This is a practical world, however, and the practical facts are that the difficulties in the way of public ownership of railways in this country at present are very great, and that much good may be accomplished by judicious regulation. The long and short haul clause may be made effective; the railroads can be prevented from paying shippers more for cars or switches than they would pay each other; private car-lines, express companies, and water carriers can be brought within the Commerce Act; the Commission can be given power to name a reasonable rate or practice in place of one found unjust, and either put it in force at once, subject to revision in a special court devoted to transportation cases, and acting promptly on all appeals, or themselves take the facts and their conclusions at once to the court and get a ruling before putting the order into effect; and railroad managers can be prohibited from having any interest in any concern that can be aided by transportation favors over their roads, as is already the case on James J. Hill’s Great Northern, except with respect to Mr. Hill himself.
Besides all this it may be possible to make the law so clear that the courts cannot twist it out of shape, and the States might be got to pass laws in complete harmony with the Federal statutes. Railroads and trusts can be subjected to public inspection, and to the pressure of damage suits, injunctions, and progressive taxation. If need be the public could demand representation on the boards of direction of all the railroads, or the traffic managers could be made public servants and required, as receivers are now, to report semi-occasionally to the Federal courts, and to State courts also, perhaps, with the power of judicial removal in case of misconduct. There is a practical warrant for demanding representation in the management of the roads, in the fact that the franchises bestowed on them by the public represent a large part, probably half, of their market values. The public is entitled, as we have said, to be regarded as a partner in the railroads.
If after thorough trial, regulation proves insufficient or unsatisfactory, public ownership remains.[[417]] The movement of thought in that direction in the last few years is very remarkable. In whatever way relief may come, whether by regulation or public ownership, the essential fact is the dominance of public interest over private interest at the points where private departs from public interest, and the essential instrumentality for the realization of this fact in a republic is the actual, complete, and continuous control of the Government by the people.
That unjust discrimination in railroad rates and service can be abolished, we know from the experience of other nations. Studying the railways of ten countries on the ground, examining the railway literature and talking with leading authorities of twenty-six countries, and analyzing the writings of the principal critics of the various systems, I find that the railroads of the United States are unique in two respects—the efficiency of the service they render, and the extent and viciousness of the discriminations they make. If efficiency and injustice were essentially related, we might look with some degree of leniency on the evils of railway favoritism, though the wise would prefer justice even at the sacrifice of some degree of efficiency. But there is no such relation. Efficiency is due to national characteristics and economic conditions. In Italy I found the least efficiency coexisting with the greatest development of railway favoritism that I discovered anywhere in Europe, while the German roads are highly efficient and absolutely free from favoritism. All over Europe shippers and railway men assured me that no concessions could be obtained on the German railroads, and that they were the best managed roads in Europe. The railways of France and England are less efficient than those of Germany, and are tainted with discrimination to a degree that is insignificant compared with the phenomena in that line over here, but is very emphatic when compared with the German standards. The press of Great Britain has for years been holding up the management of the German roads as a model to be followed in England, and attributing the success that Germany is having in superseding English goods with her own in many leading markets to the efficient and far-sighted policy of her railway management.
There does not seem to be any clear connection between efficiency and the form of ownership. The private roads of America are the most efficient and the private roads of Italy[[418]] the least efficient I have examined. The public roads of Germany and Belgium, though less efficient than our private roads, are more efficient than the private roads of France and England. In the same country, under like economic conditions, either private ownership or public ownership may secure the best management and most efficient service according to the stage of development. In the United States under existing political conditions the managers of our railways have many facts on which to base an argument that Government operation of railroads would be less efficient than private operation; and the fact that our adverse political conditions are due in large part to the private ownership of public service monopolies does not destroy the whole force of the argument, since our rings, bosses, party machines, spoils system, etc., are due in part to other causes. But where public affairs can be managed with the purity and business sense that characterize the railway managements of Germany, Belgium, Denmark, New Zealand, and South Africa, there is equally little reason to doubt that public operation is the more economical and efficient.
The low average freight rate in the United States is often adduced as conclusive proof of the efficiency of private management. But the average freight rate in England and France is higher than in Germany or Belgium.
If it is a valid argument to say that the low average freight rate in the United States under private ownership proves the case as against the higher average freight rate under the public systems, then why is it not fair to say that the high rates in Great Britain and France under private ownership in their turn prove the case for public ownership. The average passenger rate in the United States and in Great Britain is twice as high as in some of the public systems of the continent. If the low freight rate proves the case for private ownership, why doesn’t the low passenger rate in Germany and Belgium prove the case for public ownership? The fact is that such comparisons of average rates prove nothing as to the management. Differences in the density of traffic, grades, curves, length of haul, wages, capitalization, etc., enter as plural causes and make it impossible to ascertain the effect of the element under consideration. Mr. Fink found that the ton-mile cost varied eightfold on different lines in his own system, all under the same management—700 percent more in some cases than in others. In view of that fact, of what use is it to try to draw inferences from the average rate?
Underneath our low average freight rate there are not only vast masses of low grade freight, coal, iron, lumber, etc., on very long hauls, but a traffic of great density between the great cities, and innumerable discriminations in favor of big shippers and big cities. Local rates in many rural districts are very high, almost as high in some cases as in the old stage-coach days. Labor is more efficient in this country than in Europe; for example, it takes, according to Mulhall, 2 men in England; 3 in France or Germany, and 4½ in Europe on the average, to produce the same agricultural product as 1 man in the United States. In manufactures and construction work the ratios of efficiency are nearly the same; 1 man in the United States does almost as much as 2 men in England, 3 in France or Germany, and 5 in Italy or Hungary. Again our Government subsidizes the railroads by paying very large sums for the carriage of mails, while in Europe the railways are required to carry the mails free or for a very small payment. Moreover our railway capitalization, though larger than it ought to be by the amount of watered stock and fictitious securities, is nevertheless considerably below the capitalization of European roads. In the United States, the railways were mostly built through a new country thinly settled in comparison with Europe, and in many cases not settled at all. The right of way cost practically nothing as compared with the cost in Europe. The Government aided the construction of a number of giant systems by enormous grants of land and loans of money. Few roads were built that did not receive large donations from the cities and towns which they pass. And the abolition of grade crossings and other safety requirements in Europe entail vast expenses from which our roads are comparatively free.
If Government operation were established in this country under good political conditions and reasonable safeguards that would secure efficient management, rates could be lower than they are now; for hundreds of millions that go for profits on watered stock, legislative and legal expenses, exorbitant salaries, competitive advertising, and agencies, etc., etc., would be saved. The abolition of free passes and freight concessions would permit a further reduction of the tariff; so that the published rates the general public would pay could be much lower, and even the ton-mile average would be somewhat lower than at present.