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States circuit court of the district of Iowa, the following opinion is expressed:
As our railroad system is made up of links, supplied under the authority of the several States, it may admit of doubt, in our present knowledge, whether a power in a State thus limited can be beneficially exercised; but this is a legislative problem, and not a judicial question.
The following views upon this subject were expressed by the railroad commissioners of the State of Wisconsin in their annual report for the year 1874:
It is clear to us that no satisfactory solution of the question of railway obligations to the public can be attained without a more intelligible basis of estimate than has hitherto been ascertained of the exact relations of these companies to those portions of their lines lying without the State.
This subject presents great and apparent difficulties of various kinds, and it points to a line of thought and of investigation which should command the attention of railroad commissioners, of legislators, and of others whose attention is in any way called to it. Perhaps the most important function of railroad commissioners at the present time is that of affording accurate information in regard to the relation of the railroads to the agricultural, manufacturing, and other interests of the States, and to the interests of the great commercial and manufacturing cities.
When all the more important facts of public interests in relation to railroad transportation in the United States shall have been collected and clearly presented, it may be confidently expected that there will be an end to such mistakes as have been made during the last ten years, and that so far as may be needful there will be judicious legislation tending to promote the interests both of the public and the railroad companies. It is to be hoped that through the adoption of uniform methods of collecting and presenting facts, the boards of rail. road commissioners of the several States will attain their highest possible degree of efficiency and usefulness.
THE REGULATION OF RAIL-RATES THROUGII THE COM
PETITION OF WATER-LINES.
The question as to the regulation of rail-rates through the competition of water-lines having been treated of very fully in the report of the Senate Committee on Transportation, (Report No. 307, Forty-third Con. gress, first session,) it is unnecessary to add much more in this report to what has been presented in other connections in regard to the competitive influence exerted by the great water-lines of the country.
The influence of the water-lines is most effective between points situated immediately upon them. At points remote from such lines their regulating influence is much less felt. The regulating influence of water-lines is also limited by the nature of the commodities transported. Heavy freights, which must be carried at the lowest possible rates, seek
the cheap water-lines. If the railroads compete at all for the carriage of such freights, they must do so at the same rates charged upon the water-lines. But with respect to a large class of the more valuable freights, and especially that class known as “express freights,” the reg. ulating influence of the water-lines is much less felt, rapid transit being a consideration of greater importance than the mere question of the rate charged.
The regulating influence of the water-lines appears, therefore, to be confined mainly to the mineral and agricultural products of the country, and to those commodities transported in large quantities, constituting the necessaries of life, commodities which are usually grouped in those classes of freights known as "fourth class” and “special."
As we have already seen, a large proportion of the internal commerce of the country is now carried on by direct transportion from points of shipment to points of destination and upon all-rail lines which do not come into direct competition with the water-lines. Still, as we have seen, the water-lines, with respect to a large portion of the internal commerce of the country, exercise a salutary, restraining influence over the rates charged for the transporation of large classes of commodities which are seldom, if ever, transported upon them, the mere possibility of competition upon a water-line or upon an indirect line formed by a water-line and a connecting railroad operating as a limit to the rates which can be charged upon the direct rail-lines.
These considerations emphasize the importance of providing such aids to navigation, and of making such improvements of interior waterlines, as may be proved to be of value with respect to the internal commerce of the United States.
In addition to what has already been said, this subject may be dis. missed with a few remarks in regard to the two great interior waterlines of the country. The results of direct competition between the railroads and the northern water-line are clearly presented in charts Nos. 1, 2, and 3 at the end of this report, and have herein before been fully described.
It is not possible to indicate the regulating power of the Mississippi River and its navigable tributaries over rail-rates in the definite manner in which the influence of the northern water-line has been exhibited. Only facts of a general nature can be presented upon this subject. All the railroads south of the Ohio River frame their freight-tariffs to competing points with special reference to the competition of the Ohio and Mississippi Rivers. The rail rates between Louisville and Cincinnati and points below, on the Ohio and Mississippi Rivers, fluctuate according to the stage of navigation on these rivers. When the rivers fall so low that navigation ceases, the rates are increased, and when the river rises to a stage favorable for the passage of boats and barges of the larger class the rates correspondingly fall.
It is difficult to estimate the possible effect of the competition of the
water-line formed by the Mississippi River, the Gulf of Mexico, and the Atlantic Ocean, toward regulating or limiting rates on the direct rail. lines between Saint Louis and the Atlantic seaports. This is evident from the following considerations:
First. About eighty-five per cent. of the grain and flour shipped East from Saint Louis is destined to interior points, and only about fifteen per cent. to Atlantic seaports. The competition or restraining influence of the southern water-line over rail-rates froin Saint Louis toward the East is limited almost entirely to the shipment of grain and flour to Atlantic seaports for local consumption and for shipment thence to foreign countries.
Second. The tonnage of cargoes arriving at New Orleans being very much less than the out-bound tonnage, the principal part of the receipts of the round voyage of vessels trading at New Orleans is derived from freights on cotton, a commodity which yields more profitable rates than can possibly be obtained for the carriage of grain.
Third. The time required to transport freights from Saint Louis to Atlantic seaports by the way of New Orleans is usually about four times as long as the time required in the direct movement by rail.
