385.2311 
 H198a 
 
 ARGUMENT 
 
 OF 
 
 Burton Hanson, General Solicitor, Chicago, Milwaukee 
 AND St. Paul Railway, Before the Joint Com- 
 mittee ON Railroads of the Legislature of 
 Wisconsin, on the Subject of Railway 
 Regulation, February 28, 1905. 
 
 
 Agriculture, manufactures, commerce and navi- 
 gation, the four pillars of our prosperity, are the 
 most thriving when left most free to individual 
 enterprise. — ^Thomas Jefferson.
 
 OAK ST. JFiDSF 
 
 UNIVERSITY OF 
 
 ILLINOIS LIBRARY 
 
 AT URBANA-CHAMPAIGN 
 
 B00K3TAC:o
 
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 Argument of Burton Hanson, General ^oliciUr; Shiczgo, 
 Milwaukee & St. Paul Railway, Before the Joilit Gcrtpi- 
 mittee on Railroads of the Legislature of Wisconsin, on 
 the Subject of Railway Regulation, February 28, 1905. 
 
 ^Ik. Chairman,, and Gentlemen of the Committee : — 
 The subject of railway rates and regulation has 
 been before the people of Wisconsin as an issue in 
 politics almost constantly for the past two j^ears. The 
 campaign has been one of misrepresentation. What- 
 ever opinions have been formed are the result of 
 political and partisan discussion. There has been no 
 calm deliberation or intelligent investigation of the sub- 
 ject. These discussions have largely grown out of 
 misinformation and a desire to present the subject 
 in a way that would prejudice the people against the 
 railways for the purpose of securing votes. State- 
 ments that are untrue in fact or misleading in their 
 effect, when made by persons occupying official posi- 
 tion, and persisted in long enough, come to be regarded 
 as truth, and often are used as the basis of legisla- 
 tion. 
 
 The people of this state have been misled. 
 
 They were misled by the statement that they pay 
 forty-seven million dollars a year for freight. 
 
 They were misled by the statement that a railway 
 commission could save them eleven million dollars 
 annually in freight rates. The fact is that the total 
 freight earnings on Wisconsin business has never 
 
 pEOiZZ-
 
 ve.skciicdjoiirtecn million dollars a year. A commis- 
 sioii thiat v.auid save to the shippers of the state $11,- 
 000,000; of -this $14,000,000 would bankrupt every rail- 
 way c6mpf!,ny that is now solvent and at the same time 
 ruin 'eyery business enterprise that is immediately 
 dependent upon railway facilities for its success. 
 
 They were grossly misled by the statement fre- 
 quently made to them that a railway commission would 
 save each person in the state substantially five dollars 
 a year. 
 
 They were misled when two years ago they were 
 told in the executive message that the freight rates 
 in Wisconsin average from 28 per cent, to 40 per 
 cent, higher than in Iowa. 
 
 They were further misled in the executive message 
 of this year when they were told that the excess of 
 Wisconsin rates over Towa is from 20 to 70 per cent., 
 the percentages being extended in both directions, 
 despite the fact that in Wisconsin a general reduction 
 of rates was put in effect on the first of January, 
 1904, while no change has been made in the Iowa 
 rates. 
 
 They were again misled when they were told that 
 their farms and farm products were worth less here 
 than the farms and farm products of Iowa were 
 worth there, and that this was so because the freight 
 rates were higher here than there. The fact is the 
 Federal census shows that the farm products of the 
 state of Wisconsin are worth in the average 13 per 
 cent, more than those of Iowa. This increase in value 
 is due to the home markets and local consumption 
 provided by the industries fostered by the Wisconsin 
 system of rate adjustment.
 
 It is because of these misleading and untruthful 
 statements made again and again, reiterated and per- 
 sisted in from the political rostrum, and for partisan 
 purposes, that we are here to-day to consider meas- 
 ures of legislation which in the saner moments of 
 Wisconsin would never have been brought to our at- 
 tention. The sober second thought which is sure to 
 condemn such legislation as is here proposed, is bound 
 to come as it did thirty years ago, when it demanded 
 the speedy repeal of the so-called Potter law. 
 
 The banks as well as the large commercial enter- 
 prises of this state are no more ably and conserva- 
 tively managed than are the Wisconsin railways. The 
 clients of these banks and the customers of these com- 
 mercial institutions are not more conservatively or 
 considerately treated than are the shippers and pas- 
 sengers on the railways, and yet had the same men- 
 dacious campaign been made against these banks and 
 commercial institutions that has been made against 
 the railways, there is not one of them in whom the 
 confidence of the public would not have been shaken. 
 
 The issues have proceeded to the point where the 
 responsibility of determination is with you. Your re- 
 sponsibility is not unlike that of the physician, and like 
 the physician, the responsibility increases with the 
 gravity of the case. Exactly as in the practice of 
 the physician, the important question here is the cor- 
 rectness of the diagnosis; that must precede the de- 
 termination of the treatment. It would not do for 
 the physician to administer drastic remedies when 
 there is no real disease, nor will it do to enact reme- 
 dial legislation to cure evils which do not exist. 
 
 I am here to-day not so much to discuss the merits
 
 4 
 
 or demerits of any particular measure that is now 
 pending before this body, as to attempt to show, as 
 was shown two years ago to the satisfaction of the 
 legislature, that the transportation business of this 
 state is administered by the railways fairly, justly 
 and equitably, and that any legislation which will re- 
 sult in disturbing the present adjustment of rates 
 or which goes beyond the prevention of rebates and 
 discriminations of all sorts and kinds, will produce 
 in Wisconsin the same industrial losses and misfor- 
 tunes which like legislation has brought to the states 
 of Iowa and Texas. 
 
 Legislation as far reaching as that now proposed, 
 and which affects so many interests, ought to be based 
 upon conclusions that have been reached not through 
 heated or partisan political discussion, but as the re- 
 sult of investigation made impartially and by a body 
 of men competent through training and experience to 
 pass intelligently and fairly upon the questions in- 
 volved. We may well profit by the example and expe- 
 rience of Great Britain. Since the advent of steam 
 railroads in that country in 1830, there have been many 
 parliamentary investigations concerning the relation 
 of the railroads to the public interests. Indeed, there 
 has scarcely been any legislation in that country reg- 
 ulating railways, that has not been preceded by a par- 
 liamentary investigation. To quote from Joseph Nim- 
 mo, Jr., an eminent writer on railway regulation, — 
 
 ''As the result of these elaborate parliamentary in- 
 quiries, abuses of various sorts have been abated, 
 mistaken ideas in regard to the management and reg- 
 ulation of the railroads of Great Britain have been 
 corrected, sensible remedial expedients have been 
 adopted, many questions at issue have been amicably
 
 settled, and public discontent has been allayed. Thus, 
 British statesmen, folowing the historic example of 
 their illustrious predecessors, have from time to time, 
 in the language of Mr. Gladstone, 'submitted them- 
 selves to the lessons of experience and to the lessons 
 of the hour.' " 
 
 In the United States, with an area twenty-five times 
 that of Great Britain and Ireland, and with a railroad 
 mileage of over 200,000 miles, as against 22,000 miles 
 in Great Britain, there has been only one congres- 
 sional investigation of the railroad question, and that 
 was the senate inquiry of 1886, preceding the passage 
 of the Interstate Commerce Act. Is not the subject 
 important enough to require legislative investigation 
 before legislative action? 
 
 The Tariff Eate. 
 
 In the discussion of railway rates and regulation 
 a large number of statistical tables have been pre- 
 pared purporting to show the amounts which the peo- 
 ple pay for freight. These tables are in the main in- 
 accurate and misleading. 
 
 All that has ever been presented in any of these 
 comparisons is the tariff rate. This has been used 
 without consideration of the traffic which is moved 
 under it and without reference to whether it was a 
 rate under which traffic is actually moved at all. From 
 these tariff rates thus used, averages have been com- 
 puted and percentages deduced from the averages. 
 
 Of and by itself, the tariff rate proves nothing. The 
 average rate on grain in Wisconsin is eight cents per 
 hundred pounds, and the average tariif rate on logs 
 is tivo cents per hundred pounds. On the comparison
 
 6 
 
 of these rates, it would appear that the rate on grain 
 is four times the rate on logs, but eight cents carries 
 the grain 150 miles, while two cents carries the logs 
 50 miles; therefore the rate on grain is 1.07 cent per 
 ton per mile and on logs .8 of a cent per ton per mile, 
 the rate on grain being one-third more than that on 
 logs and not four times as w,uch. To a large extent 
 such error as this runs through all the tabulations and 
 comparisons that have been made. 
 
 Eates That Do Not Cakry the Traffic. 
 
 The people of "Wisconsin have been seriously mis- 
 led in their consideration of the transportation ques- 
 tion by the frequent comparison of rates under which 
 no traffic is moved. At Rhinelander, during one of 
 the political campaigns upon this subject, a very 
 plausible argument was ]:)vesented, showing that the 
 value of farming land in Oneida County is depre- 
 ciated $6.16 per acre in value because the freight rate 
 on oats from there to Milwaukee is 1.09 cent per bushel 
 higher than the rate for a like distance in Iowa. This 
 is a very taking argument, especially among those 
 whose delight is in any statement ''against the rail- 
 roads." But the fact is that it would not make any 
 difference in the shipment of oats from Rhinelander 
 if the rate were $5 a bushel, and it would be of no 
 benefit to the farmers of Iowa if the rate for the same 
 distance within the state of Iowa were $5 a car. No 
 oats are shipped from Rhinelander to Milwaukee or 
 anywhere else. Oats are shipped into Rhinelander 
 and the market price at Rhinelander is the value of 
 the oats at Milwaukee with the freight from Mil- 
 waukee to Rhinelander added. The Oneida County
 
 farmer can get the same price for his oats at Rhine- 
 lander that it would cost to buy the oats at Milwau- 
 kee and ship them there, so that in his case the higher 
 the freight, the better his price. He gets the benefit 
 of the freight, and the greater it is, the larger his 
 benefit. Therefore, the excess of 1.09 cent per bushel, ' 
 if it had any such force at all, would increase the 
 value of his land $6.16 per acre instead of decreasing 
 it. In Iowa it makes no difference what the rate of 
 oats may be between two points within the state. No 
 oats are shipped between points in Iowa. Oats grow 
 everywhere in that state and everyone there has what 
 he needs. They have no occasion to buy them or 
 ship them in. Iowa oats are shipped to Chicago and 
 eastern points. Therefore, it is of no avail to com- 
 pare the rate on oats from Rhinelander to Milwaukee 
 with the rate for a like distance in Iowa, and any re- 
 sult deduced from such a comparison is unfair and 
 misleading. 
 
 It needs the exercise of no imagination to see the 
 effect which such an argument as this would have upon 
 the voters of that community, coming as it did from the 
 chief executive of the state. It could not fail to have 
 great weight with them. It cannot be denied that it 
 was a material factor in influencing the determination 
 of their votes. Such misrepresentation as this was 
 made throughout the state and throughout the entire 
 campaign on this question. The sentiment that is back 
 of this legislation rests upon this misleading of public 
 opinion. Without it, these bills would not be here to- 
 day for us to consider.
 
