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England and in this country for the purpose of regulating freight tariffs and tbe traffic of railroads will be briefly noticed.
(b) Specific rates.- The establishment of specific rates by the Govern ment for the transportation of freights is, perhaps, the most crude of all the propositions which have been made for the purpose of regulating freight-charges. The enforcement of such a measure would require the traffic of all railroads to be placed under the immediate supervision and control of State officers. This method would probably lead to the entire ownership and control of the railroads by the State. It is hardly necessary to present any argument for the purpose of showing that such a policy would be ruinous to the railroad interests of the country, since it would destroy the stimulus to individual enterprise. This method of regulation has been condemned by all who have carefully investigated the subject.
(e) Equal mileage-rates. This mode of regulation is subject to an objection just stated in regard to specific rates, viz, that it would involve a degree of supervision of railroad affairs detrimental alike to the railroads and to the public interests.
It has already been shown that distance alone is not a proper measure of the service performed by railroad companies. In certain cases the cost of transporting quantities in bulk and in large quantities 1,000 miles is less per ton than the cost of transporting like commodities 100 miles if carried in packages and in small quantities. If equal mileage-rates were applied to all the railroads, the effect would be to destroy competition and to sobrert the existing order of commercial enterprise. This is evident from the fact that the shortest line between any two commercial points would be able to secure all, or very nearly all, the traffic, as the lines of greater length would be unable to compete for traffic, although the longer lines might, on account of the greater magnitude of their trafic, more favorable grades, cheaper fuel, better management, or other cir. cumstances, be able to transport freights at less cost. The establishment of equal mileage rates would revolutionize the present course of commercial movements by diverting trade from commercial cities now held by virtue of the lower rates to aud from such points secured by competition and the less cost of moving large than small quantities of freight.
(d) Maxima rates.- The plan of regulating freight-charges and passenger-rates on railroads by the establishment of maxima rates is not sub. ject to the particular objections which have been mentioned in regard to specific rates and equal mileage rates, and it has been found in a few cases to be a protection against exorbitant rates. But the evils of discrimination and exorbitant rates generally lie within the limits of such maxima rates as it has yet been practicable to establish. This plan has been tried in Great Britain. The parliamentary commission of 1872 stated as their conclusions in regard to it that the rates are always fixed so high that it becomes sooner or later to the interest of the company to carry freights at less than the prescribed "maxima rates."
A few instances of the establishment of maxima rates may be aciduced in order to show how far they generally exceed the average rates charged on the trunk lines.
In Pennsylvania the companies inost restricted are allowed to charge an average of 4 cents per ton per mile. The average cost of transportation on the Pennsylvania Railroal during the year 1876 is stated in the last annual report of that company to have been only .592 of 1 cent per ton per mile. The average charges were .892 cent per ton per mile, or less than one-fourth the legal masimum rate.
The railroads of New Jersey are, by general law, authorized to charge 10 cents per ton per mile, whereas on the New Jersey division of the Pennsylvania Railroad the average cost of transportation during the year 1876 is stated to have been 1.562 cents per ton per mile. The average earnings were 1.737 cents per ton per mile, or only about onesixth the legal rate. The six leading railroads of England are allowed to charge 6 cents per ton per mile, but the average charges on those roads are very much below this limit.
The maxima rates established for passenger-fares on the New York Central and Hudson River Railway are frequently referred to as an instance of the advantages of maxima rates. The division of that road from Buffalo to Albany is limited to 2 cents per mile, and the Hudson River division is limited to 2 cents in summer and 2 cents in winter. The line of that road, however, passes through many populous towns and cities, and consequently it has a large passenger traffic, which, in connection with its enormous “through " and "local” freight traffic, enables it to carry passengers at a very low rate.
The following table exhibits the average cost and the average charge per ton per mile for the transport of freight on several lea ding roads during the year 1876:
(e) Limitations of profits on capital. This method of regulation involves very great difficulties in practice. The principal objection is that it is liable to be evaded in many ways, and in the present state of knowledge of railroad affairs there seems to be no means of preventing such evasions. In view of the risk attending investments in railroad property it is found necessary, in order to secure the construction of railroads, to set the limitations of profits on capital at a very much
higher rate than is generally realized on investments. A limitation of 10 per cent. has been adopted in England, although money is there abundant at 3 per cent. The general railroad law of the State of New York limits the profit on railroad capital to 10 per cent.
The most serious objection to limitation of profits is the fact that it tends to eliminate the strongest incentives to the economical manage. ment of those railroads upon which it is possible to earn more than the legal maximum. This is of course detrimental to the public interests, since it tends to increase the cost of transportation.
The method adopted in France of dividing all profits above a fixed limit between the railroads and the state avoids in some measure the objections to an absolute limitation of profits, but a plan of this kind would, in this country, be exceedingly unpopular, since it would cause the state to become interested in the maintenance of high rates, and practically to levy a tax upon commerce.
While it appears to be generally concedel, both in England and in the United States, that it is impolitic for the government to prescribe the rates which shall be charged on railroads, or by any line of action practicalls to assume control over the freight-traffic of railroads, unless for the correction of flagrant and manifest abuses, yet the importance of maintaining at all times a certain degree of governmental oversight over them is conceded in both countries. There is a constant tendency toward wild and reckless competition in certain directions, as the result of contests between railroads, and a corresponding increase of rates on non competitive or local traffic for the purpoes of making up the losses of mismanaged competitive traffic. This, as we have seen, may lead to such discriminations against the interests of particular cities or states as practically to work the confiscation of large amounts of property in commercial and manufacturing cities.
