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cluding the compensation paid to officers, agents, and employees of the company. 3. The amount of stock and bonds issued, the price at which they were sold, and the disposition made of the funds from said sale. 4. The amount and value of commodities transported during the year, as nearly as the same can be ascertained.

8. Though the existence of the Federal power to regulate commerce to the extent maintained in this report, is believed to be essential to the maintenance of perfect equality among the States as to commercial rights; to the prevention of unjust and invidious distinctions which local jealousies or interests might be disposed to introduce, to the proper restraints of consolidated corporate power, and to the correction of many of its existing evils, your committee are unanimously of the opinion that the problem of cheap transportation is to be solved through competition, as hereinafter stated, rather than by direct congressional regulation of existing lines.

9. Competition, which is to secure and maintain cheap transportation, must embrace two essential conditions: First-It must be controlled by a power with which combination will be impossible. Second—It must operate through cheaper and more ample channels of commerce than are now provided.

10. Railway competition, when regulated by its own laws, will not effect the object; because it exists only to a very limited extent in certain localities, it is always unreliable and inefficient, and it invariably ends in combination. Hence, additional railway lines, under tho control of private corporations, will afford no substantial relief, because self-interest will inevitably lead them into combination with existing lines.

11. The only means of securing and maintaining reliable and effective competition between railways is through national or State ownership, or control of one or more lines, which, being unable to enter into combinations, will serve as regulators of other lines.

12. One or more double-track freight railways, honestly and thoroughly constructed, owned and controlled by the Government, and operated at a low rate of speed, would doubtless be able to carry at a much less cost than can be under the present system of operating fast and slow trains on the same road, and, being incapable of entering into combinations, would, no doubt, serve as a very valuable regulator of all existing railroads within the range of their influences.

13. The uniform testimony deduced from practical results in this country, and throughout the commercial world, is, that water routes, when properly located, not only afford the cheapest and best known means of transport for all heavy, bulky, and cheap commodities, but that they are also the natural competitors, and most effective regulators of railway transportation.

CHAPTER XXII.

RAILROAD LEGISLATION AND INVESTIGATION IN WISCONSIN.

RAILROAD LEGISLATION IN WISCONSIN--ABSTRACT OF THE POTTER LAW--ABSTRACT OF REPORT OF COMMISSIONERS--)

--NATURE OF THE CONTROVERSY BETWEEN THE PEOPLE AND THE RAILROADS--SELF-INTEREST OF CORPORATIONS NOT A SUFFICIENT GUARANTY AGAINST EXTORTIONS--COMPETITION TENDS TO CONSOLIDATIONEvils OF RAILWAY CONSTRUCTION AND MANAGEMENT-CAUSES OF UNDUE COST-CONSTRUCTION ON CREDIT--CORRUPT LETTING OF CONTRACTS-MISAPPROPRIATION OF LAND GRANTS-ILLINOIS LAW--SUPERVISORY DUTY OF STATES HOLDING LAND GRANTS-ILLINOIS DECISION.

ANOTHER source from which we have drawn largely, is the “First Annual Report of the Railroad Commissioners of the State of Wisconsin,” lately published.

The people of that State had been eager for railroads. To build the first road, they had mortgaged their farms to the amount of over $1,000,000, and had granted other charters in excess of the real demand, and through unbounded confidence had failed to secure their own interests by proper guaranties. They had been taught by signal experiences the power of railroad corporations over legislatures. So far from being inimical to railroads, the contrary was true. They had “suffered long and were kind," until unjust discrimination in the matter of freights roused their indignation, and hastened the favorable hearing of their complaints. The strength of the Grange made them masters of the situation; a Granger Governor, perfectly familiar with the history of the roads and with legislation, was in the executive chair. This turning of the tables resulted in the passage of what is known as the “Potter Law," by the Legislature of 1873–4. This law classified the roads, determined a tariff for fares and freights according to such classification, and affixed severe penalties to its violation. The Supreme Court of the United States liad held that the right of a company owning a road, to fix its rate or charges, was an "attribute of ownership.” The railroad companies, therefore, declared the Potter law unconstitutional, and courteously informed the Governor, through their respective presidents, of their determination to resist it. The Governor as courteously, in a “proclamation,” announced his intention to enforce it. By successive steps, the case finally reached the Supreme Court. The opinion of Chief Justice Ryan was rendered on the 15th of

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September, 1874; an injunction was granted “including all the railroads of the State," and the Wisconsin Railroad war closed in the declaration, through the President of the Chicago, Milwaukee and St. Paul Railroad Company, that, “as law-abiding citizens, the railroads would at once conform to the decision of the Court, and endeavor to obey it, in good faith, until it should be reversed by a decision of the Supreme Court of the United States, or until the law was repealed by the Legislature.”

These two reports are an education in railroading, and we commend their careful reading to every Patron who desires to secure the great ends of these exhaustive investigations. The fact that the conclusions arrived at by these two independent committees are so nearly identical, seems to give them such additional weight as to justify the large space given them in this work:

To a considerable extent, the interests of the railroad corporations and the public are in harmony; thus it is clearly for the real interest of the corporations to build good and safe roads, and upon lines that will accommodate the largest number of people and the greatest amount of traffic; and yet, practically, they not unfrequently disregard both these elements:

First, because the wisdom and foresight that should eminently characterize the management of railways are often wanting; and,

Secondly, because the managers are not unfrequently in their places for the sole purpose of promoting their own personal ends. But again, there are cases in which the interest of railway corporations and the public are opposed. For example, it is the interest of the companies to prevent the building of competing roads; to hamper and embarrass rival lines already established; to force such traffic as they are able to command over as much of their own lines respectively as possible, though it be at the expense of time and other advantage on the part of the shipper.