 8 
 
 Rates to and From the Market. 
 
 Perhaps the most important source of serious mis- 
 representation in the presentation of the railway rate 
 question in Wisconsin has been the selection for com- 
 parison, of rates in Wisconsin which carry the product 
 to market or bring goods from the market, with rates 
 in Iowa which do not reach the market in either direc- 
 tion. It has been practically a universal comparison 
 of market rates with paper rates. It does not make 
 any difference to the shipper what the rate is on com- 
 modities he does not ship and it makes equally no dif- 
 ference to him what the rate is between two points to 
 or from which he does not ship, ^^^lat concerns the 
 shipper of Wisconsin in comparing rates with Iowa, 
 is whether the Iowa shipper can get his commodity 
 to or from the market for less money; and in the 
 overwhelming preponderance of comparisons that have 
 been made between Wisconsin and Iowa, where in both 
 cases compared, the rates reach the market, Wiscon- 
 sin rates are lower mile for mile. The fact that rates 
 are lower for the same number of miles in Iowa, 
 where nothing can be shipped, and where in fact, 
 nothing compared is ever shipped, is neither a bene- 
 fit to Iowa nor disadvantage to Wisconsin. 
 
 Average Rate. 
 
 Another important particular in which the argu- 
 ments made to sustain the railway regulation agita- 
 tion have been erroneous and misleading is the frequent 
 use of the term "average rate," which as it has been 
 used is in fact neither an average nor a rate. The 
 only way in which an average rate could be made 
 to mean anything would be arrived at by the averag-
 
 9 
 
 ing of rates on whicli an exactly equal amount of each 
 commodity averaged liad been moved. The worth- 
 lessness of such computations, as well as their posi- 
 tively misleading character, is shown by the following 
 series of computations: First, we will take the rates 
 in Iowa and Wisconsin on four commodities for the 
 same distance: 
 
 COMMODITY IOWA WISCONSIN 
 
 Grain 8.24 8.50 
 
 Hay 6.17 7.50 
 
 Lumber 6.41 7.00 
 
 Soft Coal 5.07 3.75 
 
 25.89 26.75 
 
 Average rate 6.47 6.69 
 
 Wisconsin .03 per cent higher than Iowa. 
 
 The rate per ton mile for each commodity in both 
 states, is as follows: 
 
 COMMODITY IOWA WISCONSIN 
 
 Grain 1.20 1.07 
 
 Hay 1.00 1.33 
 
 Lumber .85 .67 
 
 Soft Coal 77 .80 
 
 3.82 3.87 
 
 Average .95 .97 
 
 Wisconsin .03 per cent, higher than Iowa. 
 
 But, the fact is that in Iowa these four commodities 
 amount to 55.34 per cent, of the traffic, and are car- 
 ried at a net amount 16.69 per cent, below the average 
 of revenue, while the same commodities in Wisconsin 
 amount to 43.92 per cent, of the traffic and are car- 
 ried at a net amount 17.32 per cent, below the average 
 of revenue. Therefore the net traffic result, when the 
 business is applied to the rates, is that on these four
 
 10 
 
 commodities Wisconsin pays .63 per cent, less than 
 Iowa, in spite of tlie average rates that are, on the 
 face of them, higher. These are as plausible compari- 
 sons as any which have been made, they are as accu- 
 rate as anv that have been made and are as mislead- 
 ing as any that have been made. They have all of the 
 characteristics of the comparisons which have been 
 presented to the people for the formation of their 
 opinion upon this important question and yet, when 
 analyzed, they show the exact opposite of the facts. 
 
 Conclusions based upon such premises as these 
 cannot fail to be as erroneous as the basis of them is 
 false, and yet it is upon these arguments that the 
 opinions of the people of the state of Wisconsin, con- 
 cerning the regulation of railroad rates have been 
 built. They have been led to believe that the rates 
 of Wisconsin are higher than those of Iowa, and that 
 the farmer of Iowa gets his product to market for 
 less money than the farmer of Wisconsin; that the 
 merchant of Iowa gets his goods from the market for 
 less money than the merchant of Wisconsin. This con- 
 viction has been forced upon them by the comparison 
 of elements which are not related to each other, and 
 between which no comparison is possible that will pro- 
 duce an intelligible result. The rates of freight do 
 not represent what the people pay, nor do the miles 
 on the schedules of the railroads represent the haul 
 of their tonnage. A rate does not become a factor 
 in traffic until it is applied to a commodity shipped, 
 and a given number of miles has no relation to the 
 freight service of a state until a commodity is moved 
 that distance. The determAning factor in any consid- 
 eration of transportation, and the only factor %ipon
 
 11 
 
 ivhich the cost of the service can be ascertained is the 
 application of the traffic moved to the rate and the 
 distance. 
 
 Not until the traffic of the states of Iowa and Wis- 
 consin is analyzed and the rates under which it is 
 moved are applied to the commodities actually trans- 
 ported, can a result be reached upon which to base an 
 intelligent opinion. The campaign for railway regu- 
 lation has been carried forward wholly upon the paper 
 basis of rates and distance, with no reference to the 
 actual results arrived at from the traffic. "We are 
 now confronted with bills which have been presented 
 to the legislature for the purpose of correcting the 
 evils of • a situation which is claimed to exist, the ex- 
 istence of which is dependent for proof upon the argu- 
 ments that have been based on such foundation as 
 this. If the condition does not exist and if the peo- 
 ple have been led into the belief of substantially the 
 exact opposite from the real truth, it would seem to 
 follow that a large measure of the reason for the pas- 
 sage of such a law is thereby removed. 
 
 Reduced to a general statement, the claims for the 
 passage of these bills may be said to rest upon the con- 
 tention that the rates charged for freight in Wiscon- 
 sin are too high and that they are inequitably dis- 
 tributed; the" specification of the general charge resting 
 upon comparisons with assumed conditions in the 
 state of Iowa.
 
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 14 
 
 The Basis of the Tables. 
 
 The basis of the tables presented herewith is the 
 percentage of each class of commodity carried in both 
 Iowa and Wisconsin as sho'^>ni by the reports of the 
 railroad commission of each state for the year 1902. 
 This is the latest year for which complete reports are 
 published in both states, and in a volume of traffic as 
 large as that which is treated here, the difference in 
 the proportion of each commodity carried will not be 
 material as between different years. It should be borne 
 in mind that the object of these tables is to establish 
 the relation of rates to other rates in showing which 
 the proportion of the whole traffic, rather than the ac- 
 tual volume of the traffic, is the important factor. 
 
 The Eate per Toit Mile. 
 
 It is practically an impossibility to arrive at the 
 exact and actual rate per ton mile at which each com- 
 modity is carried in the business treated in these 
 tables. To do this would require the compilation of 
 every waybill on every individual shipment in both 
 states for the entire year, a task which is manifestly 
 out of all proportion to the value of the result thus 
 attained. It is not intended to represent that the 
 rate per ton mile for each commodity as given in these 
 tables is the exact rate per ton mile which the traffic 
 in each instance bears, but it is approximately so, and 
 for the purpose of comparison they are relatively ac- 
 curate. They are arrived at by taking the best judg- 
 ment of a number of traffic officials familiar with the 
 business of both states as to the average haul on each 
 of the different commodities, which will carry them
 
 15 
 
 to and from the market, and the average rate which 
 will carry the commodity for that haul. The accuracy 
 of the judgment of these gentlemen is amply at- 
 tested by the fact that the net result arrived at from 
 their estimates is substantially the same as a compu- 
 tation of the rate per ton mile shown by dividing the 
 total freight receipts of each state by the total ton 
 mileage. 
 
 'o^ 
 
 Modification of Eate by Teaffic. 
 
 It has long been recognized by traffic officials that 
 the revenue from freight is beyond their control. It 
 has long been established that the traffic will not pro- 
 duce in the aggregate the result called for by the 
 tariffs. This is shown very conclusively by these tables, 
 in which the amount of modification of the net rate 
 per ton mile resulting from the character of the traf- 
 fic carried is presented. The average rate called for 
 by the separate rates per ton mile in the Wisconsin 
 table is 1.39 cent, and if an equal amount of traffic 
 Were carried under each of the rates, the net rate 
 per ton mile on the business carried would be 1.39 
 cent. But we find that 7.61 per cent, of the business 
 is merchandise carried at 115.83 per cent above the 
 average rate. So that the net result is increased 
 7.61 per cent, of 115.83 per cent, or 8.81 per cent. 
 On the other hand, we find that 19.53 per cent, is 
 lumber, which is carried at 51.80 per cent, below the 
 average rate, which results in a decrease of the aver- 
 age amounting to 10.12 per cent. Carrying these fig- 
 ures out, we find that in Wisconsin 79.37 per cent, 
 of the traffic results in a decrease of the average rate
 
 16 
 
 of 31.08 per cent., while 20.63 per cent, of the traffic 
 results in an increase of 12.58 per cent. This makes 
 a net reduction of 18.49 per cent, in the rate per ton 
 mile, which amounts to .26 of a cent and reduces the 
 rate per ton mile from 1.39 to 1.13. In Iowa we find 
 that the average rate per ton mile as shown by the 
 estimated rates per ton mile is 1.41 cent, and that 
 78.35 per cent, of the traffic decreases the rate 20.28 
 per cent., while 21.65 per cent, of the traffic increases 
 the rate 10.36 per cent., making a net decrease of 9.92 
 per cent., which reduces the rate of 1.41 cent to 1.27 
 cent. This shows that the net rate per ton mile in 
 Iowa for that year was 12.3 per cent, higher than Wis- 
 consin, which is in some measure accounted for by 
 the fact that 24.5 per cent, of the Iowa traffic is grain, 
 which is carried at 12.15 per cent, higher than Wis- 
 consin. The rate is not only that much higher than 
 Wisconsin, but the volume is almost twice as much. 
 These two elements go a long way toward accounting 
 for the difference in net rate per ton mile. The fact 
 is, that taking the different character of the traffic 
 displayed into account, the adjustment of rates as 
 between Iowa and Wisconsin is remarkably just and 
 equitable.
 
 17 
 
 Diagrams of Traffic. 
 
 w
 
 18 
 
 PROPORTIONAL VOLUME or various COM MODITI E5 mWISCONSIN TRAf flC 
 
 e.e* 
 
 ME3 , tiOuORs 
 
 b seen 
 
 L47 
 
 ^'l- tTC 
 
 j7 Lw^r 
 
 M E RCmANOI 5C 
 7? 61 
 
 tivc STOCH *■ ! 
 
 CCMCNT, BRICK ^ 
 
 LIME rsTON e , 5AN0 ETC I ^^^ 
 
 S '59 J i»4 
 
 J 1 J. 1 
 
 r L o u « 
 
 rRulT5 fcvEGCTABLCS 
 2.59 
 
 i 
 
 O R ES 
 «8 
 
 SOFT COAL 
 9.S7 
 
 koes 
 •SI. 
 
