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The Commoner
JANUAJlf , 1917
i;
11
from you upon any of the subjects that are em
braced in resolution Nq, CO, Mr. Bryan.
Mr. Bryan. WouldT'tho question of what a
railroad should be allowed to earn come undor
that?
The Chairman. Yes; any legislation relat
ing to interstate commerce transportation.
Mr. Bryan. But you adjourn at 12, and I
want to give you plenty of time to ask questions,
because I think I will not be able to come back
after 12.
The Chairman. Yes.
Mr. Adamson. Capitalization is a very im
portant feature, is it not financing?
Mr. Bryan. Yes.
The Chairman. The questions of government
ownership, capitalization, control of stock and
bond issues, national incorporation, and every
subject that relates .
Mr. Cullop. Financing.
The Chairman. Yes. .
Mr. Bryan. I think it will not take me long
to express an opinion, but Ivrecognize that the
expression of an opinion is not of value to the
committee, and I am sorry I can not fortify my
opinion with something more substantial.
GOVERNMENT OWNERSHIP
As to government ownership, I have believed
for a number of years that it was inevitable,
and inevitable only because the railroads will
not consent to effective regulation. I think it is
now some 10 years since I had occasion to say
that unless our experience with the railroads
was different from our experience with muni
cipal corporations, the people, for their own
protection, would be compelled to take charge
of the railroads. Our experience with muni
cipal corporations has been this: that the men
who own the franchise have so large a pecuniary
interest that they are always alert and watch
ing; while the individual citizen has so small
an interest, relatively, that he is not so alert or
so watchful, and the result has been that in
cities of any size the people holding the fran
chise have felt that it was necessary for them
to control the election of councilmen, or who
ever have the authority, in order to protect their
interest; and some of yotl may have heard the
argument made that they do not want to enter
politics, but they have to enter it in order to
protect themselves from the demagogue; and I
may add that the first time this was presented
in an official way by any high authority this
matter of national incorporation I remember
that the president of a railroad, whose rail
road had, only a short time before, been found
by an investigating committee to have three
times as much capitalization as it had property,
gave out an interview indorsing national incor
poration, and the reason he gave was that it was
the only way the railroads could protect them
selves from, the demagogues in the legislature.
That is the argument given in the cities that
they must protect themselves from sandbaggers
and demagogues; but the result is corruption,
and the cities have been forced to lake over
their franchises for the protection of their peo
ple, not only the economic protection but the
political protection.
Now, I said that unless our experience with
the railroads was different, we would have to
do the same thing for the same reasons, and the
effort that is now being made to secure a revo
lutionary change, an effort made not in the in
terest of better regulation, but to avoid the reg
ulation of the states, is simply an illustration of
what I meant when I said the people would, for
their own protection, be compelled to take these
railroads over, and my opinion is that nothing
would hasten the government ownership of rail
roads more than the success of the plan which
is under discussion. If you can never secure
national incorporation and that, of course, is
of no value unless it is effective in transferring
the control, for a national incorporation that
does not effect any change is not worth having;.
it is only valuable in proportion is it does bring
this change In the centering of authority. If
this succeeds, I believe that the evils that will
develop will become so intolerable that it will
hasten the action; but my friends, I never be;
Jieve it wise to advocate a bad thing in the hope
that it will bring a better thing. In fact, I think
it is a very unsound philosophy. If you oppose
a thing, and it comes, you can then take ad
vantage of 'it, and you may be able to use it to
bring something that -is better; but whenever I
am tempted to advocate a bad thing, in the hope
It will bring a better thing, I am restrained by
this process of reasoning rather, this Illustra
tion. I will put It this way: If I ever get it into my
head that I can raiso a man from the dead, I
will try it on a dead man; I will not kill a man
just to experiment with him; and I appfy the
reasoning to this case. Whilo I believe that out
of the abuses that this would lead to, govern
ment ownership would come, I would not bo
willing no matter how much I favored govern
ment ownership to favor the bad thing and
take my chances on the good thing coming, be
cause If I helped to get the bad thing, I would bo
responsible for it, and then, if I wero not able to
get the good thing, I would havo no way of de
fending myself from a very serious responsi
bility. Now, personally I can not say that I de
sire government ownership, because I lean to
the individual Idea rather than to the collective
idea; that is, I believe that government own
ership is desirable only where competition is
Impossible. I am not able to toll you who first
laid down the rule that I havo adopted, but the
first man whose name was attached to it was
Professor Ely; I do not know whether it was
original with him or whether ho took aomo one
.else's statement, but my understanding of it
was this I think he put it this way: that na
tural monpolles must bo owned by the peoplo, ton
the theory that in the case of a natural mon
opoly competition is impossible, or, if not im
possible, was so expensive as to amount to the
same thing, and that there should in sUch cases
be government ownership.
That proposition expresses my views better
than any I have been ablo to myself frame; that
where competition Is impossible, government
ownership Is necessary; that a private monopoly
is indefensible and intolerable, and I only favor
government ownership on the condition that a
proper regulation Is impossible. I have been
frank to express the belief that it will be found
impossible, simply because of the natural tend
ency of the men in charge ot the railroad to
make all they can out of it, without regard to
the equities or to the rights of the peoplo. But
J am perfectly willing to give to prlvato owner
ship a fair and complete trial, and I am willing
to have all proper restrictions tried, so that
when the people turn to government ownership,
they will turn with evidence either that it is
impossible to devise restrictions, or because the
railroads are able to prevent efficient restriction.