Notwithstanding these limitations to the regulating influence of rates by water from Saint Louis to Atlantic seaports, vessels may occasionally be chartered at New Orleans for the transportation of freights to northern ports and to ports in Europe at very low rates. In case no other freight can be secured it is found more profitable to take a cargo of grain even at a very low rate than to depart in ballast. In such cases grain may be transported very cheaply from Saint Louis to the Atlantic seaboard by water. This marks the very important distinction between a regular and a sporadic movement of commerce. The rates occasion. ally obtained via New Orleans cannot, therefore, be compared with the rates on the direct all-rail lines to the east from Saint Louis, volume of traffic and regularity of movement being very important conditions toward securing cheap transportation.
These and other circumstances, hopefully of a temporary nature, have tended to repress the natural advantages of the New Orleans route. The events of the late war, the disrupted commercial relations at that port, and the obstructions to navigation at the mouth of the Mississippi River have for several years dwarfed its possibilities as a great shipping port. The lack of railroads connecting New Orleans with the railway system east and west of the Mississippi River has also had a depressing effect upon the commerce of that city, especially in view of the fact that rival commercial centers have secured such connections. The rapidly approaching completion of the improvements of the mouth of the Mississippi River, now an assured success, the construction of railroads into the interior, and the re-establishment of commercial intercourse will undoubtedly tend to attract shipping to New Orleans, for the purpose of engaging in the carriage of the cereal products of the West to foreign markets.
From its geographical position the city of New Orleans possesses singular advantages for trade with the West Indies, Mexico and Central and South America; countries to which is exported from the United States a large amount of breadstuffs and provisions, and with which our commerce is steadily increasing. Already New Orleans has a considerable and growing commerce with these countries, and it appears probable that it is to this trade, more than to a grain-trade with the countries of Europe, that she must look for an apbuilding of her commercial interests. The increase of the trade of New Orleans with foreign countries, and the consequent reduction of rates on the ocean, will also tend to exert a regulating influence over the rates which may be charged on the truuk lines connecting the West with the seaboard.
THE REGULATION OF RAILROADS THROUGH THE COMPETITION OF ONE OR MORE RAILROADS OWNED AND CONTROLLED BY THE NATIONAL GOVERNMENT OR BY STATES OR CITIES.
The experiment of State railroads was made in this country at an early period in the history of railroad enterprises, but the roads thus constructed were subsequently sold or otherwise placed under the control of private corporations.
In almost every country the government has aided the construction of railroads by private corporations, but the experiment of governmental ownership and management of railroads has thus far been confined chiefly to Belgium and the German states. It has been found in these countries that the plan of governmental ownership and management can only succeed where the power exercised by the government through competition is so great as to operate as an effectual restraint upon all the principal lines constructed by private companies. The government must therefore obtain control of all the lines connecting the chief commercial centers. Where the competition of governmental lines is supplemented by laws restraining discriminations, the private lines are virtually placed under the absolute control of the government. The natural tendency of this system is toward the absolute ownership by the government of all the roads.
It was soon realized both in England and in the United States that private enterprise was generally equal to the demands for railway construction. In both countries the unbounded faith reposed in the possibilities of individual effort and a repugnance to embarking the government in enterprises competing directly with the industrial operations of the people, naturally led to the system of independent corporate ownership, with its gigantic energies and its manifest faults, and the line of public policy which is the expression of these sentiments has been departed from only by the stress of apparent and clearly defined public necessities.
A few efforts have been made in this country toward the ownership and control of railroads by the State. The State of Michigan as early as the year 1837 entered upon the construction of roads under the management of commissioners, but during the years 1846 and 1847 the roads thus built were sold and passed under the control of private corporations.
The Western and Atlantic Railroad of Georgia was constructed by that State, and it is stated that while operated by the State it yielded a large net revenue. It is now leased for a term of years to a company which pays the State $25,000 per month and keeps the road and rollingstock in repair. The company has complied with the terms of the law, and it is believed it has also realized a handsome profit beyond the amount paid to the State. This road is 132 miles in length and is almost wholly dependent upon through traffic.
Two or three other efforts toward the construction and management of railroads by the State have subsequently been abandoned.
During the early part of the year 1873, while the public mind was in a somewhat excited condition with respect to the results of the growth of the railroad power and the demand for cheap transportation was heard in all parts of the country, the railroad commissioners of Massachusetts proposed that the State should, by purchase of several connecting roads, secure the ownership of a through line from Boston to Albany, and enter into the business of operating that road, with the double purpose of securing a cheap avenue of commerce between Boston and the Western States and of regulating rates on competing roads, in the manner in which the railroads of Belgium are regulated through the competition of the state roads. The State of Massachusetts had expended about $14,000,000 in the construction of the Hoosac Tunnel and the short sections of road connected with the tunnel, and this great work was at that time approaching completion.
The commissioners presented their views and recommendations to the legislature in a report, exhibiting a careful study of the subject in its various economic and political aspects. But the legislature, after mature consideration, rejected the proposed plan, and placed the entire property of the State in the Troy and Greenfield Railroad, including the Hoosac Tunnel, under the control of a private corporation. This corporation is known as the Hoosac Tunnel and Western Railroad Company. Under this plan the State receives a moderate toll for the use of its lines,
Besides the aids extended by the National Government, States, coun. ties, and towns have aided largely in the construction of railroads by means of subscriptions to stock, loans, and subsidies of various kinds, but the system of free railroads has generally been allowed to work out its own development under the laws controlling its existence.