 ©RAIN 
 ■3.33 
 
 L U M B CR 
 I9.S3 
 
 0< LB 9 
 
 
 M^HO COAL 
 3 46 
 
 1 i 1" 
 
 L| PI& b BU30M iMACMiMCWY |»*'»-» 
 
 I 1.03 T ez I •**
 
 19 
 
 PROPORTIONAL VOLUME OFVARI0U5 COMMODITIES mlOWA TRAmC. 
 
 STOnc . Sa.no etc. 
 3.19 
 
 r RuiTs « 
 I5J 
 
 MtftCHANOiSC 
 69i 
 
 CtMtNT. BRICK fcLIME 
 2j83 
 
 MOU5CM0L0 C0005 
 10} 
 
 SUGAfl 
 '42 
 
 .3S 
 
 01 L5 
 
 l»lfWMCIIT3 lip 
 ,70 
 
 MISCCI.LANCOU3 
 650 
 
 PACKING HOUSr 
 
 PROOUCTa 
 
 I.SS 
 
 LOGS 
 .72 
 
 i§3 OitsirD MCAT3 .67 rjoxll'S: 
 
 11 ■ I I 1 ■£ o J I ^ 
 
 ALT I RAH.5 l!^*"ts-ttircO«C T°\^f' 
 
 r LO UR 
 2J+ 
 
 IOTHCR MILL PRODUCTS 
 ISO 
 
 HAY 
 1.14 
 
 HARD COAL 
 112 
 
 H# 
 
 L UM B ER 8.03 
 
 LIVE STOCK 9.68 
 
 SOFT COAL 21.63 
 
 GRAIN 24.55
 
 20 
 
 The diagrams are prepared to scale for the purpose 
 of exhibiting the proportional relations of the differ- 
 ent lines of data contained in the tables. 
 
 Proportionax, Volume of Traffic. 
 
 These diagrams both for Wisconsin and Iowa show 
 the proportional amount of each class of commodity 
 handled, and it is to be noted that the Wisconsin dia- 
 gram shows a rather more even distribution of com- 
 modity, and a slightly reduced tendency to concentra- 
 tion within a few lines. To a large extent this is 
 governed by the difference in the character of the two 
 states. Iowa is an essentially agricultural state, the 
 great bulk of her traffic being limited to grain, soft 
 coal and live stock, together with lumber, which forms 
 a staple bulk in the traffic of all states. Wisconsin, 
 on the other hand, shows an increase over Iowa in 
 flour, which is an industry fostered by the milling-in- 
 transit rate, and also in hard coal in which the traffic 
 is stimulated by the commodity tariffs. In the area 
 in which Iowa shows four commodities AVisconsin 
 shows eight, which represents in a general way the 
 diver sitv of interest in Wisconsin, and the concentra- 
 tion of business in Iowa. This difference is largely 
 due to the adjustment of railway rates to the needs 
 of business, rather than determined by the ar- 
 bitrary rule of distance. The one meets the necessi- 
 ties of commerce, while the other forces commerce 
 within its limitations.
 
 21 
 
 The Relative Eate per Tox Mile in Iowa axd 
 
 Wisconsin. 
 
 The diagram showing the relative rate per ton mile 
 in Iowa and Wisconsin, is a complete exposition of 
 the fact that as between the two states, the rates are, 
 generally speaking, not dissimilar. Especial atten- 
 tion on this diagram is called to the figures indicat- 
 ing the amount of traffic moved on the different rates. 
 In all considerations of transportation matters, this 
 is the important factor. For instance, Wisconsin 
 shows a rate of four cents per ton mile on poultry, 
 while only .28 of one per cent, is moved under this 
 rate. On the other hand, Wisconsin shows a rate of 
 .67 of a cent per ton mile on lumber on which practi- 
 cally one-fifth of the entire traffic of the state is moved. 
 On the basis on which all rate comparisons have here- 
 tofore been made, the rate on the poultry would stand 
 as an equal factor with the rate on the lumber. But 
 when the amount of traffic moved under the two rates 
 is considered, the exceedingly high rate on the poul- 
 try becomes of infinitesimal consideration in the reg- 
 ulation of transportation. There is another element 
 to be considered, and that is the value of the commodi- 
 ties transported. The exceedingly high rate on poul- 
 try puts the dressed poultry down in the market at a 
 -tax of not exceeding 2^ per cent, of its value, while 
 the exceedingly low rate on lumber, taxes that com- 
 modity 15 per cent, for delivery. Certainly, the poul- 
 try raiser could hardly expect to get his product to 
 market for less than 2^ per cent., and no one could in 
 fairness ask the lumberman to pay more than 15 per 
 cent, for the market of his product. Similar com- 
 parisons to this run all through this diagram. It not
 
 22 
 
 only shows the justness of the "Wisconsin rates, but the 
 more thoroughly it is studied, the more strongly will 
 it demonstrate that rate making is not only technical 
 and scientific in the abstract, but that there is much 
 of scientific application and much more of justice in 
 the adjustment of those rates. 
 
 The Eelation of Rate to Traffic. 
 
 These diagrams for both Iowa and Wisconsin show 
 the relation of rate and traffic, and illustrate the fact 
 that the large volume of traffic moves on the low rate 
 and that the high rates carry the small volume.
 
 23 
 
 en o 
 o o o 
 
 2.50 
 2.00 
 1.50 
 
 4.00 
 3.50 
 3.00 
 
 
 
 lof^ 
 
 
 5> 
 
 
 
 
 
 
 r U u u r\ -^ -■ 
 
 
 
 t 
 1 
 
 
 
 
 
 OTHER MILL PRODUCTS-*— 
 
 
 i.ij 
 
 1 
 
 
 
 
 
 GRAIN-* — 
 
 
 
 / 
 
 
 
 
 ' %l, 
 
 
 HAY-< ■ 
 
 
 
 X 
 
 
 
 
 FRUITS 8iVEGETABLE5-<- 
 
 
 
 Zf 
 
 
 
 
 LIVE STOCK-< 
 
 
 
 
 
 
 
 
 
 DRESSED MEATS-< 
 
 < 
 
 
 tss- 
 
 u 
 
 ^ 
 
 
 OTHER PACKING HCU5E PROD. 
 
 
 POULTRY. GAME & FISH-( 
 
 
 
 
 
 
 
 
 > 
 
 s i 
 
 o^f 
 
 5 f 
 
 >' 
 
 n 
 
 0' 
 
 za 
 
 
 
 WOO L-< 
 
 
 
 
 >AJ9 
 
 WJ2 
 58 
 
 v: 
 
 
 5 
 
 h 
 
 ii.-i 
 
 f> r 
 5 
 
 9 
 9 
 
 O 
 
 
 
 
 HIDtS SLLATHcn-^ 
 
 
 
 
 
 
 HARD COAL-< 
 
 
 ) i 
 
 
 
 
 SOFT COAL-* 
 
 
 nc ^ 
 
 t 
 
 
 
 \ 
 
 >^ 
 
 
 COKE-< -■ 
 
 
 1 
 1 
 
 / 
 
 
 
 Co7 
 
 
 ORCS-< ■■ 
 
 
 N 
 
 N 
 
 
 
 
 STONE. SAND ETC.-< 
 
 
 
 ^<< 
 
 
 
 
 
 SALT -< ■ 
 
 
 
 3> 
 
 47 
 
 43 
 
 
 
 
 LU MBlR -< 
 
 
 * 
 
 
 
 
 LOGS ETC-:< 
 
 
 
 •^.,\ 
 
 
 
 
 01 L5^ - 
 
 
 
 .10-^ 
 
 
 
 Of 
 
 ^ 
 
 
 SUGAH-< 
 
 
 _^^ 
 
 y> 
 
 
 
 — 
 
 i 
 
 
 IRON-PIG & BLOO(/-< 
 
 
 
 
 
 
 •• RAIL5-< 
 
 
 
 
 CASTINGS SiMACH'Y- 
 
 
 
 1 
 
 
 
 
 
 »» BAR & SHEET'* 
 
 
 JO, 
 
 
 
 
 
 CEMENT, BRICK &LIME-* 
 
 
 "'-<. 
 
 ,/*^ 
 
 
 AGRICULT'L IMPLEMENTS 
 
 
 
 
 
 1 
 
 
 WAGONS, CARRIAGES ETC^ 
 
 .^ 
 
 1 
 
 
 
 
 1-«-^ 
 
 *!..-> 4T 
 
 
 
 
 WINES, LIQUORS 8iBEER-«- 
 
 
 
 
 - ^IJ3> 
 
 
 
 
 H.H. GOODS &FURNITURC-*— 
 
 ■ 
 
 
 "♦•"v. 
 
 ^ 
 
 
 
 
 
 MISCELLANEOUS-* 
 
 . 
 
 
 
 
 -^ 
 
 
 
 
 MERCHANDISt-< 
 
 
 
 
 
 
 ^' 
 
 
 ' 
 
 o 
 
 UI 
 
 o 
 
 o 
 
 
 
 O 
 O 
 
 IN> 
 
 o 
 
 . 
 
 
 in 1 
 
 3
 
 24
 
 25
 
 
 — 
 
 
 
 5 
 
 ? 
 
 
 ^ 
 
 * 
 
 ^ • 1 ■ f=^^ 
 
 . ', 
 
 -x: 
 
 — • 
 
 1 
 
 n. n — ^ * 
 
 
 
 
 
 
 
 
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 • 
 
 -^ 
 
 
 
 
 
 
 m 
 
 
 a 
 
 
 
 m. 
 
 
 
 
 
 
 
 
 
 
 ' 
 
 
 
 
 5 
 
 
 
 
 
 
 
 
 s 
 
 
 -s 
 
 
 
 
 
 
 2 = 
 
 
 - ^ -m '^ ■^~ -^ % ^ - • 
 
 £ < ^ 5 -s^ E -_ - £ < := 
 
 - = 5 « .-^ = «' — S — <; 
 
 — = I « c ? 
 iz z. ~ 'E '^ "E
 
 27 
 
 I .74 
 
 
 ^: 
 
 Gram 
 Fkm" 
 
 ^ ... 
 
 Ores 
 
 
 A-renge nte 
 
 -53 
 .57 
 -50 
 
 7.42 
 .74 
 
 -r«^jv^
 
 28 
 
 Taking the rates of the state in comparison with each 
 other, we find that 79.37 per cent, is carried below the 
 average ton mile tariff rate for the state, and 20.63 per 
 cent, above the average. When the average rate is 
 applied to the volume of traffic, the net revenue of the 
 carriers is increased 12.58 per cent, by the amount that 
 is carried above the average rate, and the amount which 
 is carried below the average decreases the net revenue 
 31.08 per cent., making the final result of the applica- 
 tion of the traffic to the rate a net reduction of 18.49 
 per cent. It is this fundamental element of the rate 
 question which has never been considered in all the 
 arguments upon which the people of Wisconsin have 
 been asked to base their judgment. 
 
