Again, consider the predicament Commissioner Prouty presents.[[405]] If the Commission, considering all the circumstances including railroad competition, finds that the rates from certain points to W should not be higher than the rates to O and orders the railroads to discontinue the discrimination between the two cities, the court will sustain the order and grant an injunction to enforce it. But if the Commission finds that there should be some difference between the rates to the two places, though not so much difference as there is, and it orders the rates to W down so that they will be fair, the courts will annul the order because the Commission has no power to fix rates in the opinion of the Supreme Court.
The railways contend that a relative order would be sufficient. The Commission could say what percentage of the Omaha rate the advance for Wichita should be, and in the Kansas case the rate on oil could be determined in reference to the rates on other commodities. It is true that a relative order could be made, but it might be more embarrassing to the railroads to have a group of rates tied up by each decision so that they could not vary any of them without changing the rest, than it would be to have one rate definitely fixed; the subtraction from elasticity might be greater, and the difficulty of determining the true relations between various rates might be far more serious than the fixing of a reasonable rate in the particular case. It would be possible to give the Commission the option to make a relative order or to definitely fix a reasonable rate providing that it should carefully consider the preference of the carrier as to the form of order, the reasons for that preference, and the guarantee the carrier may be willing to give as to bona fide compliance with the order, and then make up its judgment in the light of the circumstances in such a way as to accomplish the purpose in view with the greatest certainty and the least friction or interference with the freedom of railroad management.
But the railroads object to the fixing of rates in any manner by a public board,[[406]] declaring that such a board could not be in sufficiently close touch with traffic conditions all over the country to adapt their rulings to the needs of business, that tariffs would lose the elasticity requisite to keep them in harmony with changing economic conditions. A rate that is reasonable to-day may be unreasonable to-morrow. It is said that it keeps several hundred men, 500 to 700 skilled traffic men, working all the time on the adjustment of rates, and that it is beyond the power of half a dozen men to pass on the rate question of a country like this; that Congress cannot delegate to a commission the power to fix rates; that it would destroy the initiative of railroads and hurt their power of borrowing money for improvements, injure investors, and throw the whole railroad world out of gear; that the centralization of power would be dangerous, the disturbance of business and interference with development disastrous, and the practical confiscation of railroad properties and values unjust; that a flood of litigation would follow, and that discrimination would not be removed, for agents hustling for business would cut under commission-made rates as quickly as they cut railroad-made rates.
There is much force in some of these points, none at all in others. There is no reasonable doubt that Congress can authorize a commission to fix rates. Railway Commissions in 21 States have power to fix rates, either absolute or maximum, and some of them have exercised the power vigorously, and a national commission may be given the same power over interstate commerce that a State commission may have over State commerce.
There is more force in the objection based on the lack of elasticity in commission-made rates. Elasticity, however, may easily be overdone and much of the present elasticity is very undesirable. Many flying tariffs and unfair discriminations lurk under cover of that reputable word elasticity. Moreover the Commission would not interfere with any fair rate-making by the railroads. The bulk of the rates would not be touched but only those that were unjust. So that it would depend entirely on the railroads how much of the flexibility they so much admire should be kept in their own hands. They would keep it all unless they were guilty of dishonest flexibility, in which case the elasticity, which, according to impartial judgment, exceeded the bounds of justice, would be checked.
In reference to the alleged necessity of flexibility in tariffs and the ability of traffic managers to accommodate the rates to fluctuating commercial conditions, Chairman Knapp of the Interstate Commission says that there need not be any tendency to iron-clad rules or undue emphasis of the mileage basis on the part of a Government board, but that the necessity of frequent changes in tariffs is greatly overdrawn. He states that the railroads have kept the same basis of rates since 1887 throughout the most important part of the United States, the “official classification territory” or the section north of the Ohio and Potomac and east of the Mississippi, and that “the class rates which govern most merchandise and articles of manufacture and ordinary household consumption have remained unchanged in all that territory.” The railroads changed the classification of many articles about 1900, “but they did not change the rates or the adjustments between localities.”
“I take it there is no agricultural product the price of which has shown such wide fluctuations in the last few years as cotton. It is one of the great staple articles of the country; the most valuable per pound of anything that grows out of the ground in large volume. More than half of it is exported and you know the price has gone from scarcely above 5 cents to 16 or 17 cents. And if there is any article which would seem to be susceptible to market fluctuations and the changes in commercial conditions, it must be cotton. But an inspection of the tariffs will show you that the rates on cotton have not been changed in ten years.
“There has been no material change, I think, in any cotton rate in more than ten years, except that certain reductions have been made in the State of Texas by the commission of that State.
“Now, when I observe instances of that kind, when the ablest and most experienced traffic officials tell me that there is no sort of reason for 500 to 1,000 changes in interstate tariffs every twenty-four hours, as our files show there are, you must not be surprised if I fail to accept at par value all that is said here about the necessity of adapting rates to commercial conditions. Undoubtedly, when you take a considerable period of time, great influences do operate to an extent which may justly require material modifications in freight charges, but to my mind it is quite unsuitable that the little surface fluctuations in trade should find expression in extended changes in the daily tariffs. I believe that those surface currents should adjust themselves to the tariffs, and not the tariffs to the currents. And I am saying this, gentlemen, not as a result so much from my own observation or from any à priori view of the case as because of the statements made and arguments submitted to me by practical railroad men of the highest distinction.”[[407]]
To lay stress on the number of men required to arrange the details of tariffs might seem to imply the belief that a very large part of existing railroad rates will be found unreasonable and need the attention of the Commission. It may however imply merely that there is likely to be a very large number of complaints. The fact is that the fixing of rates is a complex business, with a considerable percentage of guesswork, experiment, broad judgment, and arbitrary decision. There are some general principles of cost, distance, what the traffic can pay and move, what shippers demand, what other carriers are charging, what rates are necessary to create new business and fill up the cars both ways, etc., but they are like the principles of law, you can come to any conclusion you wish and then find a principle that will back up your decision. Railroad men do not trouble themselves about consistency. They do not and cannot adjust rates with reference to just relations between places and commodities. They are looking for dividends and they make the best rates they can with that object in view. The chief traffic officer of one of the trunk lines, being pressed by the Commission as to his method of making rates, said: “We make rates very much as the honey bee makes its cells, by a sort of instinct.” When we look at his rates we find that he is not so successful as the honey bee in respect to symmetry and balance. Another traffic manager whose skill brings him a salary of $50,000 a year, testifying as to the reasonableness of his grain rates, was asked question after question as to methods of determination, till finally he said: “To tell you the truth, gentlemen, we get all we can.” Now it is because the railroads know that the Commission would refuse to adopt this time-honored principle and would aim primarily not at profit to the railroads, but at just and impartial rates—it is this knowledge which more than anything else impels the railroads to such strenuous opposition to any proposal for the fixing of rates by a public board. The matter is of such moment that, when I asked one of our leading railroad presidents what would happen if the rate-making power were put in the hands of a commission, he said: “The stake would be so great that the commission would have to be controlled, that’s all.”