For all these reasons, and others that might be named, the insufficiency of self-interest on the part of companies, as a protection to the public, has been long recognized.

Again, competition is an unequal reliance, though it is so invariably applicable as a restraint in all sorts of trades, professions, and ordinary commercial enterprises, that it is not surprising how long it has misled the public and legislative bodies. It always serves as a protection where it is full and permanently maintained, as well in matters of transportation as in the case of the trades and most individual enterprises. But therein lies the difficulty. Competition implies freedom of the operator, both as to material and forces. In case of the ordinary avocations, this freedom is practically quite complete; the materials and the labor to be used can be had in the open market, and fair purchase is protected by the active interest of those who have them to sell. With regard to competition between railroad companies, this natural law is not certainly operative. There is neither freedom of means nor of forces. A road once built cannot be placed in any market the company pleases and compete for freight, as the manufacturer can compete for his raw material, or the merchant vessel for a cargo. It can only offer its facilities and bide its time. Should no rival spring up to contest the field, it can command the produce of the section of country tributary to it, on its own terms, so that it leaves barely margin of profit enough to the producer and dealer to induce production and delivery. And if, by-and-by, a rival line should be established, and the traffic should be less than equal to the carrying capacity of both, the two are almost sure, after fruitless efforts to drive each other from the field, to form a combination, agreeing either to demand equal rates, agreed upon, or to "pool" their earnings.

This point having been reached, the public have no ground of hope, except in the possibility of a falling out of the companies, and a renewal of the competition which gave origin to the compact. For the companies themselves, there seems, in most cases, to be no safety but in a still closer union, under an act of consolidation from which there is no breaking away.

The controversy, then, is irrepressible, if the reliance is upon economical laws alone; being a conflict between the necessities of society on the one hand, and the natural selfishness of strong monopolies on the other.

We will now consider other difficulties and evils of railway construction and management. To make the matter worse, the roads are often so constructed, and railway transportation so managed, as to almost compel heavy exactions on the part of the railway companies, and lead to dissatisfaction and condemnation on the part of the public. An overshadowing evil attendant upon railway construction and operation is the fact that all railway enterprise is the result of individual interest and purpose, subject to no harmonizing general control. To avoid inconvenience and losses, consequent upon discordant management, the companies themselves are impelled to consolidation by a constant law of self-interest, which the public have regarded with hostility and distrust. The result must and should be an appreciation of the fact that the true interest of the public, as well as of the corporations, lies in the direction of better organized and less discordant expenditure of energy and capital, and in the adoption of more comprehensive principles of legislation to that end. The facts ought to be realized not only that discriminations by exorbitant charges upon one locality at the expense of another, is an evil to be discouraged, but also that legislation discouraging investment by encouraging ruinous competition is equally to be deplored.

Prominent among these evils is the primary one of unwarrantable cost. A road having been built as economically as possible, no one can reasonably make complaint of charges that yield only a moderate per cent. of profit on the investment. Indeed, the public are willing that they who put their money into railways should have a very liberal profit, since it is attended with more risk than is the investment of money in many other ways. But if a road has cost

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neces

thousands of dollars per mile more than it ought, owing to want of skill and judgment on the part of the company, or if there is reason to believe that the assumed cost is not the real cost-the difference having gone into the hands of the officers, or their friends acting in the capacity of contractors or “ promoters,"—then it is natural that there should be an unwillingness to allow even a moderate per cent. on the declared cost.

Unfortunately, these mere hints of dishonest management find warrant in actual facts in all countries.

If we inquire into the causes of undue cost of railways, they will be found with but little difficulty. Prominent among them are the following: 1. Slight pecuniary interest of the managers.

. 2. Construction on credit.

It is not essential that every dollar necessary to build a road should be in bank before the work of construction begins; if it were, few roads in a region of country like ours, where there is but little spare capital, would be built. A reasonable amount of credit is legitimate, indeed often absolutely essential; but since the use of it adds greatly to the cost of building, it should in all cases be employed as sparingly as possible.

3. Injudicious location of lines.

This particular cause of undue cost will be best appreciated by skillful engineers, who cannot have failed to note how very often lines of railway are made to cost much more than was sary by careless surveys. But one need not be more than an ordinary engineer, or even a professional engineer at all, to detect expensive blunders of this sort on every hand-blunders which not only occasion a large increase in the cost of construction, but also a permanent extra expense of working.

4. Corrupt letting of contracts.

Probably the system of construction by “rings” formed inside to operate outside, for the private gain of individual officers and their friends, is, of all causes of excessive cost, the most prolific. Of course there are many railway officers too honorable to resort to measures for private advantage which involve the robbery of stockholders and creditors; but such practices are nevertheless so common as to make it somewhat doubtful whether they do not constitute the rule rather than the exception. Sometimes they are carried on by directors and officers openly, but oftener, of course, under cover. We would not be understood as branding every construction company, composed in whole or in part of officers and members of the company contracted with, as guilty of fraudulent dealings with stockholders. A construction company possesses some advantages for conducting the work of construction which a chartered railroad company does not possess—especially if many of the directors of the railway company are non-resident-and the undersigned have knowledge of some such who are believed to conduct the business of building in that way solely, because of these advantages, and wholly in the interest of the stockholders who compose the railway company. They are forced to believe, however, that the number of those who thus manage is comparatively small.