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ically changed by conformity to the exigencies of the new mode of intercommunication.

Many of the abuses and evils which have sprung up with the railroad system are traceable to the fact that railroads have never been, and perhaps in the nature of things never can become, free highways in the sense in which the term "free" applies to navigable waters and to wagon roads. When railroads were first introduced, it was supposed that they could be operated in the same manner as other public highways; but it was soon demonstrated that upon an avenue of commerce the path. way of which is no wider than the wheel of the vehicle which moves upon it, not only the road itself but the entire equipment and motive power must be placed under the control of one central organization. The peculiarities of the railroad as a public highway are based upon this mechanical feature, and to it may be directly traced almost every question wbich has arisen respecting the relations of the railroads to the public. The circumstance just alluded to gave to the railroad system certain marked characteristics of monopoly, and at an early day serious apprehensions were entertained as to the abuses which might arise in the course of the development of the system. But the popular demand for railroads at almost any cost set at rest all these fears. Some of the evils encountered have in the progress of events worked out their own cure, some have been adjusted by legislation and by the coarts, some have been corrected by the railroad companies themselves, while others remain unsettled, constituting what is termed "the rail. road problem of the day."

No attempt has ever been made either in the United States or in Great Britain toward the adoption of a general policy of railway construction, and the result is that railroads have been located and constructed with little regard to the public interests, except as those interests have been in harmony with the interests of the companies. In many cases two railroads have been built between the same points, where one road could have done all the business at much less cost. Competition in railroad construction and management has, however, from the beginning, enjoyed the largest liberty, and public sentiment bas sustained this policy, in the belief that it was better to allow the system to work out its own destiny under the stimulus of individual enterprise than to attempt to place it under the control of the State. The genius of our governmental institutions has also prompted to this course.

The exploits which have characterized railway financiering from the beginning to the present time, perhaps present the most extraordinary spectacle in the history of railroad construction. Among the methods pursued may be mentioned: First. Corrupt contracts with corporations for the construction of the roads, the parties forming such contracts with the railway corporations being officers of the railroad companies or persons acting in their interest. Such contracts were evidently in

direct conflict with good morals and with established principles of law. Second. The fraudulent purchase of branch roads, the managers of the trunk-lines being interested in such transactions. Third. The manage ment of railroad interests in such manner as alternately to raise and lower the value of stocks and bonds for speculative purposes. Fourth. Misrepresentations in the published statements of receipts and expenditures of roads. Fifth. The granting to individuals the privilege of engaging in certain branches of traffic, by which means the profits of railroads have been diverted from their stockholders. Sixth. The issu. ing of railroad-bonds upon the faith of fictitious subscription to stock. This practice was quite common during the flood-tide of railway speculations.

In some of the States railroads have been built almost exclusively from the proceeds of bonds sold at a large discount. Owing, however, to the

pid increase of wealth and population in some of the Western States many railroads, constructed even ouder such an abnormal mode of financiering, have become profitable to their stockholders. The very success of enterprises of this character tended for a while to demoralize the public mind respecting the construction of railroads in this country. But the exposure from time to time of these schemes and the frequent collapse of inflated values eventually put a stop to such ventures. The hope may be indulged that hereafter the railroad system of the country will be extended upon sound commercial and financial principles, and that it will keep pace with the legitimate development of the resources of the country.

The granting of railroad charters and other legislation in behalf of railroads have been marked by blunders and abuses which form a discreditable record in the history of railroad construction both in England and in the United States. The manifest advantages to be gained from railroad construction and the force of public opinion strongly in favor of the companies for many years impelled legislators to extend to them extraordinary privileges, subsidies, and immunities.

The popular sentiment which impelled the National Government to make large contributions in aid of the construction of railroads in the Western States and Territories also led several of the States to pursue a similar policy with respect to railroads projected within their territorial limits. The plan of granting direct aid to railroads by subscriptions to their stock, and by guarantees of their bonds, prevailed quite extensively in the Western States during the period of wild and reckless railroad adventures. Serious mistakes were made in the man. ner of granting sach aids. In some of the Western States, counties, towns, and cities were empowered to subscribe to the stock of projected roads and to become guarantors of their securities. In the State of Wisconsin the people authorized towns and counties to issue their bonds, secured by mortgages upon lands, the owners of the lands taking in exchange for such securities the stock of the projected railroads.

At that time railroad projectors were regarded almost as public benefactors, and an enterprising but incautious people, actuated solely by the motive of developing the resources of their new-found western homes, paid little attention to the possible consequences of the obligations which they assumed for the sake of securing the advantages of railroad transportation. The proceeds from the various forms of aid extended to railroads in the Western States were largely squandered or misappropriated, and there appears to be little doubt that a very large proportion of the funds realized from the various forms of aid found its way into the pockets of dishonest railroad financiers. A large number of the roads ultimately became bankrupt, entailing heavy losses upon the people who had contributed toward their construction.

But whatever may have been the mistakes and abuses which have marked the construction of railroads in the United States, it is evident that the system has been the instrumentality through which a vast territory has been developed and through which grand achievements have been made in material prosperity and greatness. The progress of the railroad system has been a contest between opposing forces. Many victims have been left upon the field of battle, but, a great victory has been won.