 The utter futility of comparing tariff rates is illus- 
 trated by the analysis of traffic presented herewith. 
 The traffic rate per ton mile on poultry is 187.77 per 
 cent, higher than the average rate. On the face of it, 
 presented to the poultry raisers of Wisconsin, this 
 statement could not fail to create the impression that 
 they were unfairly dealt with, and as it has been so 
 frequently put to them, ''robbed." The fact is that 
 the traffic in this commodity amounts to .28 of one per 
 cent, of the total traffic, and the total amount of freight 
 paid under this rate for 1902 was $260,167.56, of which 
 the amount added by the excess over the average is 
 $169,759.40. On the other hand the grain of the state 
 which amounts to 13.38 per cent, of the traffic, is car- 
 ried at 23.2 per cent, below the average tariff rate 
 per ton mile on which the total freight paid is $3,- 
 325,704.25, the reduction by the variation from aver- 
 age amounting to $994,514.31, or almost a million 
 dollars a year. While the effect of the increase froim
 
 29 
 
 average on poultry would have been vigorously called 
 to the attention of the farmers of Wisconsin, nothing 
 has ever been said to them about the decrease from 
 average on grain. The fact is that there is no basis 
 except that of the relation of freight to the value of 
 the commodity transported, on which the relative 
 rates of different commodities can be compared. The 
 rate on poultry is 4 cents per ton mile and the rate 
 on grain is 1.07 cent per ton mile. Both these figures 
 are absolute and not in any way relative; there is 
 no way in which they can be made so. The only ques- 
 tion to be determined is whether 4 cents is a fair rate 
 on poultry and whether 1.07 cent is a fair rate on 
 grain. The rate on poultrj^ lays the product down at 
 the market for 2.5 per cent, of its value, and the rate 
 on grain lays that down in the market for about 12 
 per cent, of its value. This reduces the transporta- 
 tion of the two conmiodities to a basis on which the 
 relative rates can be compared, and there is no other 
 basis on which any relation between the rates on dif- 
 ferent commodities can be shown. From this com- 
 parison it appears that the rate which is 187.77 per 
 cent, higher than the average rate is actually lower 
 than the rate which is 23.2 per cent, below the aver- 
 age, so far as results are concerned. This is a basis 
 to which no rate comparison out of all the thousands 
 that have been made, has never been reduced. 
 
 Revenue Determined by Traffic, Not Rate. 
 
 It should be understood that in all the discussion of 
 the analysis of traffic presented herewith, the term 
 average rate is used merely as an arbitrary point of 
 computation. The fact that a rate is above or below
 
 30 
 
 this arbitrary point has no bearing whatever of itself 
 on the question as to whether the rate is high or low. 
 The actual amount received for transportation de- 
 pends as much on the character and amount of the 
 tonnage as it does on the rate. It is therefore neces- 
 sary to arrive at a point at which the rate would be 
 fixed, if an equal amount of tonnage were moved at 
 each of the different rates, in order to compute the 
 amount which a variation in amounts of tonnage at 
 varying rates affects the result. This is important 
 as showing that the regulation of tariff rates either 
 by the carriers or by a commission, will not determine 
 the revenue to be derived from the traffic. A decrease 
 of the proportion of a commodity carried at below the 
 average of the tariff rates will reduce the revenue 
 without any modification of rate, while an increase of 
 any commodity carried above the rate will increase 
 it. The tariff rates are merely the measure with which 
 the traffic is reduced to revenue. The amount of the 
 revenue is determined by the volume of commodities 
 measured after the measure has been fixed. For in- 
 stance, if it is proposed to reduce the revenue of the 
 carriers, it is a practical impossibility to determine in 
 advance what result a given reduction in rates would 
 produce. 
 
 Let us suppose, for illustration, that it is determined 
 to reduce the revenue 10 per cent. On the theory on 
 which railway rates have heretofore been discussed, 
 this could be arrived at by making a general or hori- 
 zontal reduction of 10 per cent, in the tariff rates. 
 This would reduce the average of the tariff rate per 
 ton mile as shown on the accompanying analysis of 
 Wisconsin traffi-c from 1.39 cent to 1.25 cent. The tariff*
 
 31 
 
 rate is modified 18.49 per cent, by the cliaracter of the 
 traffic which in the case of the present average re- 
 duces it to 1.13 and after the 10 per cent, reduction 
 would reduce it to 1.02. This would be a net reduc- 
 tion of .23 of a cent instead of .26 of a cent., or a result 
 20 per cent, in error. But even if the reduction were 
 made by a percentage that would reduce the net result 
 10 per cent., the only thing that would actually produce 
 that effect in the end would be the exact maintenance 
 of the proportions of traffic between the different com- 
 modities, as it existed at the time of the reduction. 
 
 The Adjustmei^t op Rates. 
 
 The adjustment of rates as between each other, as 
 shown by these tables and diagrams, is very interesting 
 and instructive. This is especially so, as there is no 
 basis known to the transportation expert, on which 
 a given rate for a given commodity can be arbitrarily 
 arrived at. The traffic official cannot fall back on the 
 simple computation of cost, as the merchant can, in 
 arriving at his charge. The elements of cost which 
 enter into transportation are entirely beyond human 
 knowledge in advance of the performance of the ser 
 vice, and are only subject to general estimate, as re- 
 lated to any particular item transported, after the 
 service is performed. The element of cost in trans- 
 portation is a very elusive factor. The only method 
 known to the traffic official, is to find tlie rate that will 
 move the traffic. In the very nature of this process, it 
 is no rule at all. It is for this reason that wherever 
 the regulation of railway rates by arbitrary limitations 
 or by inexperienced effort has been attempted, it has 
 resulted in disaster to the carriers, and misfortune to
 
 32 
 
 the shippers. In Texas, where rates are made by a 
 state commission, the business of the state has been 
 concentrated at the points favored by the discrimi- 
 nations of the conmiission, and within the lines aided 
 by their inexpert and experimental rate-fixing. In 
 Iowa the inelastic nature of the tariff based only on 
 distance has driven practically everything except agri- 
 cultural and mercantile business out of the state. The 
 result of removing from commerce the benefits of prop- 
 erly adjusting its transportation rates is strikingly 
 shown by the effect upon the business of Iowa. In 
 1902 the strictly local business of the Chicago, Mil- 
 waukee & St. Paul Eailway in Iowa was 18.6 per cent, 
 of its total business in that state, while in Wisconsin 
 the local business was 29.2 per cent., the fostering of 
 local business by the adjustment of rates giving the 
 people of Wisconsin 59 per cent, more of their own 
 business than the people of Iowa could secure under the 
 inelastic rates provided by a distance tariff under 
 maximum limits. This explains, to a degree at least, 
 the following editorial which appeared in the Des 
 Moines Daily Capital, February 4, 1902: 
 
 The people of Iowa realize that they have a great 
 state and they are proud of it, but they are asking 
 themselves why mannufacturing industries, according 
 to the census of 1900, increased in a greater propor- 
 tion in Wisconsin, Illinois and Missouri than in good 
 old Iowa. Iowa has great coal fields — in fact is the 
 sixth state in the union in the production of bituminous 
 coal. In some parts of the state oak and hickory wood 
 suitable for wagon timber abound. In all parts corn 
 and potatoes are produced, and corn and potatoes make 
 starch. In all parts of the state sweet corn, tomatoes, 
 peas, beans, pumpkins, squashes, and everything go- 
 ing to make up canned goods are grown in abundance. 
 
 The soil is especially adapted to growing oats for 
 oatmeal; likewise it will produce broom corn of the
 
 33 
 
 best quality. Milk is already a groat ;pro<^y v)t , ^nd 
 there is room for condensed milk factories. Hogs and 
 cattle are the well known staples, bii^ ^'aciking houses 
 are few ; in fact, fewer than they wer6 ten "years ago> 
 With all these raw materials at hanci. .^ky has iowft 
 not grown in manufacturing mdustr les L Xlie.Qapital 
 is free to say that we believe the fault is with the 
 Iowa railroad law and its ironbound conditions. There 
 has been no reduction of interstate rates to and from 
 Iowa points in twelve years, not since the present 
 Iowa railroad law was enacted. 
 
 Not a single new industry has been built up in Iowa 
 on account of the present law. No one industry has 
 been especially favored and developed, excepting the 
 wholesale grocery trade, which appears to have espe- 
 cially flourished. What is to be done under these cir- 
 cumstances? What can be done for the upbuilding of 
 Iowa industries, Iowa factories, and Iowa packing 
 houses ? There must be some loosening up of railroad 
 matters to allow factories and packing houses to be 
 taken care of. There will be no particular develop- 
 ment under present conditions. Numerous packing 
 houses and other industrial establishments are stand- 
 ing idle in various parts of the state. Others have been 
 removed to Illinois and other neighboring states. 
 
 They have not gone to Chicago. They have not been 
 swallowed up by the great cities. They have gone to 
 towns in Illinois and other states no larger than those 
 they left behind. What committee of the legislature 
 will have the foresight to take up and deal with this 
 problem honestly and conscientiously? The prosper- 
 ity of the Iowa farm depends much upon the prosperity 
 of the Iowa factory. These are pressing problems that 
 ought to be considered by the proper committees of 
 the present general assembly. 
 
 To this astonishing exposition of the industrial con- 
 dition of Iowa, might well have been added a reference 
 to the fact that with all the live stock which is raised 
 there, not a hide is tanned in the entire state, while 
 Wisconsin, with very little live stock produced, has 
 large and growing tanning industries.
 
