property rights, but it should never be forgotten that in truly democratic countries the judges are chosen by the people directly or through the medium of a selected executive, so that this condition is not necessarily an enduring one. The popular will when persistently bent upon a definite goal is bound to prevail in the end. In the best interests of conservatism, therefore, the safest course for the judiciary will be not flatly to dam the course of public opinion when once clearly defined, lest a flood sweeping all before it result. That happened in the case of our Civil War. The true function of the courts should be to hold back the impending waters until the issue is clear, and thenceforth to so shape or divert the current of affairs that both the individual and the public welfare may interact upon one another to the good of both. Reverting to the specific matter of regulation of railway rates, one cannot doubt that some such compromise will be the final outcome. European conditions and experience in railroad matters, described in the final division of these reprints, have until recently received little attention in the United States. Our problems were unique in themselves; and in so vast an area rail transportation was from the outset so vital to extended existence. that the United States has been rather a pioneer than an imitator of Europe in all matters pertaining to construction and operation. But now that affairs are entering upon another stage of development, what with governmental regulation and the increasing density of population, it appears that much valuable information may be gleaned from European experience. At the present time this is peculiarly true of the British Isles, where the economic condition of private ownership and operation prevails as in the United States. On the other hand, owing to its minute area, with omnipresent water carriage by sea, the problems imposed by British geographical conditions are less instructive perhaps than those upon the Continent, especially in Germany and France. With private ownership and operation of railways, the British government has had an extended experience in regulation by L governmental authority. The last fruits of this are set forth in detail, in our chapter upon "The English Railway and Canal Commission." The problem, however, is simpler than ours, by reason of the fact that all control flows from one source, not being divided as in the United States between a Federal Congress and administrative Commission and a host of entirely independent state legislatures and commissions. Moreover, in the British Isles, it should be noted, the difficult questions of authority raised by the presence of a Constitution do not come into play. Parliament is supreme in legislative matters; its word is law. The will of the people may be expressed statutorily, at any time, regardless alike of legislative and judicial precedent. Protection for vested interests lies in a restricted suffrage together with the innate conservatism and sense of fair play of the British people. Thus freed from judicial trammels, it is of interest to observe what has been accomplished in the line of regulation. Among the peculiarities of the situation one notes the entire absence of our great evil of personal discrimination and rebating;2 and especially that much of the activity of the Railway and Canal Commission is analogous rather to the work of some of the best of our state commissions, Massachusetts and Wisconsin for example, than of the Federal Interstate Commerce Commission. Pooling, likewise, and contracts providing for division of the field, permitting of an avoidance of the evils of excessive competition are allowed, not forbidden as in the United States. The business consists to a far greater degree of small or retail shipments. The problems of classification arising from widely different climatic, industrial, and social conditions do not complicate matters. But, on the other hand, the radical step has been taken of detailed prescription by law both of freight rates and classification. The Dominion of Canada in 1903 has proceeded even farther in this direction, its law upon the subject being based upon the Report upon Railway Rate Grievances of 1902, drawn up by Professor S. J. McLean, author of our chapter upon the English Commission. The 1 Chapter XXVII, p. 745, infra. 2 Cf. p. 760, infra. Canadian Board of Railway Commissioners combines all the powers of the English Commission with those vested in the British Board of Trade. There is conferred a concentration of power over rates, both in England and Canada, beside which even our amended law of 1906 appears pale and colorless. Altogether the British experience is highly suggestive in all that concerns government regulation. Government ownership of railroads is so obviously a remote possibility in the United States, so long as administrative regulation is effectively applied, that the experience of Germany in this field would seem to be unimportant. And yet, having due regard to her superb administrative system, and to her peculiar industrial problems, the service is so admirably adapted to her needs that it amply repays close investigation. From the point of view of public finance alone, the Prussian achievement of government ownership is extraordinary. In 1882, with a gross income of about $109,000,000, a clear surplus above expenses and interest on debt of slightly more than $10,000,000 resulted. This net profit has steadily risen. Ten years later it was about $25,000,000; and in 1900 it had increased to $99,000,000. In 1905, with a gross income of approximately $405,000,000 (1,621,000,000 marks) expenses absorbed about $250,000,000, and interest charges about $28,000,000, leaving a net profit on the investment of more than $125,000,000 (503,000,000 marks). A return of something like five and onehalf per cent on the capital investment is indeed a notable result in government finance. This has been made possible because of two unique conditions; the wonderful industrial growth of Germany in the last two decades, and the high standard both of technical education and of the personnel of the government service. The railway net comprises only about one seventh of the mileage of our American roads, all operated in a densely populated country with high-grade traffic. No reasonable conclusion can be drawn from these results as to the advantages of government ownership in a vast, sparsely settled region like the United States. But we can learn much from certain features of the management of these German railroads, as set forth in our chapter on the subject.1 One of the most admirable features is the system of advisory councils, composed jointly of traffic officials and of prominent representatives of shippers. Extended deliberation upon every adjustment of rates ensues; all possible complications are considered, with reference to export trade, fiscal receipts, economy in operation, territorial competition, and the like. Observation in the field strengthens the conclusion that a degree of peace and coöperation between the railroads and the shipping public, far better than that which prevails to-day in the United States, has followed as a result. The avoidance of economic wastes, such as are described in our chapter on the subject, are also strongly in contrast with our American practices. It is my conviction, all things considered, that our American transportation system is the best in the world. All the more reason why we should open our eyes to the excellences of the railroad systems of foreign countries. WILLIAM Z. RIPLEY HARVARD UNIVERSITY 1 P. 803, infra. RAILWAY PROBLEMS THE I A CHAPTER OF ERIE 1 HE history of the Erie Railway has been a checkered one. Chartered in 1832, and organized in 1833, the cost of its construction was then estimated at three millions of dollars, of which but one million was subscribed. By the time the first report was made the estimated cost had increased to six millions, and the work of construction was actually begun on the strength of stock subscriptions of a million and a half, and a loan of three millions from the State. In 1842 the estimated cost had increased to twelve millions and a half, and both means in hand and credit were wholly exhausted. Subscription books were opened, but no names were entered in them; the city of New York was applied to, and refused a loan of its credit; again the legislature was besieged, but the aid from this quarter was now hampered with inadmissible conditions; accordingly work was suspended, and the property of the insolvent corporation passed into the hands of assignees. In 1845 the State came again to the rescue; it surrendered all claim to the three millions it had already lent to the company; and one half of their old subscriptions having been given up by the stockholders, and a new subscription of three millions raised, the whole property of the road was mortgaged for three millions more. At last, in 1851, eighteen years after its commencement, the road was opened from Lake Erie to tide water. Its financial troubles had, however, as yet only begun, for in 1859 it could not meet the interest on its mortgages, and passed into the hands of a 1 From Chapters of Erie and Other Essays, by (Hons.) Charles Francis Adams and Henry Adams, New York, 1886. By permission. The historical setting of these events is given in Ripley's Railroads, both in the volume on Rates (p. 16) and that on Finance (Stock-watering, etc.). |