365 
 
 KMU, l i'."M TUi: ka:
 
 UNIVERSITY OF ILLINOIS 
 LIBRARY 
 
 Book Vnlll _ 
 
 s 
 
 Volume
 
 Return this book on or before the 
 Latest Date stamped below. A 
 charge is made on all overdue 
 books. . , _ 
 
 University of Illinois Library 
 
 - 
 
 -1:19S(1 
 
 J21! 1 2 BT? 
 
 M32
 
 h 
 
 e ii-^.. . :><*. 
 
 Oolutiori ot tqe 
 
 urrferieaq Kailroad S\usterr(. 
 
 AN ADDRESS BY 
 
 JOSEPH NIMMO, JR., 
 
 BEFORE THE 
 
 WORLD'S CONGRESS AUXILIARY 
 
 WORLD'S COLUMBIAN EXPOSITION OF 1893. 
 
 DELIVERED AT CHICAGO. ILL, 
 June 22, 1893.
 
 3^S 
 Nfe\e
 
 The Evolution of the American Railroad 
 
 System. 
 
 An Address by Joseph Nimmo, Jr., before the World's Con- 
 gress Auxiliary of the World's Columbian Exposition, 
 Delivered at Chicago, III., June 22d, 1893. 
 
 In addressing this Congress upon a topic so broad and 
 so comprehensive as The Evolution of the American Rail- 
 road System it is of course necessary to confine ray atten- 
 tion to some special treatment of the subject, and to some 
 particular line of thought embracing the history of railroad 
 transportation from its genesis in the United States, about 
 the year 1830, to the present time. I shall therefore ask 
 your attention, first, to some of the conditions which consti- 
 tute the environment of the American Railroad System and 
 which prescribe the law of its being, and, second, to the cir- 
 cumstances under which, and the acts by which, the physical 
 unity of that system has been accomplished. 
 
 The railroads first constructed in this country gave but 
 Blight notice of the conditions under which transportation by 
 rail is being conducted in this centennial year 1893. It was 
 
 300563
 
 for several years a debated question as to whether the owners 
 and managers of Railroads ought to be allowed also to own and 
 manage the vehicles and the motors employed upon them 
 in the work of transportation. But the lessons of experience 
 soon solved that question. Every consideration of economy, 
 of safety, and of public convenience pointed to an undivided 
 corporate ownership and a common management of roadway 
 and equipment, and accordingly that has become the estab- 
 lished law of railroad development. Then the question was 
 agitated for several years as to whether this new and won- 
 derfully potential instrument of commerce should or should 
 not be owned and operated by the several States of the 
 Union in order to avoid the danger of allowing private cor- 
 porations so highly endowed with the control of commerce 
 to set their own interests up above the public interests. 
 The experiment of State ownership and management of 
 railroads was tried in six States, viz : Massachusetts, Michi- 
 gan, Pennsylvania, Illinois, Indiana, and Georgia. These 
 attempts at governmental ownership and management were 
 made at a time when, as hereinafter indicated, the governing 
 conditions were much more favorable to success than they 
 are at the present time, and yet all these experiments re- 
 sulted in absolute failure. From a purely economic and 
 commercial point of view they demonstrated the wisdom of 
 remitting the entire work of railroad construction and opera- 
 tion to private enterprise, and they also proved, beyond 
 the shadow of a doubt, that the political institutions of this 
 country are not adapted to the successful administration of 
 transportation by rail. 
 
 Several States of the Union besides those above
 
 5 
 
 mentioned made large loans ami grants of lands, or became 
 stockholders in railroads, from correct views as to their 
 enormous powers for developing the natural resources of 
 tli9 country ; but such States prudently refrained from any 
 attempt at State management of railroads. The State of 
 Virginia, for example, was at one time a subscriber to two- 
 fifths of the stock of certain railroads and canals, but was 
 never tempted into the experiment of State railroad manage- 
 ment. The State of Missouri became the owner of several 
 railroads upon the default of their obligations to the State, 
 but the results of State ownership in other States deterred 
 the people of Missouri from the attempt to repeat such ex- 
 periments. Accordingly the railroads thus acquired by 
 foreclosure were sold in the year 1868 to private corpora- 
 tions. 
 
 The general tendency of all the States of the Union during 
 the last thirty years has been to withdraw entirely from any 
 sort of financial association with railroad construction or 
 management. 
 
 But these attempts at State control of railroad transporta- 
 tion cut a small figure in the otherwise unbroken evolution 
 of the American Railroad System under the plan of inde- 
 pendent corporate ownership and control of both the road- 
 way and the equipment employed upon it. 
 
 Until about the year 1850 the railroads of the United 
 States were practically autonomies in the work of transpor- 
 tation ; that is to say, each line had an independent terri- 
 torial traffic area, and in all matters relating to rate-making 
 and general management was independent of all other rail- 
 road companies. But this state of affairs rapidly passed
 
 6 
 
 into a condition of the most extended and complex combina- 
 tion and co-operation, and of the most intense competition. 
 Competing lines were rapidly constructed between all the 
 more important sources of traffic. Many of these lines were 
 constructed in competition with canals, and with rivers and 
 other natural waterways. The tracks of coterminous lines 
 were also connected, so that in time the railroads of the 
 country formed one intimately connected network of trans- 
 portation lines. 
 
 This concatenation of railroad lines has by an imperious 
 force of circumstance, independent of any intent on the part 
 of railroad owners and managers, led up to the evolution of 
 the American Railroad System, which to-day presents itself 
 to the commercial, industrial, and social interests of the 
 country as practically one system of transportation with 
 respect to travel and the transportation of merchandise 
 and the mails. 
 
 It is my present purpose to point to the more important 
 circumstances and conditions attending this evolution, and 
 briefly to describe the commercial and physical forces whose 
 interaction has evolved economic laws which to-day deter- 
 mine the course and govern the conduct of the internal 
 commerce of the United States. 
 
 Practical Difficulties which have Arisen in the Course of 
 the Development of the American Railroad System. 
 
 The fact that the railroad is an avenue of commerce, the 
 pathway of which is no wider than the wheel of the vehicle 
 which moves upon it, at the very outset forbade that it should
 
 become in the ordinary sense a free highway. This physi- 
 cal disability, if such it may be termed, developed new expe- 
 riences and led to important modifications of the law of the 
 common carrier in its application to railroad transportation. 
 
 As lines were extended and connected, and as competing 
 roads were constructed, the transportation interests of the 
 United States rapidly assumed a degree of complexity which 
 transcended the ability of the most intelligent to understand, 
 and baffled the skill of the most adroit railroad managers to 
 carry into execution any proposed scheme of administration. 
 Railroad managers were at their wits' end. For years wars 
 of rates prevailed extensively and receipts from traffic were 
 greatly reduced. Many railroad companies were driven into 
 bankruptcy and others were seriously embarrassed. 
 
 The precise difficulty which confronted the railroad in- 
 terests of the country was that as railroad lines were extended 
 and competition among them was developed the vitally im- 
 portant matter of determining rates was remitted to so- 
 liciting agents in all parts of the country — a class of men 
 neither amenable to the caution which attaches to ownership 
 nor governed in the exercise of their discretionary powers by 
 any general line of policy, presumably at least, directed to 
 the object of conserving the interests of the corporations by 
 which they were employed. This proceedure was not an 
 expression of caprice, or of any vicious propensity on tin- 
 part of railroad managers. It was dictated by a force of 
 circumstance and a compulsion of environing conditions 
 entirely beyond their control, and it constituted a phase in 
 the processes of a mighty evolution. In the course of time 
 published freight tariffs furnished to the public no reliable 
 information whatever as to the actual rates charged.
 