I have gone bo far in my willingness to try effec
tive regulation as to suggest this: that the rail
road capitalization be reduced to an honest
basis, and that then the railroads be allowed to
earn a sufficient income to keep their stock at
par, and, in addition to that, a sum to be put
into a surplus, as a bank creates a surplus, from
which the railroad could draw in bad years, to
keep its dividend at a just and reasonable point.
NO DESIRE TO DO INJUSTICE
Now, if I know the sentiment of the people,
there is no desire among the masses to do in
justice to the railroads, and I have no doubt
that any fair proposition that Is just to both
sides would be indorsed by the public. I havo
such faith in the sense of justice and the fair
ness of the masses that I would not hesitate to
indorse, and appeal to them to indorse, a prop
osition that would give absolute stability to
railroad stock by permitting this accumulation
of a reasonable surplus, out of which the divi
dends could be paid In any bad year, so that any
man who bought a railroad stock could know
that every year he would receive a return that
paid a fair return on the money Invested.
Now, just how this would be brought about
Is a matter of detail, and I would not be pre
pared to go into it, but that Is the principle I
would like to see the stock of a railroad, as
long as It is In private hands, made as substan
tial and as unvarying as the value of a govern
ment bond. ....
I remember that in 1907 the stock of some
of these railroads went down more than one
half In a year's time. Now, if legislation had
reduced the value of that stock one-fourth of
the amount that It fell without legislation, there
would have been a great cry about injustice, and
vet the railroad managers are permitted to
water stotfc. and sometimes, to juggle the mar
k? and Ss dp injustice to stockholders, wlth
ou 'any seeming complaint, whereas if the gov
ernmeid it there would be a great outcry
against the unfairness of the government
. So much In regard to the matter of rates;
first, that the capitalization should be reduced
to an honest basis, so that the railroads would
represent the cost of reproducing, and 1 know
of no other basis; everybody elso Is governed by
that rule. A merchant's stock Is only worth the
cost of reproducing. Tho land that a farmer
buys is not determined by tho amount of
the mortgage on It; it is determined by the
value of tho crop and tho value of tho land
around It, and it is only where tho owner of the
property has some special means ot protecting
himself from general laws and general rule
that ho can oxpoct to prcsorvo a value that is In
oxcobs of tho cost of reproduction, and tho way
that tho railroads do It is to exerclso the priv
ilege I say privilege rather than right the
privilege of collecting rates sufficient to pay In
terest and dividends on tho capital that they
have. I believe tho only Just basis would be
tho cost of reproduction, and how that Is to be
ascertained or how it is to bo reached is a mat
ter that would rcqulro a good deal of discussion
and Investigation.
That is all on that point.
Tho Chairman. Are you through, Mr. Bryan?
Mr. Bryan. Yes; unless thoro Is something
else suggested. ,
Tho Chairman. Mr, Bryan, you say that the
capital stock of corporations should be reduced
to a fair valuation of tho properties?
Mr. Bryan. Reduced on tho supposition that
it is now above.
Tho Chairman. Yes. You are aware that
undor existing law tho national government can
not control stock issues, are you not?
Mr. Bryan. That we havo no law for it?
Tho Chairman. Yes; that wo havo no law
for It. Do you think tho national, government
should pass a law controlling stock and bond
issues?
Mr. Bryan. I do.
Tho Chairman. Do you think that control
should be exercised contemporaneously with a
similar control by the respective states?
Mr. Bryan. I see no conflict.
Tho Chairman. Supposo a state should come
to one conclusion rogarding the cnpitalizatlos
of a railroad incorporated in that state but op
crating In interstate commerce, and the national
government should come to a different conclu
sion, which would control?
Mr. Bryan. I should say that each would
control within its own borders.
The Chairman. You would say, then, that
the state action would control as to purely state
commerce?
Mr. Bryan. I would say this, that the state'
action would control in tho state which acted,
but that would not prevent tho federal govern
ment from controlling outside of that state in
interstate commerce, or any other state con
trolling within its own borders.
The Chairman. Well, then, you understand
that the issue of stock and bonds is a mathe
matical expression?
Mr. Bryan. Yes.
The Chairman. So much stock and so much
bonds. Now, if tho national government says
that a stock and bond Issue shall be a certain
amount and the state says that that stock and
bond Issue shall be a different amount, which
mandate shall the state corporation follow?
Mr. Bryan. Well,! should say this, that the
federal government can take the matter up the
moment the corporation attempts to do business
outside of the state of its origin, and can fix
tho conditions upon which that state corpora
tion will be permitted to do interstate com
merce, just as we have in tho child-labor law.
You know that the trust remedy that I have ad
vocated for many years is based upon ..that very
power that a state may create a corporation
as It pleases, and be as lax as It will or a care
ful aa It will, and as long as the corporation
stays In 'the state the federal government has
nothing to do with it, but tho moment the cor
poration attempts to enter into Interstate com
merce, then the federal government is able to
take charge and say on what terms It shall en-
ter, and I not only believe in applying that doc
trine to railroads, but I believe in applying It to
our largo Industrial corporations. !
The Chairman. You realize that all state
corporations engaged In railroading are alee
engaged in Interstate commerce, dq you not?
(Continued on Pago 21)
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