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Vol. XVI.
LINCOLN, NEB., APRIL 20, 1905.
No. 48
FATHER OF THE TRUSTS
Without the Aid of the Railroads,
Neither Standard Oil, the Steel
Nor Any Others Could Endure.
COMMISSIONER PROUTY SPEAKS
Seven Great Railroad Systems Rule
the Country With a Rod of Iron
and the People Are Helpless.
. "There is no monopoly which is so
insidious and all prevailing as the
railroad monopoly. There is not one
thing which enters into every article of
luxury and every article of necessity
like the railway rate.
"There is no one thing which can
take a penny from the pocket of the
poor man and put it, together with
other pennies, into the enormous
whole and deposit it to the account of
the multimillionaire as does the rail
way rate."
These words were used by Interstate
Commerce Commissioner Prouty at a
banquet given by the Union League
club. Railway legislation was the
subject'of discussion for the evening,
and Mr. PrOuty's arraignment of the
roads was sensational. Besides the
commissioner, Judge Peter S. Gross
cup of the United States circuit court
and George R. Peck, general counsel
for the Milwaukee and St. Paul rail
road, took part in the discussion. Mr.
Peck advocated the cause of the rail
roads, ' , ;
Prominent railroad men were pres
ent as guests of the club, nearly every
important system of the middle west
being represented by one or more offi
cials. .. ' i
Commissioner Prouty ,came from
New England to take a hand in the dis
cussion. , ;'
"As the president declared ' in his
message," said Mr. Prouty, "there is
no more important subject before the
American people today than this and
there is unanimity of belief that there
should be by railways no sort of dis
crimination between shippers.
"In the past the discrimination has
been mostly worked by the payment
of the rebate, and the flat of the Amer
ican people , has gone forth that the
rebate shall stop. The public demands
it. The interests of the railway equal
ly demand it. The injunction and the
Elkins bill have gone a great way to
ward accomplishing it already. There
must be amendment to the law. You
must include the private car. You must
include the . terminal railroads. You
must include the elevator.
"I think you have got to provide
some sort of a tribunal other than the
interstate commerce commission to en
force - the law. , I have sometimes
thought it might; be necessary to ap
point on the part of the government
the official who receives and disburses
the money for the railways. I believe
it to be absolutely necessary that the
books of account kept by the railroads
shall be subject to public inspection.
All that, my friends, is possible.
"When I was : in Boston the other
night discussing , this question before
the Economic club, Mr. Wilcox, who
represented the railroads on that oc-
t casion, when -I stated that, some six or
seven systems ' now control ; 120,000
.miles out of the total 200,000, asked
me what those systems were. I did
not undertake to? answer that question
then, because I did not desire to speak
until I knew thai whereof I spoke.
"I want to begin tonight by answer-
Ing that question' of Mr. Wilcox. I
want to tell you ;yhat the systems are
what the six systems are that con
trol substantially 120,000 miles of rail
way. I have had certain facts put to
gether in the office of the Interstate
commerce commission. 1 :
' "Now, to begin with, we will take
the Pennsylvania system.' It embraces
19,000 miles. In that i estimate I in
clude the Baltimore and Ohio, the Nor
folk and Western, and the Chesapeake
and Ohio. The; Baltimore and Ohio
and - the Norfolk and Western
have the same . stock ownership, and
the Chesapeake, and Ohio operates
jointly with its partner, the New York
Central. - ( J' ;
"The next is the Vanderbilt system,
and as a part of that I count the Chi
cago fcr.d Northwestern.- The Reading
and the Central of New Jersey are
owned by. the Pennsylvania and the
New York Central Jointly in the same
. way that the Chesapeake and Ohio Is.
The Vanderbilt system embraces 23,
000 miles of road. .
"Now, take the Hill system the
Burlington, Northren Pacific, and the
Great Northern, with their allied lines
and ycu have there 21,000 miles of
road.
"The Harriman system the Union
Pacifls, the Southern Pacific and the
Alton, there you have again about 15,
000 well toward 16,000 miles of rail
road. "The Gould system embraces 20,000
milts, and the Rock Island 3.4,000.
4 Now, if I have given you these fig
ures correctly, they should make a to
tal of 113,000 miles of railroad out of a
total in the United States of 205,000
miles, controlled by these six systems.
"But when I give you the mileage I
have not given you the most signifi
cant part. There are in the United
States second track, third track, and
fourth track 17,000 miles in all and
of that the New York Central and the
Pennsylvania systems alone control or
embrace 10,000' miles. The gross rev
enues, in round numbers, of all the
roads in the United States for the
year ending June 30, 1904, were $1,900,
000,000 of which these six systems had
$1,200,000,000. The capitalization of
all the railroads in the United States
is twelve billions of dollars, of which
these systems embrace eight billions
of dollars.
