Except to meet competition in ocean rates, I do not now recall a case where lower rates were made at a water competing point, than the rates at intervening points less distant. Yet I do know where a Manager refrained from doing so only because to do it would bring on a rate war.

A case of the latter kind occurred at Peoria, where the rate was 110 per cent. of the Chicago rate, then 25 cents on grain to New York, or 274 cents per 100 pounds from Peoria to New York. On either of the direct lines this freight would not pass through any station from which a higher rate was charged, but by way of Jacksonville, Springfield and Decatur, it did so. The rate from Jacksonville was 120 per cent.,

or 30 cents per 100 pounds; from Springfield, 116 per cent., or 29 cents per 100 pounds, and from Decatur, 110 per cent., or 274 cents per 100 pounds. This freight was taken from Peoria through Jacksonville, Springfield and Decatur, to New York for 27 cents per 100 pounds, while 30 cents was being charged for like grain from Jacksonville and 28 cents from Springfield to New York.

There was much unfavorable criticism of this action at the time, but since, its validity in principle has been judicially determined and quite generally admitted; yet there are a considerable number of similar cases where like action has not been taken, evidently because of an apprehension of an unfavorable decision on the law. I have said in substance that the tendency of the law was to greatly increase the earnings of some roads and to diminish the earnings of others. To this, let me add here, that the end hoped for by some to have one uniform terminal charge and rate per ton per mile on each class of commodities over all roads, or over all roads in large blocks or sections of the country, is practically impossible, until all the roads in any section where like terminal and milege rates prevail, belong to one corporation. In that case only could it be done, as then the losses on part of a road could be made good by the profits from another part of it.

Let me explain why. The prorating of earnings, with here and there arbitraries or constructive mileage, especially between the Mississippi river and the seaboard, has practically become the rule. The increase of through traffic in through cars tends to strengthen this practice. The rule of prorating s a fountain of wealth for Trunk lines. The power of Trunk lines to enforce this prorating rule, or extend it territorially when they agree, is well nigh conceded, as by united action they can make or mar the fortunes of any road by diverting traffic to or from it.

Under this rule, from the gross earnings of each carload of freight is deducted a heavy terminal charge at New York, three cents per 100 pounds on grain, and the balance is divided among the roads in proportion to their mileage, over which the freight passed.

On account of the grea er cost of some roads, and therefore the larger fixed charges, the steep gradients and the sharp curves of others, and therefore the more expensive operation, there must necessarily be a considerable variance in the cost to roads of doing their business.

There is, however, a more potent factor than these for consideration.

Two roads may be taken, each in all respects an exact duplicate of the other, and each having a management equal in skill and ability to the other. Yet with inequality in volume, a rate may be made the same for both roads, and on this fixed rate one road will declare a large dividend, while the other will fail to meet its fixed charges and become bankrupt. It may be laid down as an axiom, that rate and rolume run together.

As the volume of traffic increases, the rate may be decreased proportionately to an unlimited extent, within the capacity of the road to do the business.

As the volume decreases, the rate must increase to or near the point of prohibition, or bankruptcy will ensue.

Fancy the business of one of our great lines falling off until there were but seven passengers and one car load of mixed freight each way daily, how far would the three cents per mile per passenger and the rates fixed by our State Commissioners for the freight, go towards paying the fixed charges and operating expenses? It would not meet one per cent of the gross liabilities of the road. Yet I am confident that every one within the sound of my voice knows of some road, some branch or side line, that is in just the condition I have described, and whose existence depends upon a total disregard of the principles of the letter of the long and short haul clause.

They are to be found in every State, mostly in new and undeveloped territory, and are the lines most essential to the development and success of the country. Such roads live by the allowance of arbitraries, in this way: Say there is a given amount of grain for shipment on such a line at a point fifteen miles from a main line road, both points being within the same rate district. Please bear in mind that all through rates are based on the prevailing rate between Chicago and New York, and are fixed a per cent. above or below the Chicago and New York rate, changing with it, and that they are, generally speaking, higher or lower, as the line increases or diminishes in length. Not from station to station, as that would be practically impossible, but by blocks or sections of country, marked off on the map as compact as possible, traffic facilities considered, as they can be made. In the case given, the point of origin of the freight and of connection with the main line being in the same block of country or rate district, the rate to New York would be the same from both places, say 30 cents per 100 pounds. Assume the whole distance 1,000 miles: by prorating, the short line would get fifteen thousandths of the gross earnings, after deducting three cents per 100 pounds for New York terminal charges. The accounting would be substantially this:

DIVISION OF EARNINGS.

