- average freight rates of 1903 yielded ing the interstate commerce commis- in money, when spread over the tonsion full rate making powers, that for nage volume of that year, the total of 10 years after it was created it exercised $191,000,000, and that this contributhis power; that its use was harmless tion to the country's commercial