 34 
 
 The' United States census shows that between 1890 
 ahd -IGOO the- fti^'nirfacturing establishments of the 
 StaiiecFf Texcts- increased in number 3,290, or 131 per 
 '^eiit; But ^ when -this increase is examined it shows 
 that tild regnlaf ion of railway rates has not only not 
 de\''eloped manufacturing in Texas, but has had quite 
 the contrary effect. Of the increase of 3,290 ''manu- 
 facturing" establishments, we find upon consulting the 
 details that 2,650 were cotton gins, 90 were cotton seed 
 oil and cake mills and 325 newspaper and printing 
 plants, none of which "manufacture" anything; 184 
 were "saddlerv" establishments, which includes har- 
 ness shops and repair shops, and 323 were lumber mills 
 which are located there because the timber is there, 
 and not because the rates are favorable. As these 
 five items alone amount to 282 more than the total in- 
 crease, it is evident that there must have been, in 
 general a decrease. Not onlv is there no increase in 
 manufacturing in Texas, but under the system of rates 
 in force there manufacturing is being centralized, as 
 it is impossible to distribute it without the adjustment 
 of rates to conditions. It is significant that while the 
 Texas commission has been given the power to make 
 this adjustment, it is evident they lack the ability to 
 produce the result which the railroads have produced 
 in other states. In the one matter of flouring mills is 
 presented a very convincing exposition of the indus- 
 trial effect of taking the rate-making power away from 
 people who know how to make rates. In 1890, when 
 the tariffs of the railroad companies were in force in 
 Texas, there were 690 flouring and grist mills reported 
 in the state, while in 1900, after almost ten j^ears of 
 railroad regulation, the only important industry in the 
 >State of Texas that vitally depended on the adjust-
 
 35 
 
 ment of freight rates, had been reduced to 289 estab • 
 lishments. The number of mills decreased 58 per cent., 
 while in the same time the production of cereals in the 
 state increased 70 per cent. But, the most startling 
 showing is that in the face of a reduction of 58 per cent, 
 in the number of establishments the total output in- 
 creased 24 per cent., showing that the small mill is 
 being driven out, and the business concentrated in the 
 Iiands of those ^ho happen to be located advanta- 
 geousl)^ Under the proper adjustment of freight rates 
 these inequalities of location are overcome. Tliis is 
 the whole problem of rate making, and one which the 
 Texas commission after ten years of effort, has shown 
 itself absolutely unable to solve. It has cost 58 per 
 cent, of the flour mills of Texas their industrial ex- 
 istence, in the face of an increase of 70 per cent, in 
 the raw material and an increase of 24 per cent, of the 
 output, to change the adjustment of freight rates from 
 the hands of the railroads who know how, to the hands 
 of commissioners who do not know how. On the other 
 hand, in Wisconsin, under the transportation adminis- 
 tration of the railways, while the production of cereals 
 in the state increased but 8 per cent., the product of 
 flour and grist mills increased 54 per cent., showing 
 that Wisconsin not only mills her own wheat, but 
 brings it in to a large extent from other states. 
 The number of mills increased 44 per cent., showing 
 that the policy of the railroads is to afford distribu- 
 tion of business rather than its concentration. In 
 C)ther words, with state regulation in Texas thev have 
 no flour mills where they had them once, and with 
 railroad management they have mills in Wisconsin 
 where they did not have them ten years ago. On the 
 other hand, the government regulation of rates in
 
 36 
 
 Texas, has concentrated the milling business in the 
 hands of a few, driven 58 per cent, of the mills in the 
 state out of the business, and driven 40 per cent, of 
 the increased cereal production out of the state to 
 be milled. While this has been going on in Texas, 
 the railroads have provided tariffs in Wisconsin under 
 v^hich the milling output increased 26 per cent, more 
 than the production of cereals within this state, and 
 the new mills established made an increase of 44 per 
 cent. 
 
 In Texas there are 93 kinds of industries reported 
 in the census, of which 17 show over a million dollars 
 investment each. In Wisconsin with less area and 
 less population there are 155 lines of industry reported 
 of which 37 show over a million dollars investment 
 each. If the Texas system of adjusting rates was con- 
 ducive to industrial development, it would seem that 
 in the ten years it has been in operation something 
 other than negative results would have been attained. 
 
 The analysis of Wisconsin traffic which is used in 
 this connection shows in detail how the adjustment of 
 rates has worked itself out in the course of vears, 
 under the skillful hands of the traffic experts who have 
 had them in charge. It would be much easier to 
 say that this adjustment should be revised, than it 
 would be to say how it shall be revised. No specific 
 inequities are complained of, it is not charged that any 
 industry of Wisconsin is suffering from excessive 
 freight rates, agriculture is thriving, and the mer- 
 chants of the state are prosperous. The more the traf- 
 fic of the state as it is now controlled is studied, the 
 less there appears to be any adequate reason, founded 
 upon just cause, for making any radical change in
 
 37 
 
 the transportation system of the state. In comparing 
 the analysis of the traffic of Wisconsin with Iowa, 
 there appears to be still less reason for making any 
 change. In comparing conditions in Wisconsin with 
 those in Texas, there seems to be every reason for 
 avoiding a change. In Iowa the same number of com- 
 modities are carried at above the average rate that 
 are in Wisconsin, the tonnage on them is 1.02 per cent, 
 greater than in Wisconsin, and the additions to reve- 
 nue from them 2.21 per cent, less than Wisconsin, 
 while the tonnage carried at less than the average rate 
 in Iowa is 1.02 per cent, less than Wisconsin and the 
 decrease of revenue therefrom is 10.80 per cent. less. 
 There is nothing in the adjustment of the rates in 
 either state as between each other, that specially argues 
 in favor of either one. Each seems to be well calculated 
 to carry to market the traffic which each state pro- 
 duces. But it should be remembered that the bulk of 
 the traffic which moves from Iowa to market moves 
 under interstate rates, and not under rates fixed by 
 the Iowa commission. The leading industrial pro- 
 duct of Iowa is soft coal, and the leading industrial 
 product of Wisconsin is lumber. Soft coal is handled 
 in Wisconsin at 4 per cent, higher than Iowa and lum- 
 ber is handled in Iowa at 27 per cent, higher than Wis- 
 consin. Certainly Wisconsin is not at a disadvantage 
 on her jDrincipal commodity. Grain is an outgoing 
 product in both states and is handled in Iowa at 12 
 per cent, higher than Wisconsin. Wherever the rates 
 on specific items are compared, it will be found that the 
 ruling interests of the communities served are met by 
 the rates. What puts Iowa at a disadvantage, and con-
 
 38 
 
 fines her activities practically entirely within her nat- 
 ural limitations, is the prohibition which the laws of 
 that state place upon the railroads in adjusting the 
 rates other than within the fixed degrees of distance. 
 All that has saved Iowa from dire results is the ad- 
 justment of interstate rates into other states for 
 market. 
 
 The T.\x of Transportatiox on Commerce. 
 
 There has been more or less discussion in the various 
 arguments which have been made against the railway 
 administration of transportation in Wisconsin, of the 
 fact that transportation is a tax on commerce, and 
 that as such it is of the utmost importance that it be 
 justly and equitably levied. All this argument has 
 been indulged in with no attempt to prepare a sched- 
 ule of the rates upon which this levy is made, though 
 such a schedule is a very easy exhibit to prepare. Per- 
 haps it has better served the purpose of the opponents 
 of the railways to leave this matter largely in gener- 
 ality, so that people might be more readily scared 
 with the exercise of the taxing power by a private cor- 
 poration, than they would be by the facts showing how 
 that power is exercised. 
 
 The accompanying table shows an estimate of the 
 value of a carload of various commodities together 
 with the freight on each in both Wisconsin and Iowa, 
 and a computation of the tax which is levied upon 
 conmaerce in each state on each of the specified com- 
 modities, in Iowa by the government, and in Wiscon- 
 sin by the railroads. It is not a showing which is
 
 39 
 
 The Tax of Transportation on Commerce.
 
 40 
 
 
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 42 
 
 calculated to give the people any occasion for alarm 
 over the exercise of the taxing power by the trans- 
 portation companies. 
 
 This is intended as an exposition of the situation 
 in Wisconsin, and therefore rates have been selected 
 which will represent a fair distance for which the com- 
 modity specified is handled, in actual experience, and 
 places from which the commodity actually moves have 
 in each instance been taken. So far as possible points 
 have been selected wholly within the state of "Wis- 
 consin, so that a fair comparison can be had with 
 the distance tariff of Iowa. In some commodities 
 there is practically no movement whatever within the 
 state of Iowa, and in those commodities the compari- 
 son has been based on Chicago, which is their natural 
 market. In every case in which a rate wholly within 
 Wisconsin is used it is compared with a rate wholly 
 within Iowa except in the case of sash and doors, 
 where the natural movement of the commodity in Wis- 
 consin is largely outside the state, and in Iowa largely 
 within the state. 
 
 In the preparation of this comparison an effort has 
 been made to compare the actual conditions of traffic 
 as they exist, and not mere rates for traffic that ia 
 not shipped. 
 
 This table bears out more in detail than the analy- 
 sis of traffic presented herewith, the actual adjustment 
 of rates to conditions which is afforded by the Wis- 
 consin system as opposed to that of Iowa. 
 
 It is not contended that there is any fixed ratio of 
 tax which commodities may bear for transportation, 
 but this table does show that there is no disproportion-
 
 43 
 
 ate adjiistment of this tax. There is no fixed sum at 
 which all commodities will move; the rate must be 
 adjusted to the nature of the commodity. And yet, 
 there is a sum below which the revenue from the trans- 
 portation of a car cannot go. For these reasons the 
 low value commodities must, in general, bear a higher 
 ratio of transportation tax. Bulk is an element which 
 enters into this question also. The amount of a com- 
 modity which can be loaded into a car is a factor in 
 determining the value which can be transported for the 
 unit of cost. It is therefore of interest to note the 
 amount which is the usual load for a car, in connection 
 with the iDercentage of freight to value. 
 
 "WTieat and rye are loaded 50,000 pounds to the car, 
 and in AVisconsin show a tax of 12.5 per cent, for 
 transportation. Barley, which loads a tenth less bulk 
 to the car bears a tax of 2 per cent. more. On the other 
 hand, oats, which load 3/1 0th less to the car, bears 
 the same tax. Here the difference in value comes in 
 as a factor, as it is necessary to provide transporta- 
 tion for the oats at a rate that will make their move- 
 ment profitable. "While corn loads 50,000 pounds to 
 the car on account of its bulk and its price the value 
 of the load is only two-fifths of that which can be 
 carried in wheat. In "Wisconsin the rate on this com- 
 modity amounts to 31.2 per cent, of its value, while 
 in Iowa it amounts to 27.5 per cent. It is interesting 
 to note in this connection that the last census reports 
 the production of corn in Iowa at 383,453,190 bushels, 
 the largest production of any state in the Union, while 
 that of Wisconsin only amounted to 53,309,810 bushels. 
 It is probable that as between Wisconsin and Iowa the 
 volume of traffic has some effect on the rate. Both
 
 44 
 
 rates here compared are interstate rates, and subject 
 to adjustment to meet traffic conditions. Potatoes, 
 which carry a light load to the car, and a small aggra- 
 gate value, on account of their cheapness and their 
 bulk, bear a transportation tax of 24 per cent, in both 
 states. 
 
 When we come to live stock, we find at once the effect 
 of high value on the percentage of freight. All these 
 weights are light, yielding a small tonnage, and owing 
 to the character of the service, bearing a relatively 
 high rate per hundred weight. But because of the 
 high values carried, the ratio of freight to value is 
 very low. There is no substantial difference between 
 the rates in Iowa and AVisconsin. It will be noted that 
 the percentage for butter goes up as the value trans- 
 ported comes down. 
 