Blossom Creek to New York, 5 carloads corn, 40,000 each; 200,000 lbs., @ 30c. per 100 lbs..

Less N. Y. lighterage, @ 3c. per 100 lbs..

Share of Grand Junction and Blossom Creek, fifteen thousandths of $540..

Railways, Grand Junction to N. Y.........

$600 00

60 00

$540 00

8.10

$531 90

$531.90 to be prorated among them on the basis of mileage. This division of earnings would inevitably result in the bankruptcy of the Blossom Creek road, and its management would be compelled to cease to operate and wholly abandon it, or get better terms from its main line connection, which, to save the business, would be given by the main line in the form of an "arbitrary" of, say 25 per cent. These arbitraries, where given, usually run from 20 to 33 per cent.

The account would then run thus:

DIVISION OF EARNINGS.

Blossom Creek to New York, 5 cars corn, 40,000 each, 200,000 lbs., @ 30c. per 100 lbs..

Less lighterage, etc., New York.

$600 00 60 00

Share of Grand Junction & B. C. Ry., 25 per cent..

Share of railways, Grand Junction to New York.. $405.00 for division on mileage basis.

$540 00

135 00

$405.00

The proportion of the roads from Grand Junction to New York is $93 per car, or 23 cents per 100 pounds.

If a shipper at Grand Junction should offer five car-loads of corn for New York, or a shipper from Blossom Creek should offer to haul it by wagons and put on the cars at Grand Junction five car-loads of corn for New York, and ask for a rate, the charge to him would be 30 cents per 100 pounds ($120 per car), in face of the fact that a like and contemporaneous service is being performed for the Blossom Creek road at 234 cents per 100 pounds ($93 per car), making the rate 63 cents per 100 pounds, or $27 per car less for a like and contemporaneous service.

The question naturally arises here: Why not let Blossom Creek prorate with an extra charge to be collected as back charges, or in some other way, sufficient to make up the 63 cents per 100 pounds; or, in other words, why not increase the rate from Blossom Creek to that extent? The answer is clear, the traffic will not bear the rate; the traffic would not move under it, and to increase the rate to that extent, would, in effect, be to prohibit shipment.

Then querie: if Blossom Creek is so situated that its products cannot be moved without discriminating against other points more favorably situated, does not justice to the favored ones require that it should not longer be a burden upon them, but should be cut loose from and left to its fate to drop out of the business?

A superficial view of the case would indicate the correctness of such a course, but a careful analysis will demonstrate that it would not only be unjust, but alike destructive to the interests of all. Blossom Creek is not a burden instrumental in keeping up the rates at this junction, but is one of a multitude of forces that keeps them down.

The market for the surplus bushel determines the price of the whole crop; the pig that eats that surplus bushel is kept in the rate districts of Liverpool, and if the corn to fatten him can be had one mill less from Egypt, India or the Danube, than from Grand Junction, he will not be fed on Junction corn.

Anything that will cause an increase of rate from Grand Junction, handicaps that place in the market. The decrease of the rate on Blossom Creek corn, does not increase the rate on Grand Junction corn; shut out Blossom Creek, shut out all the Blossom Creeks, and you have stopped up the numberless rivulets that furnish fully one-fourth to one-third of the volume of that class of traffic.

Having reduced the volume, the rate must necessarily be increased, and in this case it probably would be to such an extent as to prevent Grand Junction from offering corn to fatten the Liverpool pig.

Equitably, the question is not whether Blossom Creek pays too little, but does Grand Junction pay too much? Blossom Creek pays in proportion to its ability to what it gets, it is taxed on what it is worth.

Let me illustrate by figures only approximately correct, but near enough for our purpose. Bear in mind that rate must vibrate with volume. Assume that the duplicate roads referred to each have one thousand miles of road, with two passenger trains and five freight trains each way daily; that the rate on each averages three cents per mile per passenger, and one and one-half cents per ton, per mile, on freight; the gross earnings of each, $500,000 per month, one fourth of which is from passenger and three-fourths from freight traffic, and that the fixed charges and operating expenses are $500,000 per month each-that, in a word, both roads are just at par.

