The railroads have the Senate, and the Senate must confirm all nominations to the Interstate Commission. Aside from the appointment of Judge Cooley all nominations to the Commission from 1887 down have been due, said this railroad president, not to any special fitness for the work, but to political pull. If a commissioner is appointed from a certain State, the senators from that State regard the place as a part of their patronage, and when the term of his appointment expires they insist on the nomination of another man from their State. They say: “The place belongs to our State,” and it is always their man, a man they want on the board, who is presented by them for nomination. Vermont for example has had three members on the Commission in succession, Walker, Veazie, and Prouty; each time a vacancy has occurred in the Vermont representation it has been filled at the dictation of the senators from that State; “even President Roosevelt did not appoint for fitness. When a vacancy occurred he did not look for the man best fitted to serve on such a Commission, but appointed Senator Cockrell of Missouri, a nice old man of 70 that everybody liked, but without any special qualification for the work. The election went to the Republicans in Missouri, so Cockrell couldn’t go back to the Senate. He has many friends. The senators all like him, Republicans as well as Democrats, and they said to Roosevelt: ‘You must do something for Cockrell; here’s a democratic vacancy on the Interstate Commission, put him in there,’ and Roosevelt put him in.”
This railroad president is a man of the highest character and of very extensive information. Whether or no he is rightly informed in respect to the appointment of commissioners, it is clear that the railroad representation in the Senate could bring tremendous pressure to bear to secure the appointment of men approved by railroad interests, that they could block the appointment of any other sort of men even if nominated, and that the temptation to exert this power to secure men who could be controlled would be practically irresistible if the Commission were given the rate-making power.
The fear of confiscation does not seem to be well founded on the part of the railroads; there is more to justify such a fear on the part of companies and localities unfairly treated by the railroads. The Commission will have no motive to make confiscatory orders, and the courts will protect the roads from everything that is doubtful in the slightest degree as they have done in the past. The real danger of confiscation of values lies in leaving the railroads free to make such orders as those in the San Antonio case or the Kansas oil case which destroyed the business of independent operators. Adding 25 cents a ton to the coal rates from San Antonio practically confiscated the coal mines at that point, and raising the oil rates in Kansas from 10 to 17 cents practically confiscated, during the continuation of the order, the product of the independent oil wells.
That some disturbance of tariffs and business might result from conferring the rate-fixing power on a public board is quite likely. There is a good deal of business that ought to be disturbed; that of the Beef Trust and the Oil Trust for example would be the better for a thorough house-cleaning. And the tariffs need considerable disturbance to bring them into close relations with the principles of justice. But the disturbance might be more than is needful. Our railroads say that Government boards the world over show a tendency to adopt some sort of a mileage basis, in the shape of a zone system or some other form of distance tariff. This would interfere with the equalization of rates, which is one of the best elements in American railroading. The fruits of California are carried all over the country at low blanket rates that enable them to be sold in every hamlet in the country at prices the common people can afford to pay. New England shoes are carried to St. Louis at 1½ cents a pair and to San Francisco for 2 cents a pair. Milk is brought into the cities at the same rate for many miles out. So with the pulp mills in the forests of New York, Vermont, and Maine. The railroads give them all equal rates to the great cities. When the big mill at Millinocket, Me., was being planned the promoters went to the railroads for rates. To make the product cheap they must build on a large scale, and to justify this they must be able to reach many markets; they must be able to supply newspapers in Boston, New York, Philadelphia, and Chicago. So the railroads gave them rates that enabled them to send their paper 1,500 miles to Chicago and sell it to newspapers there at the same price they would have to pay for paper that came only 500 miles.[[408]] This destroys nature’s discriminations due to distance, and places men on an equality in the market to win by their merits, not by natural advantages or disadvantages of location. This is in many ways a beneficent process and if the railways did not create new artificial discriminations of their own they would be entitled to be placed among the great equalizers of the age.
Years ago there was a vigorous argument about the rates on wire from Worcester, Mass., to Chicago, and from Pittsburg to Chicago. The wire mills of Worcester had a good business, employing some 5,000 men, and marketing mostly in the West. Mills were built in Pittsburg, and being much nearer Chicago got a lower rate to that city. The New York Central at once met the rates so that the Worcester Mills could get to market on a level with the Pittsburg people, who still had the advantage of nearness to the coal and iron mines. Not satisfied with this, however, they carried the question to the Traffic Association, claiming that as they were 500 miles nearer Chicago, they should have a lower freight rate than the Worcester mills. But they didn’t get it. The New York Central said: “Here are 5,000 men at work in Worcester. What are they going to do if we let you crowd them out of Chicago, which is their principal market? We shall stand by them and meet any rate you make from Pittsburg.” That was fine, as good as the raising of a rate to kill the San Antonio mine was bad; the railroads can save industrial life as well as commit industrial murder.
