The Arena, Volume 4, No. 21, August, 1891

by Various

This is but one of many phases of the commission evil, another being that these sums are ultimately paid, not by the corporations, but by the users of the railways, and but for the payment of such commissions the rates might be reduced in like amounts. Aside from commissions paid for diverting passenger traffic great sums are paid for “influencing” and “routing” freight traffic, and these sums, while paid to outsiders, or so-called brokers, are frequently divided with railway officials. When the writer was in charge of the transportation accounts of a railway running east from Chicago, it was a part of his duties to certify to the correctness of the vouchers on which commission payments were made, and he became aware of the fact that one Chicago brokerage firm was being paid a commission of from three to five cents per hundred pounds on nearly all the flour, grain, packing house, and distillery products being shipped out of Chicago over this railway, no matter where such shipments might originate, many of them, in fact, originating on and far west of the Mississippi River; and when he objected to certifying to shipments with which it was clear that the Chicago parties could have had nothing to do, he was told, by the manager, that his duties ended when he had ascertained and certified that such shipments had been made from Chicago station. From investigations instituted by the writer, he soon learned that some one connected with the management was deeply interested in the payment of the largest sums possible as commissions.

The corporations have ineffectually wrestled with the commission evil, and any number of agreements have been entered into to do away with it; but it is so thoroughly entrenched, and so many officials have an interest in its perpetuation, that they are utterly powerless in the presence of a system which imposes great and needless burthens upon their patrons, but which will die the day the government takes possession of the railways, as then there will be no corporations ready to pay for the diversion of traffic. National ownership alone can dispose of an administrative evil that, from such data as is obtainable, appears to cost the public from $20,000,000 to $25,000,000 per annum.

[10]Mr. Meany, in his Sun article, summarizes six causes for the diminution of railway dividends and remarks: “It is unnecessary to dwell at any great length upon the first five mentioned reasons, but too much could not be said on the sixth. It is now nearly seven years since James McHenry of London (and New York, Pennsylvania & Ohio Railway litigation fame) openly charged railway managers, in an interview published in the Sun, with criminal collusion in the matter of securing extraordinary privileges and unapproachable contracts with their several corporations for favored fast freight lines, express routes, bridge companies, etc., etc., in all the benefits of which such managers shared to a very great extent. On that occasion Mr. McHenry was promptly cried down. Would he be cried down to-day?”

As a rule, American railways pay the highest salaries in the world for those engaged in directing business operations, but such salaries are not paid because transcendant talents are necessary to conduct the ordinary operations of railway administration, but for the purpose of checkmating the chicanery of corporate competitors. In other words, these exceptionally high salaries are paid for the purpose, and because their recipients are believed to have the ability to hold up their end in unscrupulous corporate warfare where, as one railway president expressed it, “the greatest liar comes out ahead.” With the government operating the railways, there would be no conflicting interests necessitating the employment of such costly officials whose great diplomatic talents might well be dispensed with, while the running of trains, and the conduct of the real work of operating the roads, could be left to the same officials as at moderate salaries now perform such duties, and consolidation of all the conflicting interests in the hands of the government will enable the public to dispense with the services of the high priced managers now almost exclusively engaged in “keeping even with the other fellow,” as well as with the costly staffs assisting such managers in keeping even, and the savings resulting may be estimated at from $4,000,000 to $5,000,000 per year.

Government control will enable railway users to dispense with the services of such high priced umpires as Mr. Aldace F. Walker, as well as of all the other officials of sixty-eight traffic associations, fruitlessly laboring to prevent each of five hundred corporations from getting the start of its fellows, and trying to prevent each of the five hundred from absorbing an undue share of the traffic. It appears that each of these costly peace-making attachments has an average of seven corporations to watch.

Referring to traffic associations, and their vain endeavors to keep the corporations within sight of commercial ethics, the Interstate Commerce Commission says: “But the most important provisions of the law have not so often been directly violated as they have been nullified through devices, carefully framed with legal assistance,—here is one of the places where the high-priced lawyer gets in his work—with a view to this very end, and in the belief that when brought to legal test the device hit upon would not be held by the courts to be so distinctly opposed to the terms of the law as to be criminally punishable.” In this connection, it is well to remember what Mr. Dillon tells us of the ease with which the laws can be evaded.

With national ownership the expenditures involved in the maintenance of traffic associations would be saved, and railway users relieved of a tax that, judging from the reports of a limited number of corporations of their contributions towards the support of such organizations, must annually amount to between four and five million dollars.

Of the six hundred corporations operating railways, probably five hundred maintain costly general offices, where president, treasurer, and secretary pass the time surrounded by an expensive staff. The majority of such offices are off the lines of the respective corporations, in the larger cities, where high rents are paid, and great expenses entailed, that proper attention may be given to the bolstering or depressing the price of the corporation’s shares, as the management may be long or short of the market. So far as the utility of the railways is concerned as instruments of anything but speculation, such offices and officers might as well be located in the moon, and their cost saved to the public. The average yearly cost of such offices (and officers) is more than $50,000, and the transfer of the railways to the nation would, in this matter alone, effect an annual saving of more than $25,000,000, as both offices and officials could be dispensed with, and the service be no less efficient.

Moreover, with the nation owning the railways, the indirect but no less onerous tax levied upon the industries of the country, by the thousands of speculators who make day hideous on the stock exchanges, would be abrogated, as then there would be neither railway share nor bond for these harpies to make shuttlecocks of, and this would be another economy due to such ownership.

Railways spend enormous sums in advertising, the most of which national ownership would save, as it would be no more necessary to advertise the advantages of any particular line than it is to advertise the advantages of any given mail route. From reports made by railway corporations to some of the Western States, it appears that something over one per cent. of operating expenses are absorbed in advertising, aggregating something like $7,000,000 per year, of which we may assume that but $5,000,000 would be saved, as it would still be desirable to advertise train departures and arrivals.