The Railroad Problem.
In studying the history of the large corporations, it pays in the beginning to indicate clearly the difference between (1) public service corporations, those which enjoy partial or complete monopoly under franchises granted by the government, and (2) industrial corporations, whose operations do not differ essentially from the enterprises of single individuals, except in the amount of capital which they command. Public service corporations may again be divided into two classes: (1) the interstate railroads, and (2) those corporations whose business is local in its nature, such as the street railroad, the water companies and the gas companies.
Attacking the problem of the interstate railroads first, the class must begin its work by studying the history of the growth of the great trunk lines, like the New York Central and the Pennsylvania, and of the transcontinental railroads, like the Union Pacific and the Northern Pacific. Next in order will come the story of the vicious practices which grew out of the excessive competition among these railroads: rate wars, unfair discriminations against localities and against individual shippers, overcapitalization, etc.
Early in the ’80’s the railroads themselves attempted to remedy these evils by forming the famous pooling associations, but these pooling associations were later prohibited by law. Next the individual states attempted to improve conditions by passing special railroad codes and by creating state railroad commissions. Finally, in 1887, the national government, by the Interstate Commerce Act attempted to better conditions, but improvement came but slowly. Since then, by numerous Court decisions, the most important of which was the decision in the Northern Securities Case, and by at least two amendments to the Interstate Commerce Act, the Elkins Act of 1903 and the Hepburn Act of 1907, the national government has attempted to improve the situation. Conditions to-day are much better than they have ever been in the past, but there is still room for much improvement.