 8 
 
 The commercial and industrial interests of the country 
 suffered from this state of affairs even more than did the rail- 
 road companies. Discriminations as between shippers under 
 like conditions became the rule, and rate-making, in almost 
 all cases, became a mere matter of contrivance as between 
 individual shippers and an army of irresponsible soliciting 
 freight agents. Mr. Albert Fink, one of the ablest railroad 
 managers of the country, thus described the manner in which, 
 by the practical abrogation of their authority, the proprie- 
 tors of railroads lost the power of determining what they 
 should be paid for the services rendered by them to the 
 public : 
 
 " The stockholders in the first place surrender their con- 
 trol to a board of directors, the board of directors surrender 
 it to the president, the president surrenders it to a general 
 manager, who in turn surrenders it to the general freight 
 agents of his own and a great number of other roads, who 
 again surrender it to a large number of soliciting agents, and 
 finally these soliciting agents surrender it to the shippers. 
 The shippers practically make their own rates. The result 
 is confusion and demoralization of traffic, and no end to un- 
 just discriminations between shippers and localities." 
 
 The general freight agents also made special secret con- 
 tracts with the larger shippers for months in advance as to 
 the rates which they should pay. No shipper knew on one 
 day what rates would prevail on the next, nor had he any 
 idea as to the rates which his competitors in trade were pay- 
 ing for transportation services. Thus the whole matter of 
 freight charges became involved in incertitude. Falsehood 
 and deception became the rule and fair dealing the exception.
 
 This state of affairs was, of course, utterly demoralizing to 
 trade. It was, also, glaringly in contravention of the great 
 fundamental law of commercial ethics, that in the competi- 
 tive struggles of life men shall be permitted to live and labor 
 in an open field and in a pure atmosphere. Loud and bitter 
 complaints arose on account of the outrageous discrimina- 
 tions made in rates. 
 
 A more serious result, however, arose from the fact that 
 glaring discriminations were made as between different 
 localities and trade centres. For example, the rates were, 
 at one time, so much less from Boston to the west than from 
 New York to the west that commerce was turned from the 
 latter to the former city. Shipments in considerable quan- 
 tities were also made from New York to Chicago via Boston. 
 This condition of affairs, of course, gave rise to bitter com- 
 plaints against railroad management generally. Trade and 
 industry became demoralized by uncertainties which neither 
 the merchant nor the manufacturer could foresee, and against 
 which they could not provide. 
 
 In a word, the fundamental economic fact that the rail- 
 road is not, and in the nature of things cannot be, a free 
 highway of commerce, on which rates are determined and 
 fairly regulated by unrestraiued competition among common 
 carriers, had led up to a stage in the evolution of the rail- 
 road system of the country where it had gotten beyond all 
 control. If this state of affairs had continued much longer 
 all the railroads of the country would probably have been 
 absorbed by, and districted among, three or four great cor- 
 porations. But that would have been calamitous, for it 
 would have involved the danger of an absolute governmental
 
 10 
 
 control of the railroads with all the evils incident to such 
 exercise of power. 
 
 It seemed for awhile as though the evolution of the 
 American Railroad System had proceeded beneficially up to 
 a certain point and then fallen into irretrievable disorder. 
 And yet it was too absurd for serious thought to assume that 
 the men of this generation had created a vast and potential 
 system of transportation which they lacked the virtue or 
 ability to administer. At last the dearly bought lessons of 
 experience clearly proved that all the troubles just recounted 
 were necessary for the inculcation of the fundamental truth 
 that transportation upon a highly organized and sharply con- 
 ditioned artificial highway of commerce, such as the railroad, 
 cannot be regulated by laws which totally different experi- 
 ences have proved to be just and beneficial in the govern- 
 ment of transportation on free highways of commerce. The 
 men of this generation were simply summoned by those 
 very troubles to the task of formulating and giving expression 
 to laws evolved by the new commercial and economic experi- 
 ences. But all this is merely a fresh chapter in the old, old 
 story of human progress guided b} r rough experiences. 
 
 Certain Established Regulations of Transportation by 
 
 Rail. 
 
 The more important of the new rules evolved as the 
 experimental law of the railroad are as follows. 
 
 1. The publication of freight tariffs : At a very early 
 period in the history of railroad transportation the fact was 
 developed that railroad companies must frame and publish 
 freight tariffs, presumably in force until a new tariff is pub-
 
 11 
 
 lishcil. This was a departure from the practice which hud 
 alwavs prevailed upon free highways of commerce, but it 
 was clearly seen to be necessary upon so constrained a com- 
 mercial highway as the railroad. 
 
 The laws of all the States which have legislated upon the 
 subject, and the laws of the United States enacted for the 
 regulation of railroad transportation services, recognize this 
 necessity. The publication of freight tariffs may be regarded 
 as the initial step in the establishment of just and practical 
 railroad regulation, and as a proper restraint upon the 
 freedom of competition. I shall waste no words in the unnec- 
 ry attempt to justify it. 
 
 •1. .\<j cements as to competitive rates : All experience in 
 railroad transportation has clearly proved that agreements 
 as to the rates which shall be charged for eompetitive traffic 
 are necessary to the orderly and just administration of rail- 
 road transportation. The laws of States and of the United 
 States recognize such agreements as in the nature of just 
 and wholesome restraints upon railroad transportation. But 
 tins regulation goes directly in the face of the rule of free 
 competition which prevails on free highways of commerce. 
 It would, however, be a waste of words to attempt to prove 
 the propriety of this rule, so generally is it recognized. 
 
 3. The uniform classification of freights : The same ex- 
 periences which gave rise to the publication of freight 
 tariffs and agreements as to competitive rates, also led the 
 railroad companies to adopt common classifications of 
 freight upon which related freight tariffs may be formulated. 
 This rule or practice commands general approbation. It is 
 also regarded as a just and beneficent restraint upon the
 
 12 
 
 freedom of competition on railroads, although having no 
 place in the conduct of transportation on free highways of 
 commerce. Like the publication of rates, and agreements 
 as to competitive rates, this particular restraint upon the 
 freedom of railroad competition rests upon a generally 
 accepted and firmly established rule of public policy. The 
 Interstate Commerce Commission has even gone so far as to 
 recommend a uniform classification of freights throughout 
 the country. That may come, although it involves rather 
 too much of a levelling process at the present time. 
 
 4. Ample public notice of intended changes in rates : Ex- 
 perience has clearly proved the commercial importance of 
 such notice. Changes of railroad transportation charges 
 without due public notice tend to demoralize trade. Changes 
 in rates, if announced only to favored shippers, constitute a 
 flagrant and unjust discrimination. But public notice of 
 intended changes in rates are repugnant to the law of unre- 
 strained competition on free highways of commerce. The 
 independent power to change rates from day to day without 
 notice is one of the recognized characteristics of the freedom 
 of competition on such highways. The lessons of experience, 
 however, have proved both to railroad managers and to the 
 public generally that the restraint of ample public notice of 
 intended changes of railroad rates is not only justifiable, 
 but that it is clearly dictated by sound views of public 
 policy. This particular restraint upon the freedom of com- 
 petition on railroads first commended itself to the approba- 
 tion of railroad managers, and it is now a fundamental 
 feature of the Interstate Commerce Act. 
 
