"T' V V- SpSJ , T
MAY, 1917
Tk Commoner
. t
y K.
--r-
Why Railroads Demand Federal
; Incorporation
By Laurence B. Finn, Chairman Kentucky
Railroad Commission, President National Asso
ciation Railway Commissioners (1914).
Railroads generally speaking are the crea
tures of the states. Their charters declare that
they are public highways and they exercise gov
ernmental functions, being endowed with the
right of eminent domain.
Railroads, like other public highways, can be
operated in two ways.
First. By general taxation; providing a fund
to acquire the highway and collecting tolls or
taxes for proper maintenance and operation.
Second. By granting to individuals charters
which privilege them to collect sufficient tolls
from those who use the public highway to
maintain and operate the road and to pay a fair
return on the private capital, invested in the
construction of the highway. This is commonly
known as the tollvgate system which is analyg
ous to the present plan of operating railroad
companies. '
Under a joint resolution of congress a gen
eral investigation is being conducted on the
subject of railroads by a special committee of
the senate and house. Before this committee
the plans of common carriers have been dis
closed. Their paramount desire is a federal in
corporation act supposedly a general federal
statute under which all railroad corporations
shall be recreated thus surrendering their
state charters and thereby being relieved of
whatever duties or restrictions contained in the
constitutions and laws of the several states that
are not acceptable to the carriers.
The real object of the carriers in making
this demand is seldom mentioned and Jiot gen
erally known. This' article proposes to disclose
the motive.
The representatives of carriers claim that the
purpose of the plan is to be relieved of con
flicting state laws as well as the conflict, which
they allege exists between the state and federal
governments; the catch phrase coined for the
occasion being, "We live under 48 different
masters, we need only one."
ARGUMENTS OP RAILROADS
In an article of reasonable length it will bo
impossible to expose all the fallacies of rail
road representatives advanced in support of
their plan. Naturally our attention should be
directed largely to the arguments advanced by
Col. Alfred P. Thom, the eminent lawyer rep
resenting the railway executives' advisory com
mittee, which In turn represents the railroads
constituting 84 per cent of all railroad mileage
in the nation. To this affable and persuasivo gen
tleman, personally known to practically all of the
representatives and senators and departments
of the federal government, the railroads as
signed the task of presenting their plans and
pleas to the senate and house committee.
Stenographic reports of the hearings before
the joint-committee on interstate and foreign
commerce have been printed by the department
at Washington; and a synopsis of all the testi
mony given before this ttommittee has been is
sued in bulletins compiled by the railway ex
ecutives' advisory committee. From these
printed documents the plans of the carriers are
accurately obtained and form the basis for this
discussion.
To justify the demands of common carriers
for a federal incorporation act many imaginary
ills are alleged from which the carriers claim
they should be relieved. The public also are
told that car shortage, inadequate service and
facilities and lack of railroad construction are
all due to "the dual system of regulation"; and
like the patent medicine vendor, who guaran
tees his drug as a panacea for all ills, railroad
representatives offer "Federal Incorporation" as
a remedy for all complaints registered by the
general public, and a guarantee to railroad cap
italists for increased revenues and lower taxes.
From the wide spread nature of the business
conducted by railroads, together with their en
tangling alliances with banks, Insurance com
paniee and great Industrial corporations, assist
ed by a well organized press, it is witMn the
power of those who control railroad policies to
create conditions affecting the welfare of the
nation and then use the resulting effect as a
basis for demanding coveted concessions from
the public. Professor Elliott says that those
whom the carriers business affects, counting
employees, stockholders, policy holders In com
panies whose assets consist of railroad securi
ties, etc., together with other allied interests,
comprise about sixty million people. Mr. County,
vice-president of the Pennsylvania railway sys
tem estimates the number at fifty millions. In
fact 100 millions of people are vitally affected
by the conduct and business of tho railroads of
this country.
The truth is the necessity of railroads to the
happiness, convenience and commerce of tho
country has not yet been fully realized and their
relationship to tho public is frequently mis
stated. "The prosperity of the railroads and
the prosperity of tho country," said President
Wilson, "are inseparably connected." Properly
interpreted this statement is true; but, when
misconstrued, it ascribes to railroads the orig1
inators of prosperity. Prosperity does not be
gin or end with tho prosperity of common car
riers. They are simply tho thermometers regis
tering tho activity of business. High freight
rates, which create a great surplus for railroads,
do not create, prosperity for the nation. Tho
exchange of commodities creates business. As
this exchange is performed through the service
of railroads, the railroads' business measures
the prosperity of the country.
FOUNDATIONS OF PROSPERITY
The source and origin of prosperity should
always be kept in mind. Like all things con
structed it must have a foundation and no
structure is complete without a superstructure.
The toiling masses are the foundation of pros
perity. Capital assembled or concentrated in
the development of enterprises is the super
structure. Capital and labor both have their
proper services to perform, and if properly ap
plied work together for the good of all mankind;
but a wise builder considers first tho foundation.
