But land grants form only a small part of the public and private donations which have been made to Iowa roads. Including the railroad taxes voted by counties, townships and municipalities, the grants of rights of way and depot sites and public and private gifts in money, these roads have received subsidies amounting to more than $50,000,000, or enough to build 40 per cent. of all the roads of the State. There is no doubt that the contributions of the public toward the construction of the railroads of Iowa is several times as large as the actual contributions of their stockholders for that purpose.
The people of Iowa were from the first very favorably disposed towards railroads. Every inducement was held out to railroad builders to come here and help to multiply the tracks for the iron horse. They came and brought with them many abuses which since the first introduction of railroads had gradually been developed in other States.
The contrast between the old and the new mode of transportation was so great, and the public appreciated so highly the superior conveniences afforded by the latter, that for years the abuses practiced by the early railroads were scarcely noticed, or, if they did attract the attention of the public, they appeared more like necessary features of the new system of transportation than like abuses. The evil gradually increased, but for years no attempt was made to check its growth. The railroad managers construed this failure of the people to interfere with, or even protest against, their unjust practices as a quasi-sanction of their course, and soon claimed to do by right what they had formerly done by sufferance. The evils increased until the patience of the people finally became exhausted.
While the State thus for years dealt very leniently with the railroad companies, the laws of Iowa had from the beginning of railroad building emphasized the principle of State control. This principle was asserted in the very first railroad act ever passed in the State. Section 14 of chapter I. of the acts of the extra session of the Fifth General Assembly, regranting to the various railroad companies the lands granted to the State by Congress for railroad purposes, provides that "railroad companies accepting the provisions of this act shall at all times be subject to such rules and regulations as may from time to time be enacted and provided for by the General Assembly of Iowa...." In 1866 an attempt was made in the General Assembly to regulate rates, but the Attorney-General, to whom the question of constitutionality was submitted, held in his opinion that it was not in the power of the legislature to prescribe rates for railroad companies. This opinion provoked much indignation among the people of the State, and led to the expression of a sound public opinion by legislative acts which could not be misunderstood.
When the Twelfth General Assembly (in 1868) regranted to the Chicago, Rock Island and Pacific Railroad Company the lands originally granted to the Mississippi and Missouri Company, it only did so upon the condition that "said railroad company, accepting the provisions of this act, shall at all times be subject to such rules, regulations and rates of tariff for transportation of freight and passengers as may from time to time be enacted and provided for by the General Assembly of the State of Iowa...." The same restricting clause, known as the Doud Amendment, was added to all other land grant acts passed by the Twelfth and subsequent General Assemblies, and the various companies willingly and gladly accepted it.
The abuses of which the people of Iowa complained were far from being confined to their State. They were practiced throughout the Northwest, and the demand for reform was as loud in Minnesota, Wisconsin and Illinois as it was in Iowa. In 1871 laws were passed in Illinois and Minnesota fixing maximum charges for the transportation of freight and passengers and prohibiting discriminations. The railroads claimed that a State did not have the right to prescribe rates and refused to be bound by these laws. Instead of modifying their policy, they became daily more arrogant. Discriminations which had before been practiced under the veil of secrecy, or which had been defended by railroad managers as exceptions to the general rule made necessary by a peculiar combination of circumstances wholly beyond their control, were now openly and defiantly practiced by several of the larger roads. The Chicago, Milwaukee and St. Paul Railroad Company, in its effort to annihilate a rival, went so far as to openly announce to the public its intention to entirely disregard distance as a factor in rate-making. It gradually became the general rule to wage war against rivals at competitive points and to "recoup" by charging excessive rates at non-competitive points. Every encouragement was thus given by the railroads to the Granger movement, which spread in less than two years over the whole Northwest.
In the fall of 1873 Iowa elected a Granger legislature, like Minnesota, Wisconsin and Illinois. The wildest predictions were made by railroad men as to the extremes to which the Granger legislature would go, but it confined itself to enacting a law establishing an official classification and fixing maximum rates for all railroad companies. The law was approved March 23, 1874, and went into effect on the 4th of July following. This law in no case compelled companies to carry freight at a lower rate than they had voluntarily carried it in the past. Many of the rates in force at the time of the passage of the act were considerably lower than the corresponding maximum rates fixed by the legislature. The average rates fixed by the law were higher than the rates at which the railroads had previously carried a large portion of corresponding freight. The revenues of the road were not even curtailed by this law; on the contrary, by equalizing rates, i. e., by leveling up the rates given to favored places and favored individuals and leveling down the exorbitant rates exacted from the public at non-competitive points, the railroad companies were enabled to effect an increase in their total revenue.
The Granger law remained in force until 1878. Its constitutionality was tested by the railroad companies in the Supreme Court of the United States, but this high tribunal held that rate-making was a legislative and not a judicial function, that it was within the province of the State legislature to prescribe rates for the transportation of passengers and freight wholly within the State, and that for protection against abuses by legislatures the people must resort to the polls, and not to the courts.
The Granger laws have been and are still severely criticised by those opposed to the principle of State control and by the ignorant. It is nevertheless true that those laws were moderate, just and reasonably well adapted to remedy the evils of which the public complained. It has been the policy of most railroad men to attack them as crude, intensely radical and socialistic. The obloquy heaped upon them was the work of designing men who desired to continue their impositions upon the people. Mr. Charles Francis Adams, however, admits that the Granger method was probably as good a method as could have been devised of approaching men who had thoroughly got it into their heads that they, as common carriers, were in no way bound to afford equal facilities to all, and, indeed, that it was in the last degree absurd and unreasonable to expect them to do so.
The Iowa law was imperfect in detail, and yet its enactment proved one of the greatest legislative achievements in the history of the State. It demonstrated to the people their ability to correct by earnestness and perseverance the most far-reaching public abuses and led to an emphatic judicial declaration of the common-law principle that railroads are highways and as such are subject to any legislative control which may be deemed necessary for the public welfare.