T-r, Ul HlIIIJilW(iH ..
DECEMBER 8, ,1905
9
clusively that it is useless to try to get any ade
quate regulation and supervision of these great
corporations by state action. Such regulation
and supervision can only be effectively exercised
by a sovereign whose jurisdiction is co-extensive
with the field of work of the corporationsthat
is, by the national government. I believe that this
regulation and supervision can be obtained by the
enactment of law by the congress. If this proves
impossible, it will certainly be necessary ultimate
ly to confer in fullest form such power upon the
national government by a proper amendment of
the constitution. It would obviously be unwise
to endeavor to secure such an amendment until
it is certain that the result can not be obtained
under the constitution as it now is. The laws of
the congress and of the several states hitherto,
as passed upon by the courts, Lve resulted more
often in showing that the states have no power
in the matter than that the national government
has power; so that there at present exists a very
unfortunate condition of things, under which these
great corporations doing an interstate business
occupy the position of subjects without a sov
ereign, neither any state government nor the
national government having. effective control over
them. Our steady aim should be by legislation,
cautiously and carefully undertaken, but resolute
ly perserved in, to assert the sovereignty of the
national government by affirmative action.
"This is only in form an innovation. In sub
stance it is merely a restoration; for from the
earliest time such regulation of industrial activi
ties has been recognized in the action of the
law-making bodies; and all that I propose is to
meet the changed conditions in such manner as
will prevent the commonwealth abdicating the
power it has always possessed, not only in this
country but also in England before and since
this country became a separate nation.
"It has been a misfortune that the national
laws on this subject have hitherto been of a
negative or prohibitive rather- than an affirma
tive kind, and still more that they have in part
sought to prohibit what c uld not be effectively
prohibited, and have in part in their prohibitions
confounded what should be allowed and what
should not be allowed. It is generally uselesa
to try to prohibit all restraint on competition,
whether this restraint be reasonable or unrea
sonable; ,ahd, where it is not useless it, is generally
hurtful. Events- have, shown that It is not pos
sible adequately to secure the enforcement of
any law of this kind by incessant appeal to the
courts. The department of justice has for the
last four years devoted more attention to the
enforcement of the anti-trust legislation ."nan
to anything else. Much has been accomplished;
particularly - marked has been the moral effect
of the prosecutions; but it is increasingly evident
that there will be a very insufficient beneficial
result in the way of economic change. The suc
cessful prosecution of one device to evade the
law immediately develops another device to ac
complish the same purpose. What is needed Is
not sweeping prohibition of every arrangement,
good or bad, which may tend to restrict competi
tion, but such adequate supervision and regula
tion as will prevent any restriction of competition
from being to the detriment of the public as
well as such supervision and regul tion as will
prevent other abuses in no way connected with
restriction of competition. Of these abuses, per
haps the chief, although by no means the only
one, is overcapitalization generally itself the re
sult of dishonest promotion because of tb.9
myriad evils it brings in, its train; for such over
capitalization often means an inflation that in
vites business panic; it always cciceals the true
relation of the profit earned t the capital actu
ally invested, and it creates a burden of interest
payments which is a fertile cause of improper
reduction in or limitation of wages; it damages
the small investor, discourages thrift, and encour
ages gambling and speculation; while perhaps
worst of all is the trickiness and dishonesty which
it implies for harm t morals is worse than any
possible harm to material interest, and the de
bauchery of politics and business by great dis
honest corporations is far worse than r.ny actual
material evil they do the public. Until the na
tional government obtains, in some manner which
the wisdom of the congress nay suggest, proper
control over the big corporations engaged in in
terstate commerce that is, over the great ma
jority of the big corporations it will be impossible
to deal adequately with these evils.
"I am well aware of the difficulties of the
legislation that I am suggesting, and of the need
of temperate and cautiou action in securing
it. I should emphatically protest against improp
erly radical or hasty action. Thv. first thing
to do is to deal with the great corporations en
gaged in the business of interstate transportation.