"So you have here, then, six sys
tems embracing 55 per cent of the sin
gle track mileage of this whole coun
try, two-thirds qf. the gross receipts
two-thirds of an actual count and al-
nost two-thirds of the gross receipts
There are certain other facts that
every student in this problem must
keep in mind along with these, and one
is the difference between industrial
monopoly and railroad monopoly.
"The typical industrial monopoly is
the Standard Oil company, and that
corporation has today almost a perfect
monopoly. But every independent re
fmery can attack it in its most vital
point. The maintenance of that mo
nopoly is only at the price of eternal
vigilance. .
"Take the United States Steel com
pany. Today it controls half the iron
output of the United States, ;and every
new furnace every mill is aiming at
the vitals of .that corporation. Unless
the United States Steel company has
some, advantage in transportation fa
cilities, or unless it can control the
raw material out of which the finished
product is made, I doubt if that corpo
ration, with all its enormous power,
can retain its monopoly. -
"Now, take the railroads today be
tween Chicago and New York. They
are built. No other trunk railroad ever
will be built to compete with them at
least in the near future. Development
will be by enlarging and developing
these same systems. ;
"The Pennsylvania system never can
fall apart. The ownership of that sys
tem may "change; the management of
that system may change, but that enor
mous system controls today one-fifth
of all the tonnage, one-fifth !0f all the
gross receipts, one-fifth of all the pas
sengers carried in the United States.
It is a system by itself forever.
There is another thing. The way in
which these combinations have been
built up mean that almost of necessity
this monopoly must increase rather
than diminish in the near 'future.
"The newspapers say the Union Pa
cifiic is to absorb the New York Cen
tral system, and that the $100,000,000
of stock which has been voted by the
Union Pacific is to be used for that
purpose. If so, one system is dropped
out, and you have five systems in the
place of six. Whoever reads the future
in the light of the past and in the light
of present conditions must understand
that the number; of railway systems
which control the railways of the
United States is only limited by the
necessities of the case. It can be made
two, or three, or four, or five, just as
may be the most convenient.
"Now, we have heard in these last
years a great deal about trusts. Now,
what is the matter with the trust?
What is the harm in a 'monopoly?
There are other evils, but the princi
pal evil is this; that it enables the
man who has the monopoly to take
from the man who requires the service
or the article he has to sell more than
a Just price."
Mr. Prouty here made his declara
tion that the railroads were the most
insidious of all the trusts, and added:
"Not only is the railway the greatest
monopoly by far of itself, but it Is the
mother of countless other-monopolies.
It is wel.l understood that an advan
tage in the railway rate means life to
one competitor and death to another
competitor, and the advantage is not
of necessity from the payment of the
rebate. There may be, and there are,
discriminations in the published sched
ule just as deadly as those which arise
out of a departure from the published
schedule. The Standard Oil company
grew and flourished on rebates In its
infancy. The boast of the Standard
Oil company today is that It takes no
rebates. It does what is better than
take rebates; it makes the schedule.
. "Mr. Rockefeller today has a potent
influence in the railroad operations of
this country. Mr. Morgan has a most
potential influence in the railroad 'ope
rations of this country. And while the
Standard Oil company may not and
does not take rebates, it enjoys advan
tages in the public schedules which
mean hundreds of thousands of dollars
I presume millions of dollars an
nually to that company.
"Now here, gentlemen, you have
the problem. You have first the great
est monopoly there is ; you have the
second the discrimination which builds
up other monopolies. Now, what is
the remedy for that? The most nat
ural thing in . the world is to say if
these combinations have produced that
sort of a monopoly Jet us stop the com
binations, let us break up the combina
tions. My friends, that is a thing you
can't do. That remedy you can't have.
You might like it, you have striven
for it in vain. You can't have it. You
must find some other remedy, or there
can be no remedy.
"When the interstate commerce com
mission was investigating the North
ern Securities merger I asked Mr. Har
riman what remedy a shipper had if
the railroad imposed upon him an un
just rate, and his answer was: 'Let
him bring suit and recover his dam
ages.' You know that kind of remedy
is no remedy at all.
"Take the rate in which this whole
western country is most interested
the grain rate. That has been ad
vanced in the last six years probably
6 cents a hundred pounds to the farm
er o Iowa. It means in the aggregate
millions of dollars. How could you ap
ply that remedy? Whose injury? Is
it the fafmer who raises that wheat
or is it the mechanic who eats it?
Who is to bring the suit? Clearly, the
man who brings the suit must be the
one who pays the freight, and the man
who pays the freight has not been in
jured. He is the middleman, who buys
and sells on the rate, whatever it may
be, and it doesn't make the slightest
difference to him what that rate may
be if it is nondiscriminating.
"No, my friends, there is one rem
edy a just remedy, a remedy ap
proved by the court and that is this:
If the rate is wrong, make that rate
right.
