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that it is firmly based upon the American common law of experience, and that it does not in the slightest degree impinge upon that freedom of commercial intercourse which is the outcome of commercial struggle and interaction, with which the National Government has never interfered. I have also sought to show to you how strangely this beneficent act contrasts with that idealistic attempt of the Interstate Commerce Commission to acquire autocratic control of the commercial and transportation interests of this country, an attempt which in the maximum-rate case caused the Supreme Court of the United States to exclaim, "Could anything be more absurd!" and again to suggest that the Interstate Commerce Commission seemed "to evolve, as it were, out of its own consciousness, the satisfactory solution of the difficult problem of just and reasonable rates for all the various roads in the country."

THE IMPORTANCE OF A THOROUGH CONGRESSIONAL INVESTIGATION OF THE WHOLE TRANSPORTATION QUESTION.

Mr. Chairman, I would fall very far behind my object at this time if I should fail to submit to you some considerations in favor of a thorough investigation of the whole transportation question in its varied and vitally important aspects.

The many vitally important questions which confront the country, touching any attempt at a radical change in our laws relative to the regulation of the railroads, seem to point unerringly to the necessity for a thorough Congressional investigation of the subject in advance of any attempt to legislate upon it. In this we may profit very much from the example set by the people of Great Britain.

As early as the year 1840 questions arising out of the independent corporate ownership and control of the railroads agitated the public mind in Great Britain. The old British ideas of liberty involved in the consideration of monopoly, competition, and combination, which from time immemorial had been the subject of heated public discussion and of reflective judicial debate, gave rise to just such apprehensions and political theorizing as those which now seriously affect public sentiment in the United States. A British statesman of influence declared at an early date that the state must govern the railroads, or the railroads would govern the state." George Stephenson, eminent as a civil engineer, declared that "where combination is possible competition is impossible. These expressions were for years accepted in Great Britain as politico-economic dogmas, but have ceased to have any influence whatever upon the public mind in that country.

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In the year 1844 a strong parliamentary committee was appointed for the purpose of inquiring into and providing against the assumed danger. The Hon. William E. Gladstone was chairman of that committee. Its labor resulted in an act of Parliament (Acts 7 and 8 Victoria, c. 85) passed in the year 1844, wherein it was provided that the Government might, upon terms stated in the act, at the expiration of fifteen years after completion, purchase any railroad constructed after the passage of the act. In a word, the British Parliament provided, conditionally, for governmental ownership and control of the railroads. But that power has never been exercised, and the public sentiment of Great Britain to-day utterly repudiates any such policy. This has come about as the result of the lessons of experience and of patient

and persistent parliamentary inquiry, reference being had particularly to the parliamentary investigations of 1840, 1844, 1846, 1852, 1865, 1867, 1872, 1881, 1888, and 1893-94. The results of these ten parliamentary inquiries were that the asserted dogmas herein before quoted have been exploded, while other baseless notions such as those which now to a greater or less degree possess the public mind in this country have been dispelled; and the ancient principles of liberty and methods of justice still prevail in the regulation of the railroads of Great Britain. In this regard railroad regulation in that country strikingly illustrates the favorite British maxim, "We have government by discussion."

But how different has been the practice in this country. With an area-exclusive of Alaska and our insular possessions-twenty-fivetimes that of Great Britain and Ireland, and a railroad mileage of 192,161 miles, as against 22,000 miles in Great Britain, we have had only one thorough Congressional investigation, namely, that conducted in the year 1886 by the Senate Committee on Interstate Commerce. The act to regulate commerce, drawn by Senator Cullom, chairman of that committee, is loyal to the fundamental American principle of government that all contested questions affecting the commercial interests of the country shall be subjected to the test of judicial inquiry and determination. But the populistic proposition confronts the country in favor of eliminating the courts from this domain of justice, and in lieu thereof of substituting an autocratic rule of administrative authority without any Congressional investigation whatsoever.

There are also other and exceedingly important questions which demand Congressional investigation and public scrutiny in the light of such inquiry. Some of these questions are more important than those determined by the Senate investigation of 1886.

The magnitude and importance of the commercial, financial, and industrial interests involved repel the very idea of any radical legislation in advance of such inquiry as that here suggested.