 Various other self-imposed rules in the nature of regula-
 
 13 
 
 tions in restraint of the absolute freedom of competition on 
 railroads have been instituted by railroad managers, and the 
 lrssons of experience, patent to the observation of all the 
 world, not only justify but absolutely demand the imposition 
 of such restraints. 
 
 The Interstate Commerce Commission is to-day devoting 
 its energies, under the general or specific requirements of 
 law, to the enforcement of all those wholesome restraints 
 just mentioned upon railroad competition, and governmental 
 regulation to-day abandons as utterly impracticable that free- 
 dom of competition in transportation by rail which character- 
 izes transportation upon free highways of commerce. More- 
 over, every observant mind clearty perceives that the specific 
 restraints upon the freedom of railroad transportation herein- 
 before considered are based upon the fact that the railroad 
 is not, and in the nature of things can never become, a free 
 highway of commerce. 
 
 But all this is simply a recognition of the generally ac- 
 cepted truth that the largest and best results of our complex 
 and refined civilization are the product of restraints. We 
 have liberty only as restrained by law. The discovery and 
 application of wholesome restraints upon human action is 
 in fact the most important requisite of human progress. 
 
 The adoption and enforcement of the particular restraints 
 above mentioned, upon the freedom of railroad competition, 
 have not, however, proved fully adequate to the abatement 
 of the evils described. Much yet remains to be done in 
 order to secure the harmonious working of the American 
 Railroad System. After all the restraints upon railroad 
 transportation already described had been fully established
 
 14 
 
 the general freight agents, or other officers having the man- 
 agement of the freight traffic of rival roads, would from time 
 to time meet together and agree as to the rates which should 
 prevail; but difficulties inherent in the system of railroad 
 transportation frequently rendered null and void all such 
 attempts. It appeared that whenever agreements for the 
 maintenance of rates were entered into there was a mental 
 reservation on the part of the representative of each road 
 that his observance of the agreed rate was conditioned upon 
 the fact that his line was to secure the share of traffic to 
 winch he believed it to be entitled at each competing point. 
 The result, therefore, was almost invariably that, soon after 
 such agreements were made, the soliciting agents of one or 
 more of the competing lines would have recourse to the cut- 
 ting of rates, in order to make up the assumed deficiency in 
 his share of the traffic. Usually such rate-cutting was based 
 upon representations of shippers, sometimes true and some- 
 times false, to the effect that Offers of cut rates had been 
 made to them by the agents of competing lines. This was 
 a constant source of trouble and demoralization. It was 
 therefore clearly perceived that some new restraint must be 
 adopted in order to preserve the harmonious and beneficent 
 administration of our vast and complex railroad system. 
 The root of the difficulty lay in the tight by each company 
 for a larger share of the competitive traffic than any other 
 company was willing to grant it. Hence was evolved out of 
 the fierce interaction of forces the new law of self-restraint — 
 agreements as to the share of the competitive traffic which 
 should be carried by each line. This expedient is repelled 
 by independent common carriers in the narrow sphere iu
 
 15 
 
 which such carriers compete on disassociated free highways 
 of commerce, and for a long time it was repelled by railroad 
 managers as a curtailment of their liberty, but at last it was 
 seen to be a necessary feature of a just and proper adminis- 
 tration of the traffic of railroads constituting by their en- 
 forced relationships one vast and closely related American 
 Railroad System. In a word, it was seen that competition 
 upon such a system of transportation must be placed in a 
 complete harness of self-restraint not applicable to common 
 carriers on turnpikes, canals, and rivers. 
 
 The agreement as to the apportionment of traffic is the 
 corollary of the rate agreement, and the former is no more 
 in restraint of competition than is the latter. Both restrain 
 destructive competition, which runs to disorder. 
 
 The question as to whether agreements in regard to the 
 share of competitive traffic shall or shall not be legalized is, 
 however, one which has been, and is to-day, hotly contested. 
 Even men who concede the justice and necessity of the pub- 
 licity of rates, of ample notice of changes in rates, of the 
 observance of agreements as to rates, and who acknowledge 
 the absolute necessity of printed railroad freight tariffs and 
 freight classifications, deny the j ustice and the necessity of 
 agreements as to the share of the traffic which shall be 
 awarded to each competitor as the substantial basis upon 
 which the efficacy of all other restraints upon the absolute 
 freedom of competition must depend. The logic of the situa- 
 tion, and the stern lessons of experience, force me to the 
 conviction that these objections to agreements as to the 
 equitable division of competitive traffic constitute a barrier 
 to the progress of the American Railroad System, and a
 
 16 
 
 blight upon its natural and proper evolution. The history 
 of such agreements is, in brief, as follows : After the re- 
 peated failures of agreements as to the maintenance of rates, 
 in order to cure the evils incident to those disastrous and 
 almost continuous wars of rates, which, as already explained, 
 threw the internal commerce of the country into confusion, 
 it was conceded by certain able railroad managers, who had 
 carefully studied the situation and who had acquainted 
 themselves with the philosophy of its teachings, that unless 
 the companies should first agree as to the share of the com- 
 petitive traffic which each was to secure, agreement as to 
 the maintenance of rates would be useless. It was proved 
 to them that the receipts from competitive traffic under a 
 fair apportionment would exceed the receipts from even a 
 larger share of it which might possibly be secured during a 
 war of rates. It is also a fact, attested by the leading com- 
 mercial bodies of this country, that agreements as to the 
 division of traffic have secured the just and equitable con- 
 duct of the railroad transportation interests of the country. 
 Besides, rates reasonably remunerative to the carriers, com- 
 mon to all shippers, and steadily maintained, are found to 
 be infinitely better for the general good of the country than 
 even much lower rates, unjustly discriminating and wildly 
 fluctuating, and which inevitably lead to disorder and the 
 demoralization of trade. This is not theory, nor can it be 
 refuted by theory. It is fact, inculcated by the hard lessons 
 of actual experience. 
 
 It was only after much opposition and many infractions 
 of agreements as to the division of traffic that the dissenting 
 companies were forced to the confession that the loss of
 
 17 
 
 their independence which suoh agreements involve consti- 
 tutes a wholesome restraint upon the freedom of competition. 
 And I believe that the public mind is rapidly coming to the 
 conclusion that such restraint of competition is justified by 
 sound views of public policy drawn from the lessons of a 
 protracted and stern experience. When the people of this 
 country come to realize this important truth, as they cer- 
 tainly will, and to impose upou their representatives in legis- 
 lative assemblies the duty of conforming the laws of the 
 country to this clearly evolved law of the American Rail- 
 road System, then, and not until then, will that system be- 
 come an orderly and self-regulated institution. 
 
 The experiences already recounted have proved beyond all 
 reasonable doubt that free competition among railroads in 
 the manner and to the extent that it is practised by common 
 oarriers on free highways of commerce is utterly impractica- 
 ble. Railroad transportation must therefore be subjected to 
 such restraint as the lessons of experience have proved to be 
 just and necessary. I strenuously maintain that the accept- 
 ance of this general truth is preliminary to the proper 
 adjustment of the railroads to the public interests. 
 
 It is unfortunate that in giving the force of legality to so 
 much which experience had proved to be just and beneficent 
 the legislator should have gone astray in regard to a clearly 
 established law of the American Railroad System which had 
 been forced upon railroad managers by the logic of events. 
 I refer to the fact that the fifth section of the Interstate 
 Commerce Act forbids such agreements, and thereby incites 
 the railroads to the violation of every beneficent provision 
 of the statute.
 
