More general legislation demanded, [494].—Congressional history 1903-1905, [495].—Railway publicity campaign, [496].—President Roosevelt's leadership, [498].—The Hepburn law, [499].—Widened scope, [499].—Rate-making power increased, [500].—Administrative v. judicial regulation, [501].—Objection to judicial control, [503].—Final form of the law, [505].—Broad v. narrow court review, [506].—An unfortunate compromise, [507].—Old rates effective pending review, [508].—Provisions for expedition, [511].—Details concerning rebates, [512].—The commodity clause, [513].—History of its provisions, [514].—Publicity of accounts, [515].—Extreme importance of accounting supervision, [516].—The Hepburn law summarized, [520].
The new incentives to rehabilitation of the Interstate Commerce law by Congress, becoming year by year more insistent after 1899, were four in number. Most of the old long-standing grievances were still on the docket. New sources of dissatisfaction and danger were now added in plenty as a result of important industrial changes. The most far-reaching of these was the spread of consolidation among railroads. This, as we shall see,[585] led within a few years to a partition of the entire railway net of the country into a few large systems, each controlled financially, although seldom by actual majority investment, by powerful individuals or banking groups, mainly located in New York. Many small local roads, long closely identified with the welfare of particular communities, were now merged in great systems under entirely different and probably absentee ownership and management. Boston, Baltimore, New Orleans, St. Paul, Cincinnati, not to mention a host of other smaller places, seemed commercially cast adrift. The welfare of railroads and of the particular communities in which they lay,—long supposed to be indissolubly linked together,—was now seen by concrete experience to be separable, often into conflicting parts. The New Haven monopoly in New England might be managed rather in the interest of New York than of the port of Boston. The Illinois Central, once devoted whole-heartedly to the upbuilding of New Orleans, must now, as a part of the Union Pacific system, comprehend San Francisco and even Savannah within the scope of its plans. New systems implied new traffic arrangements. Railroad policy must of necessity involve a choice, not between two evils, perhaps, but between a resultant good and a necessarily attendant evil. All these corporate changes made inevitably for much commercial readjustment. And each readjustment left a trail of real or alleged grievances; for the settlement of which no competent tribunal existed. There can be no doubt, therefore, that the significant changes in the railroad map after 1899 had much to do with the demand for new legislation.
The second new and general cause of dissatisfaction among the public was the great and almost continuous rise of freight rates which began about 1900. This was of course a direct outcome of the spread of railroad consolidation. The movement of freight rates has been elsewhere described in detail.[586] It has appeared that the steady decline which ensued for almost a generation after the panic of 1873, was sharply reversed when combination succeeded competition as a fundamental policy of railroading. This striking reversal of the course of railway charges was not, of course, an isolated phenomenon. It took place in a period of marked and general rise of prices, not unconnected with changes in the value of gold. The upward trend was at first more striking, and apparently more irresistible, in the charges for transportation than in the prices of commodities. Prior to 1899, not even the most astute railroad managers ever anticipated any such change. The Boston & Maine Railroad even permitted the inclusion of a prohibition of any higher rates in future than were then in force, to be incorporated in the acts of the New Hampshire legislature authorizing its leases of important lines. Attorneys sought to prove that railroads were not subject to the law of increasing returns, because it was inevitable as an economic law that with growth in the volume of business, rates should progressively decline.[587] If there was often public dissatisfaction at the scale of charges under these conditions, how irresistible might the unrest among shippers become when rates actually began to move so strongly upwards!
A single illustration of the class of complaints thus engendered may not be out of place.[588] It concerned the reasonableness of an increase of two cents per hundred pounds on lumber from Georgia points to the Ohio river. From 1894 to 1903 these rates had been already raised by three or four cents, to a level of thirteen or fourteen cents; so that prosperity had been already discounted by a rise of thirty or forty per cent. On top of this, and despite an enormous increase in the tonnage, came a further raise of two cents per hundred pounds in April, 1903. This was too much. To this exaction, involving not less than $132,000 per year additional freight rates, the lumbermen of Georgia objected. The Interstate Commerce Commission upheld their contention; and in July, 1905, more than two years afterward, the Circuit Court sustained the Commission. Appeal was then taken to the Supreme Court which rendered a decision in 1907, more than four years after the increase had occurred; and during which time the railroads had been collecting the added charge. The shippers had naturally at once shifted the burden upon the public so far as the competition of other lumber-producing centres, each championed by its own railroad or set of roads, would permit. No recovery of this tax, now held to be unjust by the highest court in the land, could possibly be had. The loss was irreparable. The frequency of complaints of this sort, involving the absolute reasonableness of rates, proves conclusively how potent a factor in furthering legislation the rise of the scale of charges had become.
The demonstration of the menace to public welfare of an inordinate concentration of financial power in the hands of a few privileged individuals, served a useful end in bringing about new legislation. The general rise of rates had been a direct outcome of the substitution of combination for competition among railroads. The danger of absolute dominion over all trade, commerce and finance without accountability to the law, was a concomitant of the growth of great railroad systems.[589] A special investigation in 1905 showed, for example, that the majorities of the boards of directors of practically all of the roads east of the Mississippi river might be selected from a group of only thirty-nine persons. The spectacular career of Edward H. Harriman with the Union Pacific and other companies was a convincing argument in itself. The disclosures in the New York insurance investigation of 1905 as to the intricate ramifications of financial power came, as will shortly appear, at a most opportune time for promoting congressional activity. The need of it was, perhaps, never more clearly shown than in the following frank admission by Mr. Harriman in December, 1906,—only a few months after the law had been amended,—made in the course of a general investigation of railroad consolidations by the Interstate Commerce Commission.[590]
Questioned as to where his policy of acquisition was to end, the following colloquy ensued:
"A. I would go on with it. If I thought we could realize something more than we have got from these investments I would go on and buy some more things.
"Q. Supposing that you got the Santa Fe?