 In coal we find a very low value per car, coupled with 
 bulk and weight, and here we find a very striking il- 
 lustration of the system of adjusting rates to condi- 
 tions. Wisconsin has no coal, and all that is used must 
 be transported. It must be transported cheaply or it 
 cannot be profitably used. It is better that the people 
 of the state should pay more on some commodities that 
 will well stand the additional tax, and get their coal 
 cheaper, than it is that on the one hand they should 
 have each individual commodity transported at ex- 
 actly its fair rate. If the merchandise rates were cut 
 squarely in two, it would not make any difference to 
 the consumers in Wisconsin, for there would not be 
 enough difference so that it could be computed per hat, 
 or per suit of clothes, or per lead pencil, or per paper 
 of pins. But if the rate on coal, which is now very low,
 
 45 
 
 were put where it would of itself produce a revenue 
 satisfactory upou that item itself, every consumer of 
 coal in Wisconsin would feel the burden, and many of 
 its industries would sustain severe loss. In hard coal 
 it is to be expected that Wisconsin would be at an ad- 
 vantage, because she has the benefit of her lake ports. 
 But there is nothing in the water competition that 
 would give her the advantage of the difference between 
 21 per cent, and 37.7 per cent, which she actually en- 
 joys. In soft coal the situation is quite different. Iowa 
 mines soft coal, and it is the leading feature of the 
 tonnage of her railroads. Her coal, it is true is of an 
 inferior quality, and this makes the transportation 
 tax heavier, but the rate per car is higher, by itself. 
 As it is, Wisconsin transjiorts the soft coal for 33.3 
 per cent, of its value, while the freight in Iowa for the 
 same distance, under the Iowa distance tariff is 114.7 
 per cent, of its value. This, which has been so fre- 
 quently urged upon the attention of the people of Wis- 
 consin, is the comparison of a rate in Iowa made un- 
 der government control with a rate in Wisconsin made 
 by the railways and revised from time to time as the 
 needs of commercial conditions demanded. 
 
 In sand, gravel and stone, all low grade commodities 
 of bulk, the percentage of freight to value is necessar- 
 ily very high, and in Iowa very much higher than in 
 Wisconsin. 
 
 In lumber, bulk weight and low values make the per- 
 centage higher than is normal, but in this again the 
 shipper is at a distinct advantage, wholly within the 
 state of Wisconsin, over the shipper on the Iowa dis- 
 tance tariff for the same number of miles. The ad-
 
 46 
 
 vantage in Wisconsin is almost a quarter of the Iowa 
 rate. 
 
 The commodities which are compared in this table 
 constitute the principal items of traffic in the 
 two states and, taken together constitute 60.02 per cent, 
 of the traffic of Wisconsin, and 76.45 per cent, of the 
 traffic of Iowa. Almost without exception where there 
 is any material advantage shown by this comparison 
 in favor of Iowa, it is on a commodity in which there 
 is no traffic in Wisconsin, such as rye, barley, etc., 
 and there are many instances, such as soft coal, in 
 which, if the railways could adjust the tariffs on their 
 other commodities so as to distribute the load equit- 
 ably, low^a would enjoy the same advantage as Wis- 
 consin. The other items of the table show the same 
 general condition as those specifically reviewed here. 
 There is no standpoint from which the actual results 
 of railway regulation in either Iowa or Texas can be 
 made to afford anv comfort to the advocate of similar 
 action on the part of the people of Wisconsin. 
 
 The Earning Capacity of the Rail v/ ays of AVisconsin. 
 
 It would seem as though the reasonableness, and just- 
 ness and equitableness of the railway freight rates of 
 Wisconsin had been demonstrated as thoroughly as it 
 is possible to make any matter the subject of proof, 
 whether they are considered with reference to their 
 adjustment as related to the different rates within the 
 state, or with reference to the much compared rates 
 in force under government control in the State of Iowa. 
 It would seem that the irrefutable facts of commerce, 
 as they are disclosed by the impartial pages of the
 
 47 
 
 Federal census, argue strongly enough for the Wiscon- 
 sin system of freight adjustments as opposed to those, 
 or rather the lack of those in force in Iowa, and those 
 which are verv much in force in Texas. But, after all 
 this there is yet to be met the universal cry that even 
 if equitable and just in themselves, the rates as a 
 whole are too high because the companies are making 
 too much money. 
 
 There seems to be an insurmountable prejudice to 
 meet, whenever the question of railway finances is dis- 
 cussed. There is a well settled conviction in the mind 
 of the public that in some mysterious way the vast 
 properties which the railways own and operate have 
 been conjured out of the air, and that the stocks for 
 which people have paid their money, and the bonds 
 which are mortgages on those properties, represent 
 a vast financial aquarium for the proper maintenance 
 of which the public is to be unjustly taxed. 
 
 Whatever water there may ever have been in the 
 railway stocks of America, and it would be useless to 
 attempt to deny that there was at one time a large 
 amount of fictitious stock on which it was vainly at- 
 tempted to earn dividends, that water was all very 
 thoroughly and effectually squeezed out in the drastic 
 reorganization plans which were accomplished a few 
 years ago. That was the purpose of the reorganiza- 
 tions and the object was accomplished, as is amply 
 attested by the prosperity which has followed the re- 
 adjustment of the securities. But, this was a condition 
 which never existed in Wisconsin, and which does not 
 enter into the consideration of the question in this 
 state. The reports of the railroad commissioner, and 
 the action of the state tax commission in making its
 
 48 
 
 assessmeDts upon the railroads of the state, show that 
 the companies have more property than their stocks 
 and bonds, and that they are therefore under- and 
 not over-capitalized. 
 
 For the past ten years only a very few of the rail- 
 roads that do business in Wisconsin have been able to 
 pay any dividends at all. The following list comprises 
 all the companies reported by the Railroad Commis- 
 sioner, and the number of those paying dividends in- 
 cludes all those who have declared dividends, whether 
 they were declared or earned in or for Wisconsin, or 
 for the whole line of interstate roads : 
 
 Year. 
 
 1892 
 
 Number 
 Companies. 
 
 30 
 
 Number 
 
 Paying 
 
 Dividends 
 
 7 
 
 1893 
 
 39 
 
 6 
 
 1894 
 
 38 
 
 6 
 
 1895 
 
 34 
 
 5 
 
 1896 
 
 37 
 
 7 
 
 1897 
 
 44 
 
 5 
 
 1898 
 
 46 
 
 7 
 
 1899 
 
 52 
 
 7 
 
 1900 
 
 49 
 
 11 
 
 1901 
 
 50 
 
 11 
 
 These figures do not indicate the general prevalence 
 of undue prosperity among the railroads of the state. 
 
 The earnings of the Chicago, Milwaukee & St. Paul 
 Railway for the past ten years show an increase in the 
 per cent, of net earnings to stock and debt gradually 
 rising from 4.87 in 1895 to 7.16 in 1904. What business 
 enterprise is there within the state of AVisconsin that 
 would have been willing to continue its operations dur- 
 ing ten years that showed no better returns than these ? 
 There is not a gentleman in the state of Wisconsin to- 
 day who may declaim ever so loudly against the robbery
 
 49 
 
 of the people by the railroads, who would be willing to 
 conduct his private business with the risks attendant 
 upon railway operation, on the meager returns which 
 the managers of railway properties are content to con- 
 sider prosperous. There is not a merchant in the 
 state who would consider ten per cent, a fair return for 
 the risks of merchandising, a business in which he can 
 at least refuse to sell if the price is not satisfactory, 
 while the railway must carry whether the return is 
 satisfactory or not. 
 
 But, it is charged that in addition to paying dividends 
 and interest charges, the company has accumulated a 
 surplus, amounting to about 10 per cent, of its total 
 stock and bonds. This surplus, the accumulation of 
 the forty years of its existence — amoimting to less 
 than a quarter of one per cent, a year — is 
 a source of pride to the officers of the Chi- 
 cago, Milwaukee & St. Paul Railway, a means of se- 
 curity to its owners, and a protection of its service to 
 its patrons. Giving to the people dependent upon it 
 for transportation service the best service of which 
 its organization is capable, giving them this service at 
 rates just, equitable and constantly lowering as the vol- 
 ume of business increases, this surplus, about which so 
 much has been said, has been put as an anchor to wind- 
 ward against the storms that are sure to come, and 
 which are being materially hastened by the unreasona- 
 ble and baseless assaults upon the management of the 
 properties which are being made with renewed vigor 
 by those who seek to make political capital out of the 
 passions and prejudices of the people. The accumula- 
 tion of a financial surplus by a railway company is as 
 necessary to its prosperity, if it can be accomplished 
 without imposing undue burdens upon the patrons of 
 the road, as is the purchase of a supply of coal to meet
 
 50 
 
 the needs of its engines. It would be as wise to require 
 the company to buy its coal by the tender full as it 
 would be to require it to get its money from hand to 
 mouth. The only reason that a reasonable surplus in 
 the railway business is large, is because the business 
 is large. A bank that paid the same dividends upon its 
 stock, and accumulated in ten years a surplus of only 
 10 per cent, of its capital would be out of business for 
 want of stockholders. Why should the railway com- 
 pany be denied in a limited way the very safeguards 
 of business which those who are loudest in demanding 
 the restriction of, are most eager to enjoy for them- 
 selves without limit? 
 
 The right of a railway company to earn more than 
 a fair dividend in times of prosperity and to accumulate 
 a surplus, was recently sustained by such eminent au- 
 thority as the Hon. Martin A. Knapp, chairman of the 
 Interstate Commerce Commission. He says : 
 
 ''Ought not a railway to be allowed to accumulate, 
 in some form, a surplus during fat years which may 
 tide over subsequent lean years? To this we would 
 unhestitatingly answer in the affirmative. In times like 
 the present a railroad company should be allowed to 
 earn something more than a merely fair return upon 
 the investment." 
 
 The figures for Wisconsin only, do not show anything 
 upon which a fair judgment can be predicated. The 
 data as to debt and earnings for W^isconsin only, are 
 not . obtainable, for the very simple reason that there 
 is no such thing as either stock, bonds or net earnings 
 for Wisconsin. The Chicago, Milwaukeee & St. Paul 
 Railway is a corporate entity, and not a commercial 
 federation. Business done upon any of its lines in any 
 of the states through which it passes, becomes earn-
 
 51 
 
 ings of the company, and expenses of operation and 
 maintenance in one state are a factor in the net earn- 
 ings of business done in other states. The operations 
 of one state cannot be separated from all the other 
 business of the company, and identified as business of 
 that state. For the purposes of taxation, and for the 
 purpose of reports, such separations have been arbi- 
 trarily arrived at, sometimes upon a proportional basis, 
 sometimes upon the basis of train revenue miles, and 
 as a matter of fact upon whatever basis the law or 
 the requisition of the commissioner demanded. These 
 figures do not show the data of net earnings accurately 
 enough to base any determinations upon them. The 
 intermixture of through and local business is so thor- 
 ough that it is a mathematical impossibility to sep- 
 arate them. For this reason the rule has been recog- 
 nized by the courts and by the Interstate Commerce 
 Commission, and is the universal rule, and indeed the 
 only one that could be founded upon reason, that a rail- 
 way company is entitled to earn a fair return upon all 
 its investment out of all its business. 
 