 18 
 
 The specious objection is urged to agreements as to the 
 division of traffic, that they are similar to agreements made 
 for the suppression of competition and for establishing 
 monopolies in commercial and industrial pursuits. It ap- 
 pears to be a sufficient answer to such objections to say that 
 combinations of every character which tend to forward the 
 beneficent enterprise of the age are aiso employed for evil 
 purposes. Knives are instruments of great utility, and their 
 use is not to be proscribed because they are sometimes em- 
 ployed to do murder and to commit suicide. 
 
 There are gentlemen in this city and in this section of the 
 country — journalists and men in public life — who have con- 
 troverted and still stoutly controvert the views just expressed. 
 — views which, as government officer and as private citizen, I 
 have been forced to accept as the result of laborious investi- 
 gation and scrutiny. While I have no doubt whatever as to 
 the absolute sincerity of those gentlemen, and while I enter- 
 tain the highest respect for their ability to discuss public 
 questions, I am as firmly convinced that they are in error 
 as I am of anything ; nor can I possibly doubt that, one 
 and all, they will be brought by farther investigation or 
 by the irresistible logic of events to see their error. In this 
 connection it is with great pleasure that I advert to the fact 
 that the Honorable John H. Eeagan, President of the Rail- 
 road Commission of Texas, has been brought by his careful 
 investigations and observations as a commissioner to concede 
 that agreements as to the division of competitive traffic, 
 under proper conditions of regulation, are just and beneficial 
 toward the public interests. This concession illuminates the 
 public records of Mr. Reagan, who, as Representative in Con-
 
 19 
 
 gress aud as Senator of the United States from Texas, threw 
 the full weight of his great influence against the legalization 
 of agreements in regard to the division of competitive 
 traffic. 
 
 The cause and, as I firmly believe, the only potential 
 cause of the popular prejudice against agreements as to the 
 division of competitive traffic has arisen from the fact that 
 to such agreements was applied in the very beginning the 
 inappropriate and offensive appellation of pooling. 
 
 It is manifest that if agreements as to the apportionment of 
 traffic shall be legalized, they should be guarded by all the 
 provisions of the act to regulate commerce relative to the 
 publication and maintenance of joint rates — provisions 
 which, in the hands of sensible railroad managers, would 
 become efficient instruments of self-government. 
 
 Ouoanized Measures for Securing the Orderly Conduct 
 of the American Eailroad System. 
 
 No organization of human devisement can exist as a force- 
 ful entity in the absence of an intelligent directory. The 
 American Railroad System is not a thing which can run 
 alone. Its existence involves conventional agreements and 
 co-operative arrangements for the maintenance of such agree- 
 ments, touching almost innumerable matters of detail. Hence 
 the federation of the railroads by means of associations of 
 various sorts followed as a necessary step in the processes 
 of that evolution which was to bring them all into practical 
 uuity. Certain of these federative organizations are based 
 upon the idea of managing the traffic of great geographical 
 areas, while others take cognizance of great traffic currents.
 
 20 
 
 There are also associations which have for their object the 
 management of through cars — i. e., car-service associations ; 
 other associations have the management of through tickets, 
 of baggage and baggage checks, etc. There are, besides, 
 claim associations and local associations of various sorts. 
 These associations constitute the mind or administrative 
 thought of the American Railroad System. Their function 
 embraces the classification of freights, freight tariffs, joint 
 rates, traffic facilities, the apportionment of traffic, receipts 
 from traffic, and a thousand matters of detail involved in the 
 administrative management of a great transportation system. 
 
 Railroad traffic associations take cognizance of agreements 
 in regard to joint traffic over connecting and co-operative 
 lines, and also of agreements between rival lines in regard to 
 competitive traffic. Such associations, besides, attend to the 
 enormous work of adjusting joint traffic accounts ; that is to 
 say, they are clearing-house establishments. 
 
 Thus the law of organic efficiency has been to a very great 
 extent substituted for the law of unrestricted competition. 
 This, of course, has involved a considerable sacrifice of inde- 
 pendent corporate power. But when men organize for the 
 accomplishment of any great work they most always surren- 
 der something for the purpose of gaining something which 
 eludes disassociated effort. 
 
 The thing of chief public interest attained by the federa- 
 tion of the railroads was the maintenance of order in the 
 conduct of the internal commerce of the country. The time 
 had come when the alternative confronted the people of this 
 country — the maintenance of order or the maintenance of 
 the absolute freedom of competition. Order is not only
 
 21 
 
 heaven's first law, but it is a vital condition of all living. 
 Competition, on the other hand, is only a manifestation of liv- 
 ing under favoring conditions. And yet much of the reason- 
 ing of the present day would place the maintenance of a wild 
 and destructive competition above the maintenance of order. 
 That is a great mistake. When competition becomes so fierce 
 that it degenerates into disorder it passes the acme of its pos- 
 sibilities and becomes the very swoon of existence — the syn- 
 cope of effort. 
 
 With the exception of agreements as to the apportionment 
 of competitive traffic, all the self-imposed restraints upon 
 railroad competition enforced by railroad associations are 
 now fully recognized by the Act to Eegulate Commerce, and 
 by the Interstate Commerce Commission as expressions of 
 American common law touching the subject of railroad trans- 
 portation. 
 
 The Eegulation of Competition. 
 
 The experience of centuries prior to the advent of the 
 railroad had firmly engrafted into the minds of the English- 
 speaking race the rule of public policy known as the freedom 
 of the highway. By the freedom of the highway is meant 
 the freedom enjoyed by every man to operate his vehicle of 
 commerce upon free higtiwaj's in competition with all other 
 carriers. 
 
 As the regulation of competition involves a fundamental 
 condition, under which the evolution of the American Bail- 
 road System has proceeded, it appears proper to give to 
 that subject some particular notice in this connection. Al- 
 though the fact is. ami almost from the beginning has been,
 
 22 
 
 clearly recognized that the railroad is not, and by virtue of 
 its peculiar physical characteristics can never become a free 
 highway of commerce, yet many cling tenaciously to the idea 
 that competition must be absolutely unrestrained upon rail- 
 roads in order to protect the public interests against unjust 
 discriminations and exorbitant rates. Two favorite 
 aphorisms have served to crystallize these ideas in the public 
 mind, viz : First, that competition is the life of trade, and, 
 second, that where combination is possible competition is im- 
 possible. The first of these aphorisms has been proved by 
 the light of modern experiences to be utterly misleading. 
 The spirit of competitive enterprise is undoubtedly a stimu- 
 lus to action ; but under the influences of the telegraph, the 
 railroad, and all the enginery of modern commerce, experi- 
 ence has proved that the stimulus of competition, like every 
 other stimulus, may be so strong as to run to demoralization 
 and disorder. In the proper adjustment of human affairs 
 too much impetus is often found to be as prejudicial to the 
 public welfare as a lack of impetus. This fact is constantly 
 being illustrated in those periods of financial and commer- 
 cial wreckage and stagnation which follow periods of unduly 
 stimulated activity. It is now perfectly clear that the 
 intense forces of the present day not only justify but abso- 
 lutely demand the regulating influence of restraint in order 
 to prevent railroad competition from running to disorder, 
 involving the demoralization of trade and the ruin of rail- 
 road companies. This is not theory, but the indisputable 
 record of history. The mischievous fallacy that " competi- 
 tion is the life of trade " was years ago denounced in a 
 learned and elaborate opinion by Judge Howe,* of the 
 
 (Afterwards Senator Howe, of Wisconsin.)
 
