The Railroad Question / A historical and practical treatise on railroads, and remedies for their abuses

by William Larrabee

"I take the liberty of adding one more thought: that the more perfect is railroad legislation, the less we shall hear of transportation by rail being made a Government function, the General Government making purchase of all the roads and entering upon a course which will lead we know not where or into what disasters."

There has been during the past twenty years a tendency in a majority of the States to place the local control of railroads in the hands of executive boards, usually styled "railroad commissioners." Previous to this period the various States relied solely upon legislation for the regulation of the transportation business, but in time they became convinced that such laws were inoperative for the want of an enforcing power. It was found that the individual shipper was unable to cope with a powerful company and usually would rather suffer wrong than to enter into a contest which nearly always resulted in great pecuniary loss to him. On the other hand, it was apparent that if the claim of the individual were pressed by a railroad commission, even though such a body had but limited powers, it would, under ordinary circumstances, be honored, provided it was meritorious; and if the commission was compelled to enforce a demand through the courts, it would have the support of the State to poise the wealth and power of the corporation.

The term "railroad commissioner" in the United States is nearly as old as the railroad itself; but the first officials bearing that title were merely successors to the turnpike commissioners of yore; their duties consisted chiefly in supervising, passing or reporting upon the construction and condition of the highway.

The first railroad commission, in the present acceptation of the term, was created in the State of Massachusetts, in 1869. The commission consisted of three persons, whose principal duty was to "make an annual report to the General Court, including such statements, facts and explanations as will disclose the actual working of the system of railroad transportation in its bearing upon the business and prosperity of the commonwealth, and such suggestions as to its general railroad policy, or any part thereof, or the condition, affairs or conduct of any railroad corporation, as may seem to it appropriate." This board also had the general supervision of all railroads and power to examine the same. It was required to give notice in writing to any railroad corporation which, in its judgment, was guilty of any violation of the railroad laws of the State; and if such company continued the violation, after such notice, it became the duty of the commission to present the facts to the Attorney-General. It was further made the duty of the board to examine, from time to time, the books and accounts of all railroads, to see that they were kept in a uniform manner, and upon the system prescribed by the board. It was also required to investigate the cause of any accident on a railroad resulting in loss of life. These being the principal duties of the board, its powers were very limited; but its personnel supplied the power which the law had withheld. The success of this commission exceeded even the expectations of the advocates of the system, who, in view of the limited powers of the commission, had anticipated but meager results.

To quiet the Granger movement the railroads favored and finally secured the adoption of the commissioner system in the West, and South, in which sections it attained its highest development. It was soon found that a commission after the Massachusetts model, when composed of men less competent or less disposed to do their duty, was liable to dwindle into a statistical board or even become a pliant tool in the hands of the railroads. Furthermore, the conditions in Massachusetts, where railroad owners and railroad patrons lived side by side and were in many instances even identical, differed materially from those found in the West and South, where railroad patrons were made to pay excessive rates, to produce liberal dividends on fictitious stocks for non-resident stockholders. Here a conflict between the railroads and such commissions as were determined to do their duty became often unavoidable. Railroad companies were as a rule disposed to disregard the recommendation of a commission to reduce exorbitant rates. This led in those States which suffered most from unjust tariffs to a popular demand to endow the commission with the power to fix prima facie rates. While the number of States which have taken this step is at present still limited, public opinion in its favor is growing throughout the nation, and a general adoption of this policy is probably only a question of time. There is every reason for believing that a commission vested with the right to fix local rates, to require full and complete reports from railroad companies, and to make proper regulations for their control, aided by penal legislation to compel compliance with their orders, will be a sufficient aid to the State in exercising such control over the companies operating lines within its borders as its dignity and the welfare of its people demand.

Viewing the question from a national point of view, we find that, owing to the great and constantly increasing importance of interstate traffic, improved Federal agencies for railroad control are a pressing need. While much has been accomplished by the Interstate Commerce Act, much yet remains to be done. Violations of the act are still far too frequent, and they have been encouraged by unfriendly decisions by some of the inferior Federal courts.

It must be admitted that nearly all the evils connected with interstate transportation could soon be remedied were it not for the difficulties which the Interstate Commerce Commission encounters in the enforcement of the law. On the one hand it is not possible with the machinery at present provided to detect and prove a considerable part of the violations of which railroad managers are daily guilty; and on the other hand, if these violations are brought to light, there would not, according to the testimony of a prominent railroad man, be courts enough in the country to try the violators. Besides this, such is the artfulness of railroad managers that in a majority of cases it would be impossible to reach the guilty party, and subordinates would have to answer for the transgressions of their superiors.

To provide adequate machinery for the supervision of the transportation business, a national bureau of commerce and transportation should be established. As its chief a director-general of railroads should be appointed by the President, on the recommendation of the Secretary of the Interior, by and with the advice and consent of the Senate. This officer should hold his office for a term of at least six years, unless sooner removed by the President, upon reasons to be communicated by him to the Senate. He should not be interested either directly or indirectly in railroad securities. The Interstate Commerce Commission should be continued as an advisory board. It should upon the whole retain its present functions and should be consulted by the director-general in all matters requiring expert investigation. A number of divisions or sub-bureaus should be established, and each should be entrusted, under the supervision of the director-general, with such duties as may be deemed necessary to secure the greatest efficiency.

There should be a division charged with the duty of carefully examining and compiling the detailed reports which the various companies should by law be required to make to the bureau. An inspection service should also be established, similar to that now maintained by the Treasury and Post-office Departments. Its officers should be empowered to enter all railroad offices and examine the companies' books, board trains and employ other legal means to detect violations of the railroad law and report them to the chief of the bureau.

Railroad companies might be permitted to make interstate rates, but all schedules should be submitted to the bureau for approval or revision. Legal provision should be made against every sort of speculation in railroad stocks on the part of railroad officers, who should, in addition, be prohibited from sharing in the profits of favorite rates, as at present. All executive officers and directors of railroad companies should, like officers of national banks, be required to qualify by taking an oath of office, and should be held to strict accountability for their official acts. Officers of railroad companies should not be allowed to receive and use proxies at stockholders' meetings.