GOVERNMENTAL REGULATIONS ADOPTED IN THE UNITED STATES.
It is undoubtedly true that some of the expedients adopted for the regulation of railroads have been ill advised and in the face of economic principles, but the effect of such regulations is believed to have been, on the whole, salutary. In the light of experience, it is evident that the state cannot conduct the affairs of a railroad company as econom: ically or as effectively as can the managers of the road acting solely in the interests of the proprietary. This is as true as that a man's best efforts cannot be brought out so long as he acts under any sort of duress; and yet the success of civil government depends largely upon the moral influence of restraints upon personal liberty, where such restraints become necessary for the protection of personal rights or for the maintenance of public order. In this view it is believed that the results of the governmental supervision over railroads, exercised in this country and in England, bave been on the whole beneficial.
It is a much easier matter to point to the inconsistencies and defects of the particular methods adopted by states for regulating the railroads than it is to discover the full extent of the advantages which have resulted from such measures. The moral effect of public vigilance alone exerts a wholesome influence. The very crudity of some of the remedial measures adopted has, perhaps, led to the more speedy correction of abuses and to the diffusion of useful knowledge in regard to the circumstances which environ the railroad problem. Although the regulations and restraints which have been adopted may have subsequently been set aside, yet they have had their desired effect, and the people have been brought to a better understanding of the relations of the railroad to the state and to the commerce of the country. Thus, many erroneous impressions in regard to supposed acts of injustice on the part of the railroad companies have been corrected. The railroad companies have also been led to a knowledge of their responsibilities and duties to the public and to realise the limits of their power.
As reformatory measures, the acts of legislatures have in a great measure effected the purpose for which they were enacted, although not always in the way intended. In some cases the railroad companies have been forced to explain their positions and to defend themselves by furnishing information of great value. The result has been that in sereral States restraints have either been relaxed or abolished. The opinions expressed by the railroad commissioners of the State of Wisconsin upon this subject are of special interest in this connection, as in that State the experiment of railway regulations has been carried to its furthest extent. The commissioners say:
It is impracticable for the State to assume the actual management of railroads or to wisely determine the multitude of ininor questions of policy constantly arising in this department of the public service. Surely there is no apology for the exercise on the part of the State of any power over corporations which can be safely and as wisely exercised by the corporations themselves. There is no principle of American government so thoroughly or so properly established as that which limits the province of legislation at all times and under all circumstances, to enactments for the general good, and which denies to government the right or the duty of unnecessary interfer. ence with private or public enterprise.
There can be no sensible reason given why
that which has been termed the "barbarous thumb rule" should not be withdrawn as soon as the conditions are reached which would, through an enlightened public opinion created and sustained by complete business exhibits of the companies, establish mutual confidence between them and the people as to management.*
It is now quite generally conceded that laws for regulating rates are useful mainly for the prevention of exorbitant charges and unjust discriminations when the effective competition of rival lines does not exist, and for the correction of other abuses.
LEGISLATION BY CONGRESS IN REGARD TO RAILROADS AND COM
MERCE ON RAILROADS. The question as to the regulation of commerce among the States has been much discussed during the last four years. The principal
Report of Railroad Commission for 1874.
points involved in the discussion are clearly set forth in the report of the Senate Committee on Transportation, presented to Congress in the year 1874. (Senate Report No. 307, Forty-third Congress, first session, pages 79 to 109 inclusive.)
Whatever may be the limits and the scope of the power conferred apon Congress in regard to interstate commerce, that power has thus far been exercised only to a very limited extent. It is sufficient in this connection to mention the acts of Congress which relate especially to railroads and to commerce on railroads.
1. The act of July 15, 1866, authorizing railroad companies chartered by the States to carry passengers, freights, &c., on their way from one State to another State to receive compensation therefor, and to connect with railroads of other States so as to form continuous lines for trans. portation of the same to the places of destination. This act was passed at the instance of certain railroad managers.
2. The act of October 1, 1873, by which Congress declared that "no railway within the United States, whose road forms any part of a line or road over which cattle, sheep, swine, or other animals shall be conveyed from one State to another, or the owners or masters of steam, sailing, or other vessels carrying or transporting cattle, sheep, swine, or other animals, from one State to another shall confine the same in cars, boats, or vessels of any description for a longer period than twenty-eight consecutive hours, without unloading the same for water, rest, and feeding, for a period of at least five consecutive hours, unless prevented from so unloading by storm or accidental causes.” A penalty of from $100 to $500 is imposed in case of a violation of the provisions of this act.
3. That family of statutes relating to the construction of bridges across navigable rivers, and providing, among other things, that the width of the span on each side of the pivot pier of the draw shall be at least 160 feet, and that the next adjoining spans to the draw shall uot be less than 250 feet.
The opinion of the Supreme Court of the United States, as recently expressed in certain important cases known as the “Granger cases," touching the limits of the control which may be exercised over internal commerce by the States and by the National Government, may be found on page 228 of the Appendix.
ATTEMPTS MADE BY STATES TO REGULATE THE RAILROADS.
It is proposed to notice very briefly the main features of the attempts which have been made in several of the States of this country to regulate the railroads.
New York.-A board of railroad commissioners was appointed in the State of New York in the year 1855. The report made by this board clearly presented the various evils which had been developed in the railroad system, both those affecting the internal management of railroads and those connected with their relations to the public.