 23 . 
 
 Supreme Court of Wisconsin, in the case of Kellogg v. Lar- 
 kin (3 Pinney Wis. Kep., 150). - 
 
 "If it be true, also, that competition is the life of trade, 
 it m*iy follow such premises that he who relaxes competition 
 commits an act injurious to trade ; and not only so, but he 
 commits an overt act of treason against the commonwealth. 
 But I apprehend it is not true that competition is the life of 
 trade. On the contrary, that maxim is the least reliable of 
 the host which may be picked up in every market-place. It 
 is, in fact, the shibboleth of mere gambling specula- 
 tion, and is hardly entitled to take rank as an axiom in the 
 jurisprudence of the country. I believe universal observa- 
 tion will attest that for the last quarter of a century compe- 
 tition in trade has caused more individual distress, if not 
 more public injury, than the want of competition." 
 
 This misleading aphorism, "Competition is the life of 
 trade," is refuted by every labor organization and every 
 trade organization in restraint of destructive competition — 
 organizations which stand for the protection of labor and 
 for the protection of commerce. 
 
 The second aphorism above quoted, " Where combination 
 /'.v possible competition is impossible" is also thoroughly ex- 
 ploded. Combination is the most pronounced symptom of our 
 refined and highly organized civilization. By it the largest 
 results in science, in art, in trade, in transportation, and in 
 education are being evoked. A prevailing fault of the 
 present day is the failure to discriminate between combina- 
 tions for good and combinations for evil — between combina- 
 tions which protect legitimate competition and promote 
 progress, and combinations which stifle competition and ar-
 
 24 
 
 rest progress. Experience also clearly proves that the 
 American Railroad System, that vast combination which is 
 neither the result of legislative nor of railroad corporate de- 
 visement, but the manifest outcome of an evolution beyond 
 all human prescience, is a combination thoroughly benefi- 
 cent and regulative of evils, and in the most complete sense 
 promotive of the public interests. Tins is so clear to the 
 comprehension of every intelligent observer that any attempt 
 to prove it would be the merest superfluity of speech. 
 
 In the face of all these lessons of experience and of sound 
 reason as to the necessity of restraint upon the absolute 
 freedom of railroad transportation, the progress of reform has 
 been from the beginning and is to-day impeded by a persistent 
 adherence to the idea of the absolute freedom of competition 
 among railroads. But state and national railroad regu- 
 lation stand as a public protest against such views, and all 
 experience clearly proves that if the various restraints which 
 are now imposed upon the absolute freedom of railroad 
 transportation were to be suddenly abandoned the com- 
 merce of the country would be thrown into the direst con- 
 fusion. 
 
 Notwithstanding the faith reposed by the present and by 
 past generations in the efficacy of competition, the doctrine 
 has prevailed for nearly two centuries, as an element of 
 English law, that competition is and ought to be subject to 
 just and wholesome restraints. 
 
 In the case of Mitchell v. Reynolds, decided about the 
 year 1711, and reported in " Smith's Leading Cases," the 
 policy of the law of England at that time is stated as fol- 
 lows :
 
 25 
 
 " The present doctrine is that while contracts in total 
 restraint of trade are void, yet if the restraints imposed be 
 partial, reasonable, and founded on good consideration, they 
 are valid and will be enforced." 
 
 This doctrine has been, time and again, asserted judicially 
 
 
 
 in this country, and it has become a thoroughly fixed prin- 
 ciple of American law. 
 
 Governmental Regulations of the Railroads. 
 
 It was impossible that such a mighty evolution of com- 
 mercial and transportation interests as that already de- 
 scribed could have taken place in this land of liberty, regu- 
 lated by law, without giving rise to some manifestations of 
 governmental power. It became necessary not only to im- 
 pose restraints upon evils but also to give legal effect to 
 practices and usages established through the interaction of 
 forces and proved by the lessons of experience to be bene- 
 ficial and necessary. The political solution of the so-called 
 "railroad problem" has for a generation harassed the legis- 
 lative and the judicial mind of this country. Many carefully 
 wrought-out plans and expedients for correcting real and 
 supposed evils have been devised, a large proportion of 
 which plans have resulted in failure. But under all the dif- 
 ficulties which surround the task that is not a strange thing. 
 As the explorer approaches the harbor of a strange coast, he 
 finds where the channel is by running into shallow water. 
 
 As this paper treats of the railroads only from a national 
 point of view, reference to governmental regulation must be 
 confined to national legislation.
 
 26 
 
 All that there is in the Interstate Commerce Act of Feb- 
 ruary 4, lb'89, in the nature of beneficent regulation is 
 based either upon common-law requirements applicable to 
 the railroad or upon usages proved to be wholesome and 
 proper in the course of the evolution of the American Rail- 
 road System. The provisions of the statute which relate to 
 the prohibition of unreasonable rates and unjust discrimi- - 
 nations are simply re-enactments of time-honored rules of 
 the common law. The provisions which relate to securing 
 shipments on direct and most convenient lines were already 
 in force as rules of railroad associations. The propriety of 
 this latter rule of conduct was clearly enunciated as long 
 ago as the year 1874, in the report of the investigating com- 
 mittee appointed by the Pennsylvania Railroad Company. 
 That report clearly announced the doctrine that railroad 
 companies recognize their true interest in furnishing ample 
 facilities, and by refraining from unwise efforts to defeat the 
 interests of the shipper in the matter of attempting to dictate 
 the route or destination of traffic, that being determined 
 mainly by elements other than the way of carriage. 
 
 The provisions of the sixth section of the Interstate Com- 
 merce Act, relating to joint rates, the maintenance of agreed 
 rates, the -publication of rates, and ample notice of intended 
 changes in rates, were, prior to their enactment, cardinal 
 features of the regulations established by railroad associa- 
 tions. It was also the fundamental object of such associa- 
 tions to prevent all forms of rate-cutting now forbidden by 
 the Interstate Commerce Act. Outside of these wholesome 
 regulations the provisions of the Act to Regulate Commerce 
 may be described as quasi -judicial and, in a qualified sense, 
 administrative.
 
 27 
 
 The Commercial Environment of the Americas Railroad 
 
 System. 
 
 It is impossible to arrive at a clear view of that interaction 
 of forces whereby the American Railroad System lias been 
 evolved without at least some brief reference to the influences 
 which have been exerted by the commercial forces of the 
 country. This wonderful system of transportation brought 
 every centre of trade and of industry into close competition, 
 and also provided a means whereby the product of every 
 farm and every mine may be speedily placed at the gates of 
 commerce. The joint traffic arrangements entered into among 
 railroad companies had corresponding commercial expres- 
 sions in through bills of lading and other commercial arrange- 
 ments, associating transportation in vitally important partic- 
 ulars with trade and with the finance of commerce. All this, 
 in connection with the facilities for commercial intelligence 
 afforded by the telegraph and the public press, has both 
 directly and indirectly created a competition of commercial 
 forces, the intensity and coercive force of which was never 
 before experienced on this planet. The tendency of this far- 
 reaching and instant competition has been irresistibly toward 
 a parity of values and toward a constant reduction in prices. 
 This has reacted upon the railroads as an absolute limitation 
 upon rate-making which no traffic manager can resist. For 
 example, if the price of wheat in Chicago is ninety cents and 
 in New York one dollar and ten cents a bushel, the cost of 
 transportation must be somewhat less than twenty cents in 
 order to insure the movement of wheat. 
 