"And the question ndw arises, How
can you a5ply that remedy?
"Well, the courts have passed upon
that, and what the court says is this
and it is a matter of 'great importance
that you should understand it and
keep it in mind in passing in your
own minds on the legislation that is
now before the country:
" 'The function of prescribing a rate
for the future is a legislative and not
a judicial function. It must be exer
cised either by direct enactment of the
legislature, or by some commission cre
ated by the legislature for that pur
pose.' You will all see that it would be
impracticable for congress to inquire
into the remedy. The only practical
means is by the creation of a commis
sion which shall inquire into the rea
sonableness of the rate, and which, if
it finds the rate unreasonable, shall
put in its place a rate that is reason
able. '
Give Commission More Power 1
"Now, that is exactly the remedy
the president proposes. He takes the
commission which exists, he says that
commission shall be given power in
case of complaint to determine wheth
er the rate in effect is reasonable. If
not to determine what rate would be
reasonable and to order the carrier to
observe that rate for the future, with
the proper right of appeal.
"Now, what is the objection to that
remedy? The first is that you there
by take out of the hands of the rail
road company the right to manage its
own business that you are naming
prices.
"Now, I don't believe the legislature
can name the price of a commodity,
and-1 want you distinctly, to observe
that when the legislature or when the
commission names a railroad rate it
does not name the prices of com
modity. It simply compels the rail
road company to carry out the con
tract by specific performance In which .
it has entered with the public.
"When the government gives me the
right as a railroad corporation to take
your land against your will, to create
a monopoly which you must patronize,
it lets me do that on this condition a
good condition that I shall render
you the service of transportation for a
reasonable rate.
"The supreme court of the United
States has said that is the implied con
dition on which every railroad charter
is granted. Now, if you and I can't
agree about the price of your land
when I take it, what is done? Why,
we leave that to a disinterested tribu
nal, don't we? The railroad rate is
not a commodity which Is bought and
sold. It is a public service which is
rendered by a public servant, and the
public may in self-defense compel the
railroad to carry out the contract into
which It entered when It obtained this
charter to build its railroad. v
"They tell you In the. next place
that there Isn't any need of any law.
They say these men who manage our
railroads all are public spirited Chris
tian gentlemen. They won't impose on
people in any extravagant rate. A
man said to me the other day: 'Do you
suppose a man like Marvin Hughitt
would extort or oppress?' And I said:
'No, sir, I don't. , From all I know of
him I don't think there 13 a man who
would be less likely to extort or op
press than Marvin Hughitt'
"Isn't John D. Rockefeller a good
man? Do you know of 'any sheriff that
is looking for him under an indictment
for any offense? Doesn't he lead a
class In the Sunday school? Doesn't
his heart warm to the heathen; Just
now especially?
"Is all that any reason why you
should not pass laws if you can de
vise them which will prevent the ex
acting of the monopoly which he in
vented and has perpetuated?
"Tfyen. they tell you this attempt to
fix a 'railway rate is paternalism. So
far. as I can understand It, paternal
ism, as applied to this thing, means
any sort of legislation which Is In
tended to prevent a monopolist from
stealing all there is and keeping all
he can steal.
"What is the function of a govern
ment? I say the function of a govern
ment is to give every man a fair
chance. So long as my brother, if
he owns the railroads in this country,
can impose on me whatever rate he
sees fit, there is no such thing as a
fair chance. The freight rate is the
life blood of commercial activity, and
this government has no higher func
tion than to remove every taint from
that vital fluid. -' ;
"Then, : they say, this plan won't ;
work because of the Incompetency of
the interstate commerce commission.
Now, if by that you mean that the
present members of the interstate com
merce commission are incompetent I
admit it. And the president has said
he is going to remove them and put
somebody in their place who is com
petent, when we have the new law. If
you mean it is impossible to select five
men or seven men who can understand
the question I deny it. It is to me an
absurdity that a board of men selected
for that purpose, hearing those ques
tions continually in all parts of this
coutnry, should not be able to under
stand and Intelligently decide the
questions which come before it.
"There is just one other idea and I
am done. I expect railroad net re
ceipts are going to fall, off this year.
Gross , receipts are increasing, but .
there is one Item of "operating ex
penses which is usually large, and that
Is the item known, as legislative ex
penses. : They are heavy this year.
"The railroads are sending out to all
parts of this country tons of literature
tables showing the amount of the
holdings of savings banks, trust com
panies, insurance companies, and such
like In railroad securities. Now, what
does that mean? It means that If the
Interstate commerce commission had
the power to fix a rate it would make
that rate so low as; to impair the
value of those securities. But so long
as the j constitution of the United
States stands and the supreme court
does its duty it Is not possible for the
commission or for congress to reduce 1
rates to a point which will impair the
value of those securities.
"But I want to ask you as sensible
business men whether you would ex