Beyond all doubt a thorough Congressional investigation of the various commercial, economic, and political questions involved in the general subject of railroad regulation in this country would develop results quite as salutary as those realized in Great Britain. It may also be stated in favor of such action that the two committees of Congress as at present constituted are admirably fitted for such inquiry.

In his recent annual message to Congress President Roosevelt referred to the railroads as "the arteries through which the commercial lifeblood of this nation flows," and in urging the importance of investigation said: "The whole history of the world shows that legislation will generally be both unwise and ineffective unless undertaken after calm inquiry and with sober self-restraint."

SENATOR DOLLIVER'S INQUIRY.

In the course of my hearing before this committee on June 6, Senator Dolliver, of Iowa, propounded to me the following question: "WILL NOT THE COMBINATION OF LINES EVENTUALLY GIVE THE RAILROADS SUCH CONTROL OVER RATES AS TO ENABLE THEM GREATLY TO ADVANCE THEIR CHARGES?"

This inquiry touches the pivotal point of the present hearings.
As at the beginning of our national life, so now we have no way of

judging the future but by the past and by the force and evident trend of existing conditions. Guided by such indications, I shall to the best of my ability attempt to answer the Senator's important inquiry.

From 1867 to 1902, a period of thirty-five years, the consolidation of competing and connecting railroads proceeded steadily. From time to time during that period the prediction was confidently made that such combinations would result in the absolute control of rates by railroad magnates, and that in consequence rates would be greatly advanced. But the historic record of railroad operations in this country proves those predictions to have been absolutely erroneous. During the period mentioned the control of rates exercised by railroad managers was weakened rather than strengthened. Freight charges fell constantly, and at times to such an extent as to force many hundreds of millions of dollars worth of railroad property into bankruptcy. The decline of rates from 1870 to 1900 is stated in the following table, taken from page 397 of the Statistical Abstract of the United States, published by the National Government:

Average reductions in the freight charges per ton per mile on the railroads of the various sections of the country from 1870 to 1900.

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This table shows that as the result of the interaction of all the forces and influences which prevailed during the thirty years from 1870 to 1900 the average rate on railroads east of Chicago, in the Western and Northwestern States, and in the Southwestern States during the year 1900 was only about one-third the rate in 1870; that the average rate on railroads of the Southern States east of the Mississippi River during the year 1900 was only about one-fourth the rate in 1870, and that the average rate on the various transcontinental lines during the year 1900 was only about one-fifth the rate during the year 1870. The average rate on all the railroads of the country during the year 1900 was only a little more than one-third the average rate during the year

1870.

According to the data of the Bureau of Statistics as stated in the above table the average rate per ton per mile fell from 1.99 cents in 1870 to 0.70 cent in 1890, a reduction of 1.29 cents per ton per mile. Multiplying this last-mentioned sum into the tons carried 1 mile in 1900, namely, 141,599,157,270 tons, we find that it amounted to $1,826,629,128, which enormous sum the people of this country would have paid for freight charges in excess of what they did pay if the tonnage carried in 1900 had paid the rates charged only thirty years before. This saving of $1,826,629,128 exceeded the value of the exports from the United States during any one year. It is also 184 per cent in excess of the amount actually collected by the railroads from freight during the year 1900.

This wonderful reduction in rates has been going on steadily during the last ten years and has not yet been arrested. The Interstate Commerce Commission states that during the year 1890 the average rate per ton per mile was 0.941 cent, and that in 1900 it was only 0.729 cent, a fall of 0.212 cent, which upon 141,599,157,270 tons carried 1 mile amounted to the sum of $300,190,213 in excess of the amount actually collected by railroads from freight during the year 1900.

The foregoing statements are not materially affected by differences in the character of the freight transported on different lines, nor by changes in the character of the freights transported in the different

years.

Prior to and during the entire period to which the above statement relates the consolidation of lines proceeded rapidly in all parts of the country. For example, the Pennsylvania Railroad Company in 1854 had under its control only 248 miles of road. In part by construction, but mainly by the acquisition of the lines of other companies, it controlled 10,202 miles of road in 1891. The Chicago and Rock Island Railroad Company, with an original mileage of only 185 miles, has by construction, but mainly by the acquisition of the lines of other companies, become the "Rock Island System," operating 6,979 miles of road. The Atchison, Topeka and Santa Fe Railroad Company owned and controlled 470.58 miles of road in 1873, but in 1901 it controlled 8,257 miles of road, mainly acquired from other companies.