 There is no popular fallacy more misleading than the
 
 28 
 
 assumption that the railroad managers of the country exer- 
 cise a very wide range of discretion in the matter of rate- 
 making. In spite of every expedient adopted by the com- 
 panies to keep rates up, they have fallen, while traffic has 
 increased. This is illustrated by the fact that the average 
 charge per ton per mile on eighteen of the principal rail- 
 roads of the country fell from 2.101 cents in 1872 to .868 
 in 1891, a decrease of 60 per cent., while the tonnage car- 
 ried more than doubled during that period. When the 
 Windom Senate Committee on "Transportation Routes to 
 the Seaboard " began its work in the year of 1873, the aver- 
 age all-rail rate for the transportation of wheat from Chicago 
 to New York was 33.5 cents a bushel, but during the year 
 1892 it was only 14.23 cents a bushel. That committee 
 devoted its attention particularly to the possibilities of cheap 
 transportation by water. In the year 1872 the average total 
 charge for transporting a bushel of wheat from Chicago to 
 New York city by lake and canal was 24.47 cents a bushel. 
 The committee concluded that if the cost of transporting 
 wheat from Chicago to New York by water could be reduced 
 to about 18 cents per bushel cheap transportation would be 
 fully secured independently of railroad transportation. But 
 during the year 1892 the total charge for transporting wheat 
 from Chicago to New York by lake and canal was reduced 
 to 5.61 cents a bushel, and, as before stated, the average 
 rail rate was reduced to 14.23 cents. Such reduction in the x 
 rates charged on railroads have been very largely the result 
 of the competition of commercial forces operative through 
 rival transportation lines. The reduction of freight charges 
 between the west and the Atlantic seaboard is also, as we
 
 all know, due very largely to the marvelous reduction in the 
 cost of transportation by lake, Erie canal, and Hudson 
 river. This has been effected in part by the generous 
 policy adopted by the State of New York in making the 
 canals of that State free of tolls by imposing a tax of over 
 nine hundred thousand dollars a year upon the people of 
 that great State. The railroad companies have been able 
 to live under such constraint upon them only by physical 
 improvements in the construction of railroads and their 
 equipment, and by labor-saving devices and other economies 
 introduced in the operation of railroads. 
 
 The influence which commercial forces necessarily exert 
 upon transportation charges may also be inferred from the 
 fact that the value of goods transported on railroads each 
 year is about three times the value of all the railroad 
 properties of the country and at least thirty times the total 
 railroad receipts each year from freight traffic. From these 
 facts it is evident that the commercial forces of the country 
 exert a preponderating influence not only over rates but 
 also over the movement of traffic. In a word, the course of 
 the internal commerce of the country is to-day mainly de- 
 termined by commercial forces. The interaction of these 
 forces is manifest in the fierce struggle of rival cities and of 
 riva^ productive areas — in the competition of soil with soil, 
 of mine with mine, and of industry with industry. Then 
 descending to the detail of railroad traffic there is the 
 struggle of individual shippers, chiefly the larger shippers, 
 to secure unjustly discriminating rates in their own favor, 
 while at the same time the competition of rival railroads 
 through their complex arrangements of soliciting agencies
 
 30 
 
 and the practical abrogating of the central rate-making 
 power has had a tendency to render the whole subject of 
 making and maintaining just and equitable rates absolutely 
 impossible in the absence of wholesome and just restraints 
 upon the evils already described. 
 
 The American Railroad System. — Its Genesis and 
 
 Evolution. 
 
 Thus far attention has been directed to the extension of 
 railroads in the United States, the vast and varied commer- 
 cial and industrial x interests which the railroad has been 
 the means of creating, and the evils encountered and in 
 a great degree overcome, in adjusting this potential agency 
 of transportation to the commercial, industrial, social, and 
 political interests of the country. This grand achievement, 
 however, is mainly the result of an evolution, unobserved in 
 its processes until recognized in its splendid consummation, — 
 the American Railroad System. 
 
 Thirty-five years ago the railroads of the United States 
 were operated as separate and independent highways of 
 commerce. A dozen different track gauges were in use. 
 Besides, the bare idea of connecting the tracks of different 
 companies having a terminus in the same town was repelled 
 by railroad managers as something in the nature of an en- 
 tangling alliance, fraught with complications and administra- 
 tive difficulties which had better be avoided. The drayman 
 and the forwarding merchant also asserted their right to 
 live, and in favoring the transfer of freights the railroad 
 companies had respect for such opposition. Different
 
 31 
 
 gauges were adopted in many instances for the express pur- 
 pose of preventing " the carriage of freights from being, and 
 licing treated as, one continuous carriage from the place of 
 shipment to the place of destination," a practice now treated 
 by the Interstate Commerce Act as a public offence (see sec- 
 tion 7). One of the latest and perhaps most notable in- 
 stances of the policy of breaking gauge for the specific 
 purpose of securing to a city the commercial advantages 
 which that expedient was supposed to afford was that of the 
 Cincinnati Southern Eailroad, an important line, 336 miles 
 in length, built by the city of Cincinnati, and completed 
 about the year 1880. The cars of different companies were 
 also so differently constructed as not to be easily hauled 
 together in trains. 
 
 But the social, commercial, postal, and military necessities 
 of the age rapidly brushed aside all obstacles to the forma- 
 tion of that great system of railroad transportation which is 
 to-day unto the traveller and the shipper as one instrumen- 
 tality of transportation, embracing nearly 200,000 miles o,f 
 track, administered and operated as though by one central 
 authority. This wonderful organic development has involved 
 connected tracks, a common track gauge, union depots, 
 through rates, the uniform classification of commodities, rate 
 agreements, prorating, through tickets, related time schedules, 
 the unimpeded passage of freight, passenger, express, and 
 postal cars and locomotives over the tracks of different com- 
 panies, and to a considerable extent the employment of oper- 
 atives in the pay of one company upon the lines of other 
 companies. Each company has also become, in ten thousand 
 instances, the agent of many other companies tor the sale of
 
 32 
 
 tickets, the collection of freight moneys, and the procurement 
 of traffic. The movement in favor of a common automatic 
 car-coupler, of which movement Hon. Edward A. Moseley, 
 Secretary of the Interstate Commerce Commission, has been 
 the most conspicuous proponent and advocate, was suggested 
 and has been carried to a point at which success seems to be 
 assured, by none other than hummie purposes toward rail- 
 road employes; but this common interlocking connection 
 between freight cars is exerting an important influence 
 toward securing the perfect physical unity of the American 
 Railroad System. 
 
 The practical unification of the great work of transporta- 
 tion by rail has come about not advisedly, or as the result of 
 design or forecast on the part of the companies, but as the 
 outcome of an evolution. Obstacles to the union of lines and 
 the correlation of traffic interests which at first appeared in- 
 superable have been swept aside by an imperious force of cir- 
 cumstances. Moreover, every effective measure of restraint 
 and every instrumentality which has advanced the efficiency of 
 the railroad as an instrument of commerce seems, by an im- 
 perious law of development, to have tended toward the evolu- 
 tion of the American Railroad System. 
 