 But, in Wisconsin, there is another basis upon which 
 the charge that the Chicago, Milwaukee & St. Paul 
 Railway earns too much money out of its present rates 
 is effectually disposed of. The state itself, by its tax 
 commission has fixed the valuation of the property of 
 the company within the state at $40,719 per mile. If 
 this is a fair basis for taxation, and the state itself 
 has said that it is, then is it not a fair basis for earn- 
 ings? If this is a fair basis for earnings, then at 6 
 per cent, the company would be entitled to earn $2,- 
 443.14 per mile, which is $277.57 more than it has aver- 
 aged to earn for the last ten years, and $33.87 per mile
 
 52 
 
 more than it earned last year, one of the most pros- 
 perous years it has ever had. In the face of these 
 facts it is apparent that the earnings of the St. Paul 
 Company have not exceeded an amount which any well 
 managed and prosperous business of such magnitude 
 ought to earn. 
 
 Gross Eaenings of the Chicago, Milwaukee & St. 
 Paul Eailway Company in Wisconsin. 
 
 Much attention has been given to the statements con- 
 tained in the executive message to the present legisla- 
 ture, purporting to give the gross earnings of the St. 
 Paul Eailway in Wisconsin as compared with the other 
 states through which it passes, as further evidence that 
 the rates of freight in Wisconsin are too high. It may 
 be said that the evidence that freight rates in Wisconsin 
 are too high is, so far as it has been presented, all of 
 about the value of the proof which these figures afford. 
 The gross earnings of the St. Paul Eailway in Wis- 
 consin have nothing whatever to do with the freight 
 rates in Wisconsin. Those earnings are the result 
 of the tonnage moved, and fully half of it is tonnage 
 which passes through the state, neither originating 
 nor terminating within the state, and on which the 
 freight rates of the state have not the slightest effect 
 whatever. The gross earnings are determined by the 
 volume of business and not by the rate of freight. A 
 large volume of business at a lower rate of freight 
 will produce a higher gross earning than a smaller 
 volume of business at a higher rate. In the case of 
 Wisconsin, the volume of tonnage is swelled by a large 
 amount of traffic from North and South Dakota, Min- 
 nesota and Iowa which passes through the state on
 
 53 
 
 the way to Chicago, and by a large amount of tonnage 
 from Chicago to those states. This is tonnage which is 
 not affected by Wisconsin rates in the revenue which it 
 produces, and, while the people of Wisconsin pay no 
 part of the freight charges upon this large tonnage 
 amounting to fully one-half the entire tonnage of 
 the state, under the former system of taxation it was 
 a source of constant revenue to them in the addition 
 to gross earnings which it presented for taxation in 
 Wisconsin. On all of the business from all these states 
 which pass over Wisconsin lines, there is a longer haul 
 in Wisconsin than in any of the other states, and there- 
 fore a larger proportion of the gross earnings would 
 appear in Wisconsin than in any of the other states. 
 It is this which accounts for the fact that the gross 
 earnings in Wisconsin are larger than in any of the 
 other states. The gross earnings of Wisconsin are 
 also increased in some measure by the fact that the 
 system of rates in force fosters business. The 
 combined manufacturing product of North and 
 South Dakota, Iowa and Minnesota, is only 25 
 per cent. greater than the manufactured pro- 
 duct of Wisconsin alone, and the St. Paul road covers 
 the whole manufacturing field in Wisconsin more thor- 
 oughly than it does in any other of the states in which 
 it operates. This of itself would make a very material 
 difference in the gross earnings of the company in Wis- 
 consin, for gross earnings are dependent on tonnage, 
 and not rates. 
 
 The statement made in this connection that the ap- 
 portionment of the expenses as between the states on 
 the train revenue mile basis is a method peculiar to
 
 54 
 
 the St. Paul Railway Company is not true. This is 
 the method which the railway commissioners of the 
 ^ various states require the companies to use, under the 
 rule adopted by them in annual convention, taking 
 effect July 1, 1895. This rule is complied with by 
 all the interstate roads, so far as we have any knowl- 
 edge. The rule will be found in the proceedings of the 
 National Association of llailway Commissioners for 
 1895, at page 38 of the report of those proceedings. 
 I do not hesitate to assert upon the authority of the 
 auditing department of the St. Paul road, that the ope- 
 rating expenses for Wisconsin compiled under this 
 rule, are considerably less than the actual operating 
 expenses in the state. 
 
 It should also be noted that in these figures the ex- 
 ecutive message is also misleading by the method famil- 
 iar to those who have followed the manufacture of 
 railway statistics in Wisconsin, in that it includes 
 revenue from all sources in a comparison which is 
 applied to the argument, of freight rates. The follow- 
 ing analysis of the statement discloses its gross inac- 
 curacy : —
 
 55 
 
 Gboss Earnings in Wisconsin as Stated by Gov. La 
 
 follette. 
 
 Average for 2 years end- 
 ing June 30, 1903 $14,549,459.94 
 
 Less Income — not earn- 
 ings 120,772.19 
 
 $14,428,687.75 
 Operating Expenses — on 
 
 train mileage basis. . . . $8,160,966.05 
 Taxes 560,971.64 8,721,937.69 
 
 Net earnings Wisconsin $5,706,750.06 
 
 Gross Earnings includes : — 
 
 Freight Earnings $10,360,452.32 
 
 Passenger Earnings 2,940,797.12 
 
 Mail, Express, & Misc 1,127,438.31 
 
 Total $14,428,687.75 
 
 How much of the passenger revenue credited to 
 Wisconsin as above is derived from passengers trans- 
 ported across the state cannot be stated at this time. 
 Of the freight revenue credited to Wisconsin as above, 
 approximately $5,250,000 is derived from tonnage 
 transported across the state. Deducting from this ope- 
 rating expenses of $3,150,000 leaves $2,100,000 of net 
 earnings derived from this source. Deducting this 
 amount from the net earnings as stated by Governor 
 La FoUette, less taxes and income from investments, 
 leaves as net earnings for Wisconsin $3,606,750.06, 
 which still includes revenue from passengers carried 
 across the state — the amount of which cannot be as- 
 certained at this time. This amount, $3,606,750.06 is 
 equal to 5.14 per cent, on the value of the property as 
 stated by the tax commission, $70,200,000.
 
 56 
 
 In the search for some adequate reason for confer- 
 ring upon a railway commission the extraordinary- 
 powers which are now proposed in these pending meas- 
 ures, sincere effort is confronted with hopeless failure. 
 There is no reason. There is not, and there never has 
 been in the state of Wisconsin, any more dissatisfac- 
 tion on the part of patrons of the railways with the 
 service afforded them, or the rates charged, than is 
 natural and inevitable in the conduct of any business 
 as large as the transportation business of Wisconsin. 
 
 And, whatever laws may be enacted, the same dissat- 
 isfaction will exist. It is largely the dissatisfaction 
 that is inherent in human discontent. To some extent 
 it is based upon sound reasons which it is im- 
 possible for the railways to remove, and which it 
 would be equally impossible for the state to overcome. 
 The relations between the railways and the people of 
 Wisconsin have, in the main, been cordial and friendly, 
 and free from serious antagonisms, ever since the tem- 
 porary ebulition of populism passed over the state, and 
 went on its way into deserved oblivion thirty years 
 ago. This present agitation did not come into exist- 
 ence as the result of any popular demand on the part 
 of the people; it is the crystallization of a political 
 issue, manufactured for adventitious purposes. Great 
 issues that spring from the hearts of the people find 
 the leaders that such issues require. Successful poli- 
 ticians find the issues that the conditions of success 
 demand. It is significant that the demand for railway 
 regulation in Wisconsin came first from the political 
 stump, and not from the field, the store, or the factory. 
 Brought forward as a political issue it was carried 
 through successive campaigns with all the skill and cun-
 
 57 
 
 ning of able and successful political generalship. Per- 
 haps never in tlie history of any state, was any issue 
 ever presented to the people with more consumate 
 skill or more daring cunning than was the railway 
 issue in Wisconsin. And in the face of this most re- 
 markable campaign the people actually recorded their 
 sober judgment against the agitation. There are some 
 features of the recent election in Wisconsin which are 
 very pertinent to the consideration of any legislation 
 upon this subject. In the executive message this year 
 your attention was called to the fact that if any ques- 
 tion can be definitely settled by the people of a state, 
 the question of railway regulation was settled by the 
 people of Wisconsin. It therefore becomes of inter- 
 est to examine just how the question was thus settled. 
 
 With no intention of descending to personalities it 
 becomes necessary to consider the remarkable person- 
 ality of the man behind the issue. It will not be de- 
 nied by his friends that to an unusual degree he has 
 commanded the personal enthusiasm of his supporters. 
 By the sheer force of his unique and versatile genius, 
 he has made himself a personal issue paramount to 
 all the other issues with which he has been identified. 
 Therefore the vote which was cast for him at the last 
 election may fairly be taken as not only the extreme 
 limit of the support of the people of the state for the 
 issues he represents, but it undoubtedly exceeds that 
 number, by the many whose personal allegience to 
 a popular leader naturally committed them to issues 
 to which they would have been opposed, had the issues 
 been disassociated from the man. So it is safe to say 
 that the number of people in Wisconsin who are in 
 favor of the regulation of railways as it was ad-
 
 58 
 
 vocated from the political rostrum, is at least uo larger 
 than the vote which was cast for Governor La Follette, 
 and, in fact, it is undoubtedly less. In considering the 
 force of public opinion which is behind this movement 
 a most important fact is that upwards of 105,000 citi- 
 zens of the state, or more than a quarter of the en- 
 tire voting population, who voted for the head of the 
 ticket on which Governor LaFollette was a candidate, 
 affirmatively expressed their disapproval of the issues 
 to which he was committed, by refusing to vote for him. 
 There is no overwhelming popular clamor for the is- 
 sues which 105,000 citizens of the state directlv and 
 affirmatively reject. Nor was this repudiation of the 
 railway issue confined to those classes who have been 
 referred to as favored shippers or coerced employees. 
 The twenty-five strongest agricultural counties of the 
 state, in which upon the occasion of his first election 
 Governor La Follette received an aggregate majority 
 oi over 33,000, gave, last year, an aggregate majority 
 of over a thousand against him. These facts show be- 
 yond question, that there is no general sentiment in 
 Wisconsin which will sustain the operation of a law 
 not demanded either by business considerations or 
 public interest. The temper of the people of Wiscon- 
 sin, as shown by their votes, is not one in which any 
 serious interference with the business conditions of 
 the state will be tolerated, merely as a matter of politi- 
 cal expediency. It therefore seems reasonably clear 
 that any bill which goes beyond the convictions on the 
 subject, of the actual minority of the people of the 
 state who are conunitted to the regulation of railways 
 as advocated by Governor LaFollette, will utterly fail 
 of the popular support in its operation without which
 
 59 
 
 its advocates cannot hope for its ultimate success. 
 Further than this, it must not be left out of considera- 
 tion that the issue which was presented to the people 
 of the state for their determination was very different 
 in its nature from the legislation which is sought at 
 your hands. There is a material and substantial dif- 
 ference between giving a commission power to regu- 
 late rates so that there shall be no injustice in trans- 
 portation charges, and taking substantially all the 
 power of management of the railway proi)erties out 
 of the hands of the companies that own them, and vest- 
 ing it in the irresponsible hands of a government com- 
 mission. It should be borne in mind that this is a ques- 
 tion which has not been "settled by the people of the 
 state", for it is an issue that has never been presented 
 for their consideration. 
 