Cnjust discriminations and exorbitant freight charges were the immediate cause of the popular uprising against railroad management in the Western States. It is evident that certain discriminations must be made in railway charges, from the fact that no common measure of the value of the services rendered by railroads can be devised. The unit of measure most frequently referred to in theoretical discussions is the cost of transporting one ton of freight one mile ; but this unit, as we bare seen, is inapplicable to the cost of transporting freights under the almost infinite variety of circumstances which present themselves.

The service rendered by railroad companies as transporters of many kinds of commodities, especially those shipped in single packages and requiring much care and personal service, cannot be estimated by weight, nor is distance in such cases a criterion of cost. In many cases the cost of hauling freight bears but a small proportion to the total cost of receiving it from the shipper, holding it in warehouse, and delivering it to the consignee; and especially is this true in regard to commodities transported short distances. Discriminations, or differences in the rate of charges with respect to the conditions of weight or distance, may there. fore be regarded as proper, if the rates charged are not out of proportion to the actual value of the services rendered.

The discrimination known as the “ classification of freights” is based upon several conditions, among which may be mentioned, differences in the cost of transporting different commodities, the value of different commodities, quantity moved of one kind, the coinpetitive influence of

rival transportation lines, and the effect of the competition of rival mar. kets upon traffic in different articles of merchandise. A consideration of these facts clearly indicates that the question as to whether discrimi. nations are just or unjust is an exceedingly complex one. Not only is it difficult to decide in special cases, but it is also a very difficult matter to formulate general rules upon the subject. The question is not an absolute but a relative one, the relationships presenting themselves under an almost infinite variety of circumstances.

Discriminations in rates exist upon all free highways where competition prevails among common carriers, and frequently in quite as marked a degree as on railroads. Discriminations in opposition to the commonlaw rule which forbids the charging of different rates for the transportation of commodities under similar conditions are evidently unjust. In practice, however, the cases in which the conditions may be said to be quite similar are comparatively few, while the cases in which they are unlike are many.

Instances may be adduced in which railroad companies charge a greater rate for hauling commodities over a part than over the entire length of their roads. In many cases this practice is unjustifiable, but it is susceptible of proof that oftentimes the actual cost to a company of hauling freight between intermediate points on a railroad is greater than the cost of hauling it over the entire length of the road. This has already been explained in the section of this report entitled “The Economy of Transport by Rail."

The charging of lower rates for the transportation of merchandise for one shipper than for another constitutes a most irritating and flagrant class of discriminations. This practice is calculated to destroy the vital principle of competition in trade and to paralyze commercial enterprise. No partiality should be extended to one shipper over another, except upon well-defined economic considerations touching the quantity of merchandise transported and the actual expense incurred by the transporter in each case. But sound views of public policy touching the importance of preventing the common carrier from interfering with the freedom of trade may to'a certain extent compel equal rates even in the face of certain acknowledged economic principles.

As we have already seen, the cost of transportation is greatly affected by the quantity of freight transported; yet it would be utterly impracticable to change rates continually, according to the fluctuations in the amount of traffic. In an agricultural country the fluctuations in the quantity of freights at different seasons of the year are very great. The establishment of rates appears therefore to be a question of general averages, rather than of special adjustments in order to meet all the exigencies of commerce.

For several years railroads have discriminated to such an extent against the commercial and industrial enterprises of certain cities in this country that fears bave been entertained of the practicald confiscation of hundreds of millions of capital invested in productive enterprises. Such a result is not only to be deprecated, but, if possible, to be prevented. If such destruction of values should be brought about either by the voluntary or the involuntary action of railroad managers, a doubt might arise in the public mind as to the security of property in all commercial cities.

It is exceedingly difficult to draw any definite line of distinction be. tween just and unjust discriminations, under the almost infinite variety of forms in which they present themselves. No particular charge for transporting freight can be proved to be absolutely equitable in comparison with any other freight-charge. There are all degrees of discrimination, from those which command general approval to those which are most irritating and most detrimental to the interests of producers, of consumers, and of merchants. A railroad commissioner of a western State, being asked why he did not in his annual report present a few marked instances of unjust discriminations, replied that to have done so would have been an unjust discrimination against the roads named, as all the roads discriminate in such manner and to such extent as their interests appear to require.

It is to be regretted that railroad managers should have failed to unite their efforts with those of railroad commissioners in endeavoring to ascertain through scientific and practical investigations such facts as may be useful in formulating rules for determining the distinctions between just and unjust discriminations.

The limits of this report will not admit of an elaborate treatise upon this difficult and complicated subject. A partial and imperfect view may, however, be afforded through one or two practical illustrations having a special bearing upon through traffic between the East and the West. The striking differences which exist between local and through rates are well illustrated by the following schedule showing the rates which prevailed in October, 1876, for the transportation of corn from various points to Baltimore, Md. This schedule was prepared by Mr. George U. P. Porter, secretary of the board of Trade of Baltimore, Md.

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Hanover, Pa.
Smithsbargh, Ma.
Summit, Va
Harrisonburgh, Va

840 780 716 6681 135 125 50 86 77 63 100 181

17 14 17 17 113 12 16 12} 16 18

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