 During this entire period of progress railroad managers 
 have been divided into two schools in regard to the new de- 
 velopment. For years a majority opposed, and a minority 
 favored it. Some of the stronger companies attempted to 
 resist the movement by the consolidation and extension of 
 their lines, assuming that thus they might be enabled to re- 
 main a law unto themselves. But in time they, too, were 
 forced to acknowledge the compulsions of the interdependent
 
 33 
 
 relationships which were slowly but surely evolving one vast 
 national railroad system. The peculiar environment of each 
 road, of course, had much to do with the detail of forming 
 connections with coterminous roads. But above every con- 
 ceivable objection, and every possible obstruction, there 
 arose an imperious commercial and social demand for a 
 united American railroad service. Upon the outbreak of the 
 late war, which was to determine the question of maintaining 
 our national unity, military necessity demanded through 
 cars and through trains over the lines of different companies. 
 The tracks of railroads having terminals on opposite sides 
 of cities were accordingly connected by lines constructed 
 through or around such cities in order that men and muni- 
 tions of war might pass unimpeded. The military demand 
 for an expedited postal service also gave rise to the railway 
 post-office, by which means the work of assorting and dis- 
 tributing the mails is now done chiefly on trains in motion. 
 Then the sleeping-car came in vogue, with a rapidly devel- 
 oped and imperative demand for connected tracks and 
 through service over the lines of two, three, and four or more 
 different companies. It was in vain that conservative rail- 
 road men protested against the loss of independence and the 
 inconveniences and vexations incident to forced partnerships 
 with companies and with railroad officials whom they would 
 gladly have shunned. The most serious difficulties arose in 
 the establishment of a through or interchangeable freight-car 
 service. Sometimes cars, when thus employed, far from tin; 
 road upon which they belonged, were left standing for days 
 and even weeks on side tracks or kept in use without an}' 
 authority or compensation for such service. In many in-
 
 34 
 
 stances cars were thus lost, and in certain cases actually 
 stolen by being repainted with the name of the appropriating 
 company substituted for that of the company to which they 
 belonged. But despite all these inconveniences the effort to 
 prevent a common use of freight cars was futile. In time 
 the evils just alluded to were in a large degree overcome by 
 car-service agents of the various railroad associations and 
 through the more recently formed car-service associations. 
 
 In treating of a united American Railroad System, I can- 
 not fail to make special mention of the inestimable service 
 performed by the car- service associations of the United 
 States.* The first association of this sort was organized 
 October 1, 1887, at Omaha, Nebraska, by Mr. E. Dickinson, 
 General Manager of the Union Pacific Railway Company, 
 Mr. G. "W. Holdredge, General Manager of the Burlington 
 & Missouri River Railroad, and Mr. J. M. Eddy, Superin- 
 tendent of the Missouri Pacific Railway. Mr. E. E. Hill 
 was the first car-service manager. From this beginning 
 there have sprung thirty-nine car-service associations, whose 
 field of operations embraces almost the entire country. The 
 common rule of these associations is to allow a car to stand 
 48 hours for loading and unloading, and after that to charge 
 for car service at the rate of one dollar a day. The results 
 attained by these associations is indicated by the fact that 
 prior to their organization the detention of cars amounted 
 to 5.85 days for each car handled, whereas since their 
 organization the detention has been only 1.45 days — a sav- 
 ing at each loading and unloading of 4.40 days. As the total 
 
 * I desire to acknowledge my indebtedness to Mr. A. M. Simmons, Man- 
 ager of the Cleveland Car Service Association, for valuab'e information 
 upon this subject.
 
 35 
 
 number of cars handled during the year 1892 was 11,108,487, 
 the total number of car-days service saved was 48,877,342. 
 which at $1.50 a day amounts to $73 : 316,013. Besides this 
 large saving to the companies, they are enabled to give the 
 public better service, and, of course, also to afford a cheaper 
 service. The courts, recognizing the fact that " the life of 
 the railroads is in their rolling stock," have fully and com- 
 pletely recognized the legal force of the rules and regu- 
 lations made by car-service associations. Perhaps there is 
 no other feature of the co-operative relationships which 
 have sprung up among the railroads of the country which 
 so strikingly illustrates the organic unity of the American 
 Railroad System as the work performed by car-service 
 associations. 
 
 There is another important organization whose work has 
 constituted an important feature of the evolution of the 
 American Railroad System. I refer to the American Rail- 
 way Association, of which Mr. H. S. Haines, of New York, is 
 now and has been president since the year 1887. This as- 
 sociation includes in its membership all the principal rail- 
 road companies of the country. Its object is the develop- 
 ment and solution of problems connected with railroad man- 
 agement in the United States. It is a deliberative body, 
 without any executive authority and endowed only with the 
 function of recommending the adoption of its conclusions. 
 But its influence and power for good has been very great 
 and all its work has tended toward a more thorough and 
 beneficent organization of the American Railroad System. 
 
 These associations and other co-operative arrangements 
 did not spring out of the ground. They are the result of
 
 36 . 
 
 the careful investigation and strenuous effort of brainy 
 men whose lives have been controlled by the best and most 
 forceful inspirations of human progress. 
 
 Finally, in the face of untold opposition and frictional 
 resistances, the American Railroad System emerged in its 
 present form and magnificent potentialities for good. 
 
 The social, commercial, industrial, and political forces of 
 the country have beckoned the companies on to this unity 
 of transportation facilities, as absolute and as imperative in 
 its manifestations as is the political unity which binds towns, 
 countries, and States into a nation which is one and 
 indivisible. State governments also have extended solic- 
 itous invitations to railroad companies to construct their 
 lines across State boundaries in order to form such connec- 
 tions, and in so doing to exercise freely one of the most 
 sacred attributes of governmental sovereignty — the right of 
 eminent domain. 
 
 Twenty-seven years ago a concensus of the social, politi- 
 cal, and commercial forces of the country led to a statutory 
 enactment by the national government which legalized the 
 physical combination of railroad interests just described. I 
 refer to the act of Congress approved June 15, 1366. This 
 statute, the most important concerning the internal com- 
 merce of the United States which has ever been enacted by 
 Congress, was simply a legal recognition of something even 
 then existent as an organic characteristic of the transporta- 
 tion and commercial interests of the country. In a word, 
 it was nothing more nor less than the statutory approval of 
 an institution and of usages which had become expressions 
 of the commercial and social life of the nation. The act in 
 question reads as follows :
 
 " Au act to facilitate commercial, postal, and military com- 
 munication among the States. 
 
 AYhereas the Constitution of the United States confers 
 upon Congress, in express terms, the power to regulate com- 
 merce among the several States, to establish post-roads and 
 to raise and support armies ; therefore, 
 
 " Be it enacted by the Senate <iml House of Representative 8 
 of the United States in. Congress assembled, That every rail- 
 road company in the United States whose road is operated 
 by steam, its successors and assigns, be, and is hereby, 
 authorized to carry upon and over its road, boats, bridges, 
 and ferries all passengers, troops, Government supplies, 
 mails, freight, and property on their way from any State to 
 another State, and to receive compensation therefor, and to 
 connect with roads of other States, so as to form continuous 
 lines for the transportation of the same to the place of its 
 destination. 
 
 * # 7f * * * 
 
 "Section 2. And be it further enacted, That Congress may 
 at any time alter, amend, or repeal this act." 
 
 This act of Congress fully and explicitly authorizes all the 
 railroad combinations and co-operative arrangements which 
 I have just described. In form and substance it is permis- 
 sive and clearly in the nature of a grant of power. It also 
 expresses an implied contract, viz., a duty to be performed 
 in consideration of a privilege granted. Therefore it may 
 properly be regarded as The Charter of The A merican Rail- 
 road System. 
 