As I said in my message of December 6, last,
the immediate and most pressing need, so far
as legislation is concerned, is the enactment into
The Commoner.
law of some scheme to Becuro to the agents of
the government such supervision and regulation
!nlet rates charged by the railroads of the
5mBSy nd effectively Prevent the imposition
n,,mn," n r "nreasonablo rates. It must include
putting a complete stop to rebates in overy sapo
ThI Power to regulate rates, like all
similar powers over the business world, should
be exercised with moderation, caution, and self
restraint; but it should exist, so that it can bo
effectively exercised when the need arises.
, iu H? rst consideration lo be kept in mind
is that the power should bo affirmative and should
be given to somo administrative body created by
the congress. If given to the present interstate
commission or to a reorganized interstate com
merce commission, such commission should bo
made unequivocally administrative. 1 do not be
lieve in the government Interfering with private
business more than Is necessary. I do not be
lieve in the government undertaking any work
which can with propriety be left in private hands.
But neither do I believe in the government flinch
ing from overseeing any work when it becomes
evident that abuses are sure to obtain therein un
less there is governmental supervision. It is
not my province to indicate the exact terms of
the law which should bo enacted; but I call the
attention of the congress to certain existing con
ditions with which it is desirable to deal. In my
judgment the most important provision which
such law should contain is that conferring upon
some competent administrative body the power to
decide, upon the case being brought before it,
whether a given rate prescribed by a railroad is
reasonable and just, and If It is found to be un
reasonable and unjust, then, after full Investiga
tion of the complaint, to prescribe the limit of rate
beyond which it shall not be lawful, to go the
maximum reasonable rate, as it is commonly
called this decision to go into effect within a
reasonable time and to obtain from thence on
ward, subject to review by the courts. It some
times happens at present, not that a rate Is too
high, but that a favored shipper is given too low
a rate. In such case the commission would have
the right to fix the already established minimum
rate as the maximum; and it would need only one
or two such decisions by the commission .o cure
railroad companies of the practice of giving im
proper minimum rates. I call your attention to
the fact that my proposal is not to give the
commission power to initiate or originate rates
generally, but to regulate a rate already fixed
or originated by the roads, upon complaint and
after investigation. A heavy penalty should be
exacted from any corporation which fails to re
spect an order of the commission. I regard this
power to establish a maximum rate as being es
sential to any" scheme of real reform in the mat
ter of railway regulation. The first necessity is
to secure it; and unless it is granted to the com
mission there Is little uso in touching the subject
at all.
"Illegal transactions often occur under the
forms of law. It has often occurred that a ship
per has been told by a traffic officer to buy a
large quantity of some commodity and then after
it has been bought an open reduction is made in
the rate to take effect immediately, the arrange
ment resulting to the profit of the one shipper and
the one railroad and to the damage of al. t-elr
competitors, for it must not be forgotten that the
bigg shippers are at least as much to blan.e as any
railroad in the matter of rebates. The law should
make it clear so that nobody can fail to under
stand that any kind of commission paid on freight
shipments, whether in this form or in the form
of fictitious damages, or of a concession, a free
pass, reduced passenger rate, or payment of
brokerage, is illegal. It is worth while consider
ing whether it would not be wise to confer on the
government tlie right of civil actioa against the
beneficiary of a rebate for at least iw:je the
value of the rebate; this would help stop what
is really blackmail. Elevator allowances should
be stopped, for they have now grown to such an
extent that they are demoralizing and are used
as rebates.
"The best possible regulation of rates would,
of course, be that regulation secured by an hon
est agreement among the railroads themselves
to carry out the law. Such a general agreement
would, for instance, at once put a Btop to the
efforts of any one big shipper or big railroad to
discriminate against or secure advantages over
some rival; and such agreement would make the
railroads themselves agents for enforcing the law.
The power vested In the government to put a
stop to agreements to the detriment of the public
should, in my judgment, be accompanied by pow
er to permit, under specified conditions ar : care
ful supervision, agreements clearly in the inter
ests of the public. But, in my judgment, the
necessity for giving this further power Is by no
melns as great as the necessity for giving the
commission or admlnlstratt'-o body the other
powers I havo enumerated above; And It nmy
well bo inadvisable to attempt to vest this particu
lar power in tho commission or other aJmlulatra
tlvo body until it already possesses and is exer
cising what I regard as by far tho most Important
of all tho powers l recommend as indoou tho
vitally important power that to fix a given maxi
mum rate, which rate, after tho lapse of a rea
sonable time, goes into full effect, subjoct to
review by the courts.