If the rates on one road are reduced one-half without an increase of the volume, the road on which the reduction is made will of course show a monthly deficit of $250,000. If there is a similar reduction of rates, that is, from three cents to one and one-half cents per mile per passenger, and from one and one-half cents to three-fourth of one cent per ton, per mile, for freight, with this increase of five times the volume, the gross earnings on the reduced rates would be $1,250,000 per month. There would not, however, be a proportional increase in the expenses; on the contrary, the increased expenses would not be above $825,000, which would leave the road running at a net profit of $425,000 per month, while the duplicate was suffering a loss of $250,000 per month.

Increased traffic within the capacity of a road involves practically little more than the expenses of moving the extra trains required to carry it, hence the result. To find these roads, look at the map: you will find the prototype of one in any of the trunk lines, and that of the other in any of the granger roads.

The roads of the west and northwest converge and pour their accumulated traffic on the few "Trunk Lines," massing the volume of a multitude of roads on

one.

The returning heavy masses of west-bound traffic is divided up at the trunk line termini, and at every junction point divided and sub-divided, until it is a small per cent. on the earning sheet of the far-west roads.

It can readily be seen why the trunk roads and heavy traffic lines have been enriched, and the granger roads and light lines impoverished, and the cause of the tendency to consolidation, or the absorption of the weaker by the stronger roads, with the apparent ultimate result of bringing all the roads of the country under the control of probably three, certainly not more than five corporations, which would almost of necessity be followed by direct government control of all the roads, probably resulting in a change of our form of government.

It was manifestly the purpose in carrying out the theory of the long and short haul, that all rates should be estimated in proportion to the distance, and that through rates should make the sum of the several local rates, but that is not in conformity with the practice; on the contrary, the sharp competition for through business has reduced the through rates much below the total sum of the several locals.

To illustrate, the rate may be, St. Louis to New York, twenty-nine cents, to be divided among the roads:

St. Louis to Toledo..

Toledo to New York..

Total..

$0 10 19

$0 29

While the local rates may be:

St. Louis to Toledo.

Toledo to New York..

$0.12 22

Total..

The class of freight and time of shipment being identical in both cases.

$0.34

So long as there is concurrent State and Federal control or restriction of the carrier, it seems to me difficult, if not impossible, to establish and maintain uniform rates, especially so, when it is required that the rate shall bear uniform relation to the distance of the haul under the long and short haul clause of the lawThe existence of most, if not all, interior jobbing and manufacturing interests, depends upon a special rate or advantage in rates, and the struggles of these interests to maintain themselves will prevent the securing of harmonious action, so long as there is dual power of control. If it should be determined that the policy shall not be what is the natural result of the enforcement of this provision of the law in this respect, then the spirit and purpose that preverted the application of an efficient remedy before the enactment of this law, will continue to prevent equitable uniform action under it, or any law that may be passed by Congress.

It will, I think, be seen at a glance by the members of the legal profession, that the power exists in any State Legislature, or the railway commission of any State, to practically nullify any act that may be passed by Congress.

The State exercises the power to fix rates in dollars and cents,-in other words, to define and limit receipts, and under the police power to direct disbursements, such as the erection of crossings, bridges, etc., for what is, or what is claimed to be, for the public safety. These powers for requiring expenditures, are, to a considerable extent, delegated to the local municipal authorities, which, if too freely exercised by them or the State authorities, or worse, by both at the same time, the income of the road being restricted by the rates of the commissioners, or by sharp competition, financial ruin is likely to be the result. These State powers, the power to destroy, carries with it a power to control.

It will at once be said that the power of the State to fix rates, is limited to strictly State traffic. This is true, but with a lower State rate substantially all the traffic in, or passing through a State, will at once become State traffic. For instance, if the portion of an Inter-State rate was $25 per car to Chicago, and the Illinois Commissioners for any reason should establish a rate of $12.50 per car to Chicago, in a single day all foreign shipments would cease, and the destination of every car would be Chicago. The owner, after getting it there, and saving $12.50 in freight on it, would then change his mind, and the final destination of the freight, or the ownership, could be changed with a profit of $12.50 to the original owner.

The question will be raised, would any commissioners resort to any such practice to get an undue advantage for their people over those of other States? The answer is, look at what has been done in Iowa, where the operation of the spirit and purpose of Inter-State law is being defeated, and rates put into effect giving their people an undue advantage over others, that if enforced everywhere, would amount to a confiscation of the property of the roads.

No matter how low the through rates, the commissioners, seeking the advantage, would make enough lower rates for their State to secure the control of the business.