The historic fact, therefore, stands unimpeached and incontrovertible that the consolidation or combination of railroad interests has not resulted in any advancement of rates, but has been followed by greatly reduced rates. It has also been followed by an enormous increase and wonderful improvement in the facilities for railroad transportation, and by an immense expansion of the commercial advantages afforded by such facilities.

THE CONSIDERATION AS TO THE RELATIVE IMPORTANCE OF THINGS.

There is an economic view of the question propounded to me by Senator Dolliver to which I would particularly invite the attention of the committee. I refer to the consideration as to the relative magnitude and influence of the various forces of transportation and of trade which govern the whole rate situation. I refer particularly to the comparative value of railroad earnings from freight, gross earnings, the value of railroad properties, and the value of merchandise transported on the railroads of the United States during the year 1900. This is exhibited as follows: "

Freight revenue.

Gross earnings from operation..

Total capital or liabilities.

a

Estimated annual value of merchandise transported.

$1,049, 256, 323

1,487, 044, 814 11, 891, 902, 339 25, 000, 000, 000

From this comparative statement it appears that the commercial value of the goods transported on railroads of the United States is about twice the value of the railroads of the United States, about seventeen times the total amount of railroad earnings from freight and

a The first three items of this statement are taken from the statistical report of the Interstate Commerce Commission, while "value of merchandise transported" is the result of careful estimates.

passengers, and about twenty-four times the receipts of the railroads from the transportation of freights. In a word, the forces of trade, measured by money value, are about twenty-four times those of transportation. This, of course, raises the strong presumption that transportation is the servitor of trade and not trade the servitor of transportation. It also suggests a cause of the reduction of rates.

THE MANNER IN WHICH THE COMPETING FORCES OF TRANSPORTATION AND OF TRADE ARE OPERATIVE.

In this connection the practical question naturally arises-in what manner and with what effect upon freight charges are the competing forces of transportation and of trade operative! Upon this point I would remark that there is a coercive, à constant, and a world-wide tendency in trade toward a parity of values as the direct result of the competition of product with like product commonly designated as the competition of commercial forces. This tendency toward a parity of values expresses itself in a constant stress upon transportation charges, for the evident reason that the rate on a given article between any two points must always be less than the difference in the price of such article at the point of shipment and at the delivery. The railroad tariff maker is never able to analyze this stress of prices upon rates, so as to exhibit its various elements. He simply designates it by the general expression "What the traffic will bear," by which he means that any price in excess of a certain standard would injuriously diminish or perhaps entirely arrest some particular traffic movement. The commercial fact therefore stands unimpeached that the tendency toward a parity of values, otherwise known as the competition of commercial forces, has in the past, does to-day, and necessarily will in the future exert a potential influence in preventing any advance in freight charges to whatever extent railroad combinations may be effected.

THE EFFECT OF THE COMPETITION OF RIVAL TRADE CENTERS UPON RAILROAD FREIGHT CHARGES.

rates.

The competition of rival trade centers and of other sources of traffic exerts both directly and indirectly a very potential influence upon It brings to bear upon the rates to and from every town and city the influence of the entire property interests of such centers of trade. Besides, the traffic interests of every railroad are greatly dependent upon the commercial prosperity of its termini and other traffic centers on its line. Hence the prosperity of the principal and other direct sources of traffic of each line must be protected by rates which will prevent any diversion of trade to rival trade centers. Thus every railroad company is bound by motives of self-interest to loyalty to its special sources of traffic, while at the same time necessarily reaching out for additional traffic from every available source. All this imparts an intense degree of complexity to the railroad-traffic situation. Its obvious and most important effect is to prevent any advancement in rates. Its actual result has been to reduce rates.

COMPETITION BETWEEN RIVAL RAILROAD COMPANIES.

The direct competition between rival lines of railroad transportation has exerted a most potential influence in the reduction of freight

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