 Certainly the people of Wisconsin do not need pro- 
 tection from excessiA'-e freight rates. It has been shown 
 here that 66 per cent, of the traffic of the state is car- 
 ried at an average rate lower than the average for the 
 entire country. It has been shown that in comparison 
 with the rates in force in Iowa, the people of Wiscon- 
 sin are at no disadvantage. There is no complaint 
 anywhere of excessive freight rates. For twenty-five 
 years the average rate per ton per mile in this country 
 has steadily declined and it has done this without the 
 
 INTERVENTION OF THE fiOVEENMENT IN FIXING RATES. 
 
 The proportion of the business of the country which 
 is local to the states that control rates is not a large 
 enough factor in the traffic of the country to affect 
 the average of the whole, and the rate for the whole 
 average has declined entirely without reference to the 
 local exercise of state control. It is the natural trend
 
 60 
 
 of the business. It has been said that during the last 
 five years the average rate per ton mile has increased 
 from .73 of a cent to .76 of a cent. That is true. But, 
 during tlie same period, the increase in the cost of ma- 
 terial used, and consumed in operating railways, has 
 advanced about 25 per cent., and the wages of railway 
 employes about 10 per cent. From this it appears that 
 the increase in the cost of operating the railways con- 
 siderably exceeds the advance shown in the rate per 
 ton mile, and when it is considered that during the 
 same period, commodities in general have risen about 
 20 per cent, in value, it is seen that the relative amount 
 paid for transportation is lower now than it was five 
 years ago. The fact is, that while there has been a 
 steady decline in railway rates, nearly every commod- 
 ity that is moved under these rates has steadily ad- 
 vanced in value. And, further, aside from the steady 
 decline in railway rates, the facilities for moving the 
 commodities which have steadily advanced in value, 
 have been greatly improved, at an enormous expense, 
 so that the railways are giving more to-day for less 
 money, and the shipper is paying less for more and 
 better service, than ever before. And, this too, so far 
 as interstate commerce is concerned, and so far as the 
 great bulk of state commerce is concerned, without the 
 government having exercised its power to fix rates. 
 So that the argument of advancing rates is easily dis- 
 posed of. Eates cannot advance; the current of the 
 stream of commerce is in the other direction. There is 
 no complaint of high rates. And why should there be? 
 The railway rates of this country only average a third 
 of those of Great Britain and France, and half those of 
 Germany, and very largely less than those of any coun-
 
 61 
 
 try in the world in which railways are operated. Sixty- 
 six per cent, of the traffic of Wisconsin is carried at an 
 average rate less than the average rate for the entire 
 country, and all of it at an average less than half that 
 of all other countries. 
 
 The whole complaint of the people, and the evil from 
 which they believe they suffer, and from which they 
 seek redress at your hands, is discrimination and re- 
 bates. Do not be led into the belief that when they 
 come to you for relief from one thing, they will be 
 satisfied with something entirely different, for which 
 they have not asked you. The law as it stands to-day 
 affords them all the relief which has been proposed in 
 any bill that has been presented here. At the end of 
 any proceeding which may be instituted under any 
 commission which may be constituted, there is the final 
 determination of the matter by the courts, and to that 
 final adjudication either party to any controversy is 
 of right entitled. Any shipper who feels that the rate 
 that is charged is too high, has the right to have the 
 question of its reasonableness tried and determined 
 in court. Under any bill that can be passed by your 
 honorable body creating any kind of a commission 
 with any kind of powers, he still must submit the ques- 
 tion to the determination of the courts, and from the 
 courts he must still obtain his remedy. He has that 
 right now without the intervention of a commission, 
 and at present he has the right to the determination 
 of the question in his home court, and before a jury of 
 his own county. We all know from experience that 
 there would be no misc^irriage of justice in any litiga- 
 tion that he might have with the railway company over 
 the reasonableness of railwav rates in his local court.
 
 62 
 
 His rights are more secure and can be more conven- 
 iently asserted now than they could be if the pending 
 bill should pass, requiring him to litigate all these is- 
 sues in Dane County. 
 
 Railway rates are regulated by a competition that no 
 man or men can control. That is the competition of 
 business. The most potent factor in the steady and 
 constant decline of railway rates is the competition 
 between different sections of the country seeking larger 
 markets for their products, and the competition be- 
 tween different lines of business in different sections 
 of the country. ^\T.iat is true the country over, is 
 true locally to Wisconsin. It is the constant effort of 
 the railways to broaden the market of producing areas 
 that constantly lowers the rate per ton mile in response 
 to the economies of constantly increasing tonnage. 
 The railway business is subject to the law of increas- 
 ing returns, under which the larger the volume of busi- 
 ness, the cheaper any unit of that business can be 
 transacted. It is because of this, that without the ex- 
 ercise of the Federal power to fix rates in interstate 
 business, which constitutes the great bulk of the traffic 
 of the country, and with only a very small percent- 
 age of the entire tonnage of the business in states lo- 
 cally subject to rate control, the average rate per ton 
 mile has decreased since 1882 from 1.24 cents to .76 
 of a cent. 
 
 From 1873, the railways of "Wisconsin have been 
 operated under a maximum rate law which has been 
 forgotten by everyone, shipper and carrier alike. The 
 natural course of business has reduced the rates so far 
 below the maximum permitted by the Vance law, that
 
 63 
 
 it has become a permission of wliich the railways have 
 not been able to avail themselves, rather than a re- 
 striction upon their charges. In Wisconsin there has 
 never been a general advance in rates, and there have 
 been many general reductions. 
 
 Frankly, gentlemen, is there anything in this situa- 
 tion which justifies the drastic legislation which is 
 sought? Is there anything in the conduct of the great 
 transportation corporations of the state of Wisconsin 
 which justifies taking the rate-making power from them 
 and placing it in the hands of a commission. I think 
 not. Are we not drifting from the fundamentals of 
 our government and building up a bureaucratic sys- 
 tem of government by commission, centralizing in these 
 appointive bodies, not directly responsible to the 
 people, power, that if persisted in, is inevitably sub- 
 versive of popular liberty? In a recent hearing upon 
 the subject of rate control before one of the Congres- 
 sional committees, Mr. Joseph Nimmo, Jr., very aptly 
 said : — 
 
 ** During the last two thousand years there has been 
 going on among the foremost nations of the globe, a 
 political struggle between the advocates of dispensing 
 justice in the conduct of the inter-action of commercial 
 industrial forces through the exercise of the judicial 
 power, and the advocates of accomplishing that pur- 
 pose through the exercise of autocratic administrative 
 authority, the latter being usually performed by a 
 bureau clothed with autocratic power or with delegated 
 legislative authority. The autocratic governmental 
 method — bureaucracy — was the potential cause of the 
 downfall of the Roman Empire. It was also the chief 
 cause of the French Revolution of 1795. The only 
 civilized nation in which it now prevails as an unre- 
 strained expression of governmental authority is Rus-
 
 64 
 
 sia, where the people are today clamoring for its sup- 
 pression for the reason that it constitutes an intoler- 
 able form of oppression. " ^;^ 
 
 So eminent an authority as Judge Cooley, who 
 presided over the Supreme Court of Michigan 
 for more than a quarter of a century, gave 
 that court a high place in American jurispru- 
 dence, and who was the first chairman of the 
 Interstate Commerce Commision, was unalterably op- 
 posed to granting a commission power to fix rates,, 
 which he described as "a dispensing power"; a power 
 which if exercised, exceeds the power of the President 
 of the United States, or the power of the governor of 
 any state. 
 
 Of the rights and the duties of the state on this 
 
 question the learned Chief Justice Dixon of our own 
 
 Supreme Court said,, in 1870: — 
 
 ' ' The true intent and object of the power is, that the 
 legislature shall be able to protect the rights and in- 
 terests of the people, but not that it shall arbitrarily 
 or unnecessarily impair the rights or franchises of the 
 company, or destroy the property of its stockholders. 
 The good faith of the state is pledged against this, 
 and it is not within the range of presumption, that it 
 will ever be done. The individuals owning the prop- 
 erty, and whom the corporation represents, purchase it 
 under this pledge and inducement held out by the 
 state. To them it is a matter of mere private business, 
 engaged in under the sanction and encouragement of 
 the state, and for their individual gain and emolument, 
 and the legislature will no more unnecessarily inter- 
 fere with it, or with the business of the corporation, 
 where it is legitimately conducted, than it will any 
 other private business." ' 
 
 These are words of calm deliberation. They are in 
 the spirit of liberty and law.
 
 65 
 
 The place to enact laws is in the legislative chamber, 
 where deliberation may be brought to the guidance of 
 your actions ; not in the heated excitement of political 
 campaigns, where the passions of the people are easily 
 wrought upon. The mandate of the people, even if 
 it were clearly and unequivocally expressed is still sub- 
 ject to the veto of your deliberate judgment; you are 
 here to legislate, not to perfunctorily record the opin- 
 ion of others. It is so that our laws may have the 
 stability which their importance demands, that their 
 enactment is left to the determination of deliberative 
 bodies, and not to the passing whims of popular clamor. 
 The opinions of the people are always entitled to due 
 weight at your hands, but it is, at the end, for you to 
 determine; not to be determined. 
 
 When the State of Wisconsin was a wilderness, the 
 railways pushed their way into its forests, and across 
 its prairies. As the state has developed into one of 
 the peerless commonwealths of the nation, the rail- 
 way has always been in advance of its development, 
 an important factor in all its growth. Wisconsin and 
 the railway have developed together, until now her 
 railway corporations have spread out over seven great 
 states, and her commerce has extended into all parts 
 of the land. Together they have conquered the wil- 
 derness, and built an empire; together they have 
 worked and prospered. In your hands is the deter- 
 mination of much of the future prosperity of both. 
 AVithout railways Wisconsin must suffer ; without Wis- 
 consin the railways must suffer. Their physical sep- 
 aration is impossible. Warfare between them cannot 
 but be disastrous to both. Their destinies are linked 
 together as indissolubly as their history; their past
 
 66 
 
 is the best guide to their future. I ask you, gentle- 
 men, in all fairness, and in all candor, to pause and 
 consider well before a blow is struck that will surely 
 separate the interests of the commonwealth and her 
 great carriers. Such legislation as is here proposed 
 is war — war which will of necessity put the carriers 
 on the defensive; war which is bound to lead to end- 
 less and expensive litigation between the shippers and 
 the railways, who ought to be at peace, as they have 
 been for more than a quarter of a century. 
 
 In closing, I beg that you bear in mind in the con- 
 sideration of these questions, that the railway inter- 
 ests like the business interests of a community are as 
 a sensitive plant ; it need not be struck, but only touched 
 to show where it is wounded. 
 
 I ask at your hands nothing but the fullest protec- 
 tion of the rights of every citizen of the state and 
 the fairest measure of exact justice for the railways.
 
 uNiVERsrrv of illinois-urbana 
 
 3 0112 067592144