Labor, the foundation of prosperity, produces
the commodities. By the exchange of these com
modities labor receives its reward. Any un
necessary burden placed upon tho exchange de
prives labor of its just reward and destroys the
foundation of prosperity.
The functions of railroads are of such public
necessity and prime importance that business
adversity, labor disputes, strikes, wars and
famines should no more retard the wheels of
transportation than should such calamities re
tard the wheels of the government.
A very subtle argument was made by Col.
Alfred P. Thom before the senate and house
committees:
"The first consideration of the public," said
he, "is to obtain transportation facilities. What
the cost is, is in reality a secondary considera
tion. This is illustrated by the sentiment of
the country last summer when it was menaced
by the prospect of an entire suspension of
transportation when business men would have
been willing to pay almost anything to get
their goods to market."
Thus the railroad representatives would have
the public consider the cost paid for transporta
tion from the same standpoint that a drowning
man would estimate the price of a floating log.
Upon such an occasion the value of the log
could not be estimated; but tho circumstance
should neither fix the customary price for logs,
nor necessitate the conclusion that the cost of
lumber was of no consequence to the public.
But If the carriers can once Impress the pub
lic that transportation charges are of no con
sequence to the public they have won their cue.
In fact a few large shippers declare that the
freight rate is of no consequence to -4hem so
long as they are placed upon an equality with
(Mr oomUtorj frit Umt t mUk U
ttslea from Um broader etaadpelmt ft Um Le
gerested publie. A Urge majority t tke fuekfe
neither owm railroad securities mcr coatraet di
rectly for transporutiom; yet their Utereet 1
freight rates is the all important feature coin
nected with this great question.
The publio bays from some one who pays the
freight. The public sells to some one who pays
the freight. When the public buys from the
man who pays the freight, the freight is
added; whon the public sells to the man who
pays the freight, the freight is deducted. While
the freight rato is small when itomlzed into in
dividual contributions, it must be romomborcd
that 100 million people aro contributing tholr
mite to tho success of various Industries and
publio undertakings and unless theso mites are
justily distributed tho stream of wealth will be
diverted from its natural flow. Tho coffors of
somo industries will ovorflow while others will
bo empty. As drops of water make tho ocean
so do theao mites contributed by millions of
people creato a sea of wealth and tho incqul-'
able distribution of profits is the source of all
our economic ills. Just prior to tho European
war railroad securities had absorbed almost
one-sixth of tho accumulated wealth of tho na
tion. CONFLICTING LAWS
Characteristic of tho inaccurate information
upon which tho public 1 aBked to mako up its
mind on transportation problems, I quoto an
extract from an article in tho Reviews of Re
views, of September, 1914, written by Mr. Han
rington Emerson. Tho editor of tho Rovlow of
Roviows qualifies Mr. Emerson as authority on
tho subject, by stating that "his convictions
concerning tho possibility of olllclent organiza
tion of railroad operations have been given the
Widest publicity by Mr. Brandies (Now Justice
Brandeis of tho supremo court of tho United'
States).
"Tho question as to tho necessity or desir
ability of all tho Hood of restrictive measures
that have become laws is not involved. The
burden remains. It adds to tho expenses when
locomotives can not cross a state lino or when
tho equipment of a passenger car differs In ovory
state through which tho car runs. These mul
titudinous restrictions have tho same general
effect upon railroad finances that tho hookworm
parasite has on human beings. Ono hookworm
would not count, a hundred thousand aro de
pleting." As chairman of tho committee on stato and
federal legislation of the national association of
railway commissioners I have concluded a thor
' ough Investigation of all the stato laws relating
to transportation companies, and such a condi
tion as is assumed by the statement of Mr. Em-
erson does not exist. In fact the supremo court
of the United States In the case of
the South Covington Street and Cincinnati
Street Railway Company, plaintiffs In er
ror, against the city of Covington, decided
January 5th, 1915, expressly enunciates prin
ciples positivelyprohibitlng such a condition as
is described by Mr. Emerson. Note this extract
from the opinion In speaking of a city ordinance
attempting to regulate tho equipment of a street
car company which served both Cincinnati, Ohio,
and Covington, Kentucky.
"If Covington can regulate these matters Cin
cinnati certainly can and interstate business
might bo impeded by conflicting and varying
regulations in this respect with which it might
be impossible to comply. On one side of tho
river one set of regulations might be enforced
and on the other side quite a different set and
Doth seeking to control a practically continuous
movement of cars." As was said In Hall vs.
Decuir, 95 U. S., 485: "Commerce can not
flourish in the midst of such embarrassments."
As the supreme court has held that state laws
can not interfere with interstate commerce by
unreasonable rules relating to the physical
equipment of transportation companies; so tho
phantom, "that locomotives can not cross state
lines" and that "passenger coaches differ in
every state through which the car runs," van-
ishes.
We will next investigate to what extent state
regulation of rates affects the revenues of car
riers. STATE REGULATION OF INTRASTATE RATE
It must be borne in mind that the rates, subt
ject to the unrestricted regulation of the several
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