"All private car linos, industrial roads, re
frigerator charges, and tho liko should bo express
ly put under tho supervision of tho interstate
connnerco commission or some sir. .ar body so
far as ratos, and agreements practically affecting
rates, arc concerned. The private car owners and
tho owners of Industrial railroads are entitled
to a fair and reasonable compenuatlon on their
Investment, but neither private cars nor Indus
trial railroads, nor spur tracks should bo utilized
as devices for securing preferential ratos. A re
bate In Icing charges, or in mileage, or In a di
vision of tho rate for refrigerating charges Is
just as pernicious as a rebate .'a any other "way.
No lower rate should apply on goods Imported
than actually obtains on domestic goods ..om
the American seaboard to destination except In
cases where water competition Is the controlling
influence. Thero should be publicity of the ac
counts of common carriers; no c moil carrier
engaged In Interstate business should keep any
books or memoranda other than those reported
pursuant to law or regulation, and those boolm
or memoranda should be open to the inspection
of the government. Only In this way can viola
tions or evasions of the law bo suroly detected.
A system of examination of railroad accounts
should be provided similar to that now conducted
into tho national banks by the bank examiners;
a few first-class railroad accountants, If they had
proper direction and proper authcity to Inspect
books and papers, could accomplish much in pre
venting willful violations of tho law. It would
not bo necessary for then to examine In' tho '
accounts of any railroad unless for "o reasons
they were directed to do so by the Interstate com
merce commission. It 1b greatly to bo desired
that some way might bo found 'y which uw agree
ment as to transportation within a state Intended
to operate as a fraud upon the federal interstate
commerce laws could bo brought under tho juris
diction of the federal authorities. At present it
occurs that largo shipments of interstate traffic
are controlled by concessions on purely state busi
ness, which of course amounts to an evasion of
the law. The commission should have power to
enforce fair treatment by the great trunk lines
of lateral and branch lines.
"I urge upon the congress the need of pro
viding for expeditious action by tho Interstate
commerce commission in all these matters,
. whether in regulating rates for transportation or
for storing or for handling property or commo
dities in transit. The history of .the cases litigated
under the present commerce act shows that Its
efficacy has been to a great degree destroyed by
the weapon of delay, almost the most formidable
weapon in tho hands of those whose purpose It
Is to violate the law.
"Let me most earnestly say that these rec
ommendations are not made In any sp'rit of hos
tility to the railroads. On ethical grounds, on
grounds of right, such hostility would be Intol
erable; and on grounds of mere national self
interest we must remember that such hostility
would tell against the welfare not merely of somo
few rich men, but of a multitude of small In
vestors, a multitude of railway employes, wage
workers; and most severely against the Interest
of the public as a whole. I believe that on tho
whole our railroads have donr well and not 111;
but the railroad men who wish to do well should
not be exposed to competition with those who
havo no such desire, and the only way to secure
this end Is to give to some government tribunal
the power to see that justice Js doi e by the un
willing exactly as it Is gladly dene by the willing.
Moreover, if some government body Is given in
creased power the effect will be to furnish au
thoritative answer on behalf of the railroad when
ever irrational clamor against it Is raised, or
whenever charges made . w Inst It are disproved.
I ask this legislation not only in the interest of
the public but In the Intcest of the honest rail
road man and the honest shipper alike, for It Is
they who are chiefly jeopards' :,y the practices
of their dishonest competitors This legislation
should be enacted in a spirit as remote as possible
from hysteria and rancor. If we of the American
body politic are true to the traditions we Lavo
inherited we shall soon scorn any effort to make
us hate any man because he Is rich, just as much
as we should scorn any effort to make us look
down upon or treat contemptuously any man be
cause he is poor. We Judge a man by his con
(Continued on Pr o 14)
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