RAILWAY RATE CONTROL BY STATE COMMISSIONS.

Hon. STEPHEN B. ELKINS,

Chairman Committee on Interstate