 That it had this significance in the minds of its Cramers i> 
 clearly indicated by the fact that out of abuudant caution it 
 was provided in the second section " that Congress ma\ at 
 any tine' alter, amend, or repeal this act." This latter pro-
 
 38 . 
 
 vision was apparently prompted by a fear, even then enter- 
 tained by many, that such intimate combinations among the 
 railroads might, in the course of their development, prove 
 detrimental to the public interests. That apprehension, 
 however, no longer has place in the minds of the American 
 people. 
 
 But the American Railroad System has a higher charter 
 even than this statutory enactment, and that is the very 
 charter of government itself — the will of the people, for this 
 act formulates at once the public needs and the public sense 
 of what is necessary and proper concerning railroad trans- 
 portation in this country. . 
 
 The beneficent character of the act of June 15, 1866, has 
 been abundantly demonstrated by the lessons of experience, 
 and there is to-day no purpose more firmly fixed in the 
 minds of the American people than that our internal com- 
 merce shall have free and uninterrupted passage. And it is 
 a source of national pride that to-day the railroads of the 
 country do present themselves to the traveller and the ship- 
 per practically as one vast system of transportation, peerless 
 in magnitude and efficiency. 
 
 The growing conviction in the public mind as to what is 
 right and necessary regarding the American Ttailroad Sys- 
 tem has found vigorous expression in provisions of the 
 Interstate Commerce Act of February 4, 1887. This act is 
 from beginning to ending based upon the idea of an existent 
 American railroad system, its needs and possibilities. 
 Although the legislator may not have had clearly in mind 
 this particular significance of the statute, such inadvertence 
 illustrates the fact that in the processes of an evolution
 
 39 
 
 men usually build bettor than they know. That the Inter- 
 state Commerce Act was based upon the conditions imposed 
 by the law of the American Railroad System is clearly indi- 
 cated by sections 3, 7, and 10 of that act, which, stripped of 
 legal amplification, are as follows : 
 
 A (Sec. 3). Facilities for interchange of traffic. Every 
 common carrier shall afford all reasonable, proper, and equal 
 facilities for the interchange of traffic between their respec- 
 tive line? and those connecting therewith. 
 
 B (Sec. 7). Continuous carriage. It shall be unlawful for 
 any common carrier subject to the provisions of this act to 
 enter into any combination, contract, or agreement, expressed 
 or implied, to prevent the carriage of freights from being 
 continuous from the place of shipment to the place of desti- 
 nation. 
 
 C (Sec. 10). Penalties for violation. Any common carrier 
 subject to the provisions of this act, or any director or officer 
 thereof, or any receiver, trustee, lessee, agent, or person em- 
 ployed by such corporation, who alone or with any other 
 corporation, company, person, or party shall wilfully do or 
 cause to be done anything in this act prohibited, or who 
 shall wilfully omit to do anything in this act required to be 
 done, shall, upon conviction thereof, be subject to a fine of 
 not to exceed five thousand dollars. 
 
 These provisions of the Interstate Commerce Act clearly 
 define certain commercial objects which the charter of the 
 American Railroad System of June 15, 180(1, \\;i> intended 
 to secure, and they simply formulate and give the sanction 
 of law to the already evolved law of that system. 
 
 When " The Act to Regulate Commerce," commonly known 
 Sfl ' The Interstate Commerce Act," took effect, July 5, 1887, 
 the constitutional power conferred upon Congress of regu-
 
 40 
 
 lating " commerce among the States " had been practically 
 dormant for a period of 98 years. Prior to the enactment 
 of that statute the American Railway System had been 
 evolved, and it had become the grandest system of trans- 
 portation ever seen on this globe in point of speedy carriage, 
 the facilities afforded for the distribution of freights, regu- 
 larity of movement, safet}-, cost of transportation, and gen- 
 eral efficiency. The practical duty now devolving upon the 
 legislator in devising a general scheme of railroad legislation 
 is that of building up a body of statute law, based upon and 
 voicing the tendencies, the needs, and the possibilities of the 
 evolved law of the American Railroad System. The Inter- 
 state Commerce Act inaugurated such legislation. 
 
 By the lessons of a hard experience, involving the consid- 
 eration of many an asserted " solution of the whole ques- 
 tion," we have come to recognize in the American Railroad 
 System a fresh illustration of that cardinal principle of free 
 government, that the evolutionary experiences of human so- 
 ciety furnish the surest foundation of beneficent law and of 
 good government. Hence it appears that the chief duty of 
 the railroad manager, of the student of our transportation 
 interests, and of the American legislator, in all attempts to 
 advance the efficiency of the American Railroad System and 
 to conform it to the public needs, is to study the course of 
 its evolution, and, if possible, to catch the drift of its best 
 tendencies. This, in the very nature of things, must always 
 be a tentative work. Disappointment may overwhelm many 
 a sincere effort, for every investigation and every earnest at- 
 tempt at reform is always more or less in the nature of groping 
 one's way out of the darkness into the light. So the work
 
 41 
 
 must go on, and it will probably be realized fifty years hence 
 by men engaged in such practical studies as those which 
 now command our thoughts that "there is a divinity which 
 shapes our ends," and that unless men " build better than 
 they know they will build in vain." And I doubt not that 
 the most effective workers in the great task of adjusting the 
 railroads to the public interests will be found to be among 
 those who, in the language of Mr. Gladstone, have " learned 
 to submit themselves to the lessons of experience and to the 
 lessons of the hour."
 
 A western railroad manager of large experience, for whose judgment I 
 have great respect, offers me the following criticism. He thinks the fol- 
 lowing statements, which may be found on page 8 of this pamphlet, are 
 rather overdrawn : 
 
 ''Discriminations as between shippers under like conditions became the 
 rule, and rate-making, in almost all cases, became a matter of contrivance as 
 between individual shippers and an army of irresponsible soliciting freight 
 agents." 
 
 And again, at the bottom of page 8: ''Falsehood and deception became 
 the rule and fair dealing the exception." 
 
 I desire to explain those expressions as follows : First, they relate espe- 
 cially to a condition of affairs prevailing for a period prior to the year 1885, 
 chiefly on lines and at commercial centres east of Buffalo and Pittsburgh : 
 second, they relate almost entirely to competitive traffic, and. third, they re- 
 late particularly to the transportation of merchandise shipped by jobbers 
 and other wholesale dealers, and by manufacturers and other large pro- 
 ducers. 
 
 My correspondent regards the above-quoted statements as rather severe on 
 railroad managers, whom he believes to be fully as fair and honorable in their 
 dealings as are merchants generally. I fully concede this, and refer to the 
 following expression on page 7 : " This procedure was not an expression of 
 caprice, or of any vicious propensity on the part of railroad manager*. It 
 was dictated by a force of circumstance and a compulsion of environing 
 conditions entirely beyond their control, and it constituted a phase in the 
 processes of a mighty evolution." And again on page 14 : " Usually such 
 rate-cutting was based upon representations of shippers, sometimes true 
 and sometimes false, to the effect that offers of cut rates had been made 
 to them by the agents of competing lines." 
 
 The sole object which I have had in view in the portion of my address bo 
 
 which the above-mentioued criticisms relate was to describe a condition of 
 
 affairs in the evolution of the American Railroad System which rendered 
 
 inevitable the evil practices which I have endeavored to describe, and I am 
 
 not unwilling to admit that this explanation may be necessary in order 
 
 clearly to manifest that purpose 
 
 JOSEPH NTMMO, Jr. 
 
 Washington. D. C. 
 
 July 12, 1893.
 

 
 
 *4