It is said that government rate-fixing would not meet such cases; that the principle of equalization is not recognized, and both justice and business development would suffer thereby.
It is not true that government rate-fixers do not recognize the equalization principle. The national post-office has carried it to the limit, and has based its business upon it to such an extent that it is known as the post-office principle. It is applied in government telegraph and telephone systems much more fully than in our private systems. Even the State railways make considerable use of it. Although the tendency is to adopt some sort of distance system as the main basis of the tariff, there is constant recognition in Germany, Belgium, Denmark, Switzerland, and the Australasian States, and it is announced as a definite policy that so far as reasonably possible rival industries shall be placed on an equality in the market. “We mean to bring the manufacturer who is 100 miles away into the market on a level with the man who is 10 miles away,” said the manager of one of these government systems to me, and there is more or less of the same spirit and purpose in all the government systems I am acquainted with. The fact is that a movement toward the equalization of rates through application of the principle to one commodity after another, or the gradual extension of zone distances in a zone tariff, offers the only hope of attaining a really just and scientific system of rates. Any sudden adoption of such a system would disturb the values of real estate, etc., beyond all reason, but it can be gradually approached, and that is what the railroads in this and other countries are doing.
Our Interstate Commission has, I believe, shown too little appreciation of this fact, too much tendency to insist that a town or city is entitled to the benefit of its geographical position. It is entitled to the benefit of its geographical position to the extent that no place more distant from its market should have lower rates to and from that market, but the right to claim that the rates shall not be equal is very questionable, and frequently it is clear that no such right exists. The Commission has recognized this point in several cases. For example, in the Business Men’s Association of St. Louis v. the Santa Fe, Northern Pacific, Union Pacific, and other roads,[[409]] the Commission sustained a blanket rate on many commodities from the Pacific Coast to all points east of the Missouri River. And in the Orange Rate Case[[410]] decided last year, a blanket rate of $1 per hundred on lemons from Southern California to all points east of the Missouri was approved. In the milk case, however, it held that “A blanket rate on milk on all the Delaware, Lackawanna’s lines, New Haven road, Reading, Erie, New York Central, and West Shore and other roads regardless of distance, viz., 32 cents on milk and 50 cents on cream per can of 40 quarts, is unjust to producers and shippers of the nearer points. There should be at least four divisions of stations,—the first extending 40 miles from the terminal in New Jersey, the second covering a distance of 60 miles and ending about 100 miles from such terminal, and the third covering the next 90 miles, and the fourth covering stations more than 190 miles from the terminal. The rates on milk in 40–quart cans should not exceed 23 cents from the first group of stations, 26 cents from the second group, 29 cents from the third, and the present rate of 32 cents from the fourth group.”[[411]]
It is quite possible that the Commission made a mistake in this case, though it is not easy for any but a railroad man, with a ravenous appetite for tonnage and reckless of the waste of economic power, to see any sense in arranging rates so as to take milk to New York from points near Buffalo while Buffalo gets milk from places east of points shipping to New York; but if the Commission did fall into error in this case, the mistake of refusing to allow the distant man to come into the metropolitan market on equal terms with the nearer man is nothing compared to the mistake the railroads so frequently commit of allowing some Chicago or Kansas City man to come into New York at lower rates than the New York, Ohio, Pennsylvania, and New England producers have to pay.
In respect to the distance tariff question, Chairman Knapp of the Commission says: “I am very far from believing that there should be anything more than the most inconsiderable tendency, if any at all, toward the adjustment of rates on a mileage basis, and I think the prosperity of the railroads, the development of the different sections of the country and their industries, justify the making of rates upon what might be called a commercial basis rather than any distance basis; but do you realize what an enormous power that is putting into the hands of the railroads? That is the power of tearing down and building up. That is the power which might very largely control the distribution of industries. And I want to say in that connection that I think on the whole it is remarkable that that power has been so slightly abused. But it is there.... It comes back to the question which Senator Dolliver asked, are the railroads to be left virtually free to make such rates as they conceive to be in their interests? Undoubtedly their interest in large measure and for the most part is the interest of the communities they serve. Undoubtedly in large measure and for the most part they try as honestly and as conscientiously as men can to make fair adjustments of their charges. But suppose they do not. Is there not to be any redress for those who suffer? That is really the question.... Suppose it were true that a more potent exercise of government authority and the adjustment of rates tended somewhat to increase the recognition of distance with the result of producing a greater diffusion of industry rather than its concentration.... I cannot believe that all those institutions, laws, administrations which operate to the concentration of industries and population are altogether to be commended. I doubt if they result in happier homes, better lives, greater social comfort.”