CHAPTER XXXIV.

CAN REGULATION SECURE THE NEEDFUL DOMINANCE OF PUBLIC INTEREST?

It is questioned whether any form of regulation can overcome discriminations. One of the ablest members of the Interstate Commerce Commission said to me: "No, regulation can never stop discrimination." And the man who is regarded by many as the leading railroad expert in the country replied to my question in substantially the same way. "Regulation properly so-called cannot eliminate discrimination, though it may greatly diminish it.”

What he meant was that a control strong enough to eliminate discrimination, would not be regulation, but ownership or quasi-ownership. So long as men representing private interests continue to possess control over rates and services they will continue to discriminate, for private interests demand discrimination. And if control of rates or services or both is placed in a public body, public ownership or quasi-public ownership is thereby established, for control is the essence of ownership. It makes little difference who has the title to a farm if I have the control of it and can determine the way in which the work shall be done and the price at which the crops shall be sold. The "owner" in such case is little more than a mortgagee he has the interest on his capital, whatever I choose to allow him, and that's all. It would seem that if the people wish to control the railroads, they should buy them at a fair value, and not establish complete or quasi-owner

ship without compensation, under the name of regulation and control.

This is an interesting line of thought, and philosophically has considerable force in respect to control extending beyond what the public may have a right to claim as a partner by reason of the bestowal of franchises and other benefits. It is also important to note that only substitution of managers owing allegiance to the public interest in place of managers representing private interests can eliminate the motives to discrimination, and remove the antagonism of interest between the owners and the public, which is the root of all railroad evils.

This is a practical world, however, and the practical facts are that the difficulties in the way of public ownership of railways in this country at present are very great, and that much good may be accomplished by judicious regulation. The long and short haul clause may be made effective; the railroads can be prevented from paying shippers more for cars or switches than they would pay each other; private carlines, express companies, and water carriers can be brought within the Commerce Act; the Commission can be given power to name a reasonable rate or practice in place of one found unjust, and either put it in force at once, subject to revision in a special court devoted to transportation cases, and acting promptly on all appeals, or themselves take the facts and their conclusions at once to the court and get a ruling before putting the order into effect; and railroad managers can be prohibited from having any interest in any concern that can be aided by transportation favors over their roads, as is already the case on James J. Hill's Great Northern, except with respect to Mr. Hill himself.

Besides all this it may be possible to make the law so clear that the courts cannot twist it out of shape, and the States might be got to pass laws in complete harmony with the Federal statutes. Railroads and trusts can be subjected to public inspection, and to the pressure of damage suits,

injunctions, and progressive taxation. If need be the public could demand representation on the boards of direction of all the railroads, or the traffic managers could be made public servants and required, as receivers are now, to report semi-occasionally to the Federal courts, and to State courts also, perhaps, with the power of judicial removal in case of misconduct. There is a practical warrant for demanding representation in the management of the roads, in the fact that the franchises bestowed on them by the public represent a large part, probably half, of their market values. The public is entitled, as we have said, to be regarded as a partner in the railroads.

If after thorough trial, regulation proves insufficient or unsatisfactory, public ownership remains. The movement of thought in that direction in the last few years is very remarkable. In whatever way relief may come, whether by regulation or public ownership, the essential fact is the dominance of public interest over private interest at the points where private departs from public interest, and the essential instrumentality for the realization of this fact in a republic is the actual, complete, and continuous control of the Government by the people.

That unjust discrimination in railroad rates and service can be abolished, we know from the experience of other nations. Studying the railways of ten countries on the ground, examining the railway literature and talking with leading authorities of twenty-six countries, and analyzing the writings of the principal critics of the various systems, I find that the railroads of the United States are unique in two respectsthe efficiency of the service they render, and the extent and viciousness of the discriminations they make. If efficiency

1 The reasons for and against public ownership of railroads are dealt with in the testimony of the writer before the Industrial Commission, vol. ix., pp. 123-193, 883-890. President Roosevelt had the possibility of public ownership in mind when he said in his message that we must choose between an increase of existing evils, or increased Government supervision, or a "still more radical policy."

and injustice were essentially related, we might look with some degree of leniency on the evils of railway favoritism, though the wise would prefer justice even at the sacrifice of some degree of efficiency. But there is no such relation. Efficiency is due to national characteristics and economic conditions. In Italy I found the least efficiency coexisting with the greatest development of railway favoritism that I discovered anywhere in Europe, while the German roads are highly efficient and absolutely free from favoritism. All over Europe shippers and railway men assured me that no concessions could be obtained on the German railroads, and that they were the best managed roads in Europe. The railways of France and England are less efficient than those of Germany, and are tainted with discrimination to a degree that is insignificant compared with the phenomena in that line over here, but is very emphatic when compared with the German standards. The press of Great Britain has for years been holding up the management of the German roads as a model to be followed in England, and attributing the success that Germany is having in superseding English goods with her own in many leading markets to the efficient and far-sighted policy of her railway management.

There does not seem to be any clear connection between efficiency and the form of ownership. The private roads of America are the most efficient and the private roads of Italy 2 the least efficient I have examined. The public roads of Germany and Belgium, though less efficient than our private roads, are more efficient than the private roads of France and England. In the same country, under like economic conditions, either private ownership or public ownership may secure the best management and most efficient service according to the stage of development. In the United States under existing political conditions the

2 The railways of Italy were operated by private companies when I was there; since then, in 1905, the Government has undertaken the operation of them.

managers of our railways have many facts on which to base an argument that Government operation of railroads would be less efficient than private operation; and the fact that our adverse political conditions are due in large part to the private ownership of public service monopolies does not destroy the whole force of the argument, since our rings, bosses, party machines, spoils system, etc., are due in part to other causes. But where public affairs can be managed with the purity and business sense that characterize the railway managements of Germany, Belgium, Denmark, New Zealand, and South Africa, there is equally little reason to doubt that public operation is the more economical and efficient.

The low average freight rate in the United States is often adduced as conclusive proof of the efficiency of private management. But the average freight rate in England and France is higher than in Germany or Belgium.

If it is a valid argument to say that the low average freight rate in the United States under private ownership proves the case as against the higher average freight rate under the public systems, then why is it not fair to say that the high rates in Great Britain and France under private ownership in their turn prove the case for public ownership. The average passenger rate in the United States and in Great Britain is twice as high as in some of the public systems of the continent. If the low freight rate proves the case for private ownership, why does n't the low passenger rate in Germany and Belgium prove the case for public ownership? The fact is that such comparisons of average rates prove nothing as to the management. Differences in the density of traffic, grades, curves, length of haul, wages, capitalization, etc., enter as plural causes and make it impossible to ascertain the effect of the element under consideration. Mr. Fink found that the ton-mile cost varied eightfold on different lines in his own system, all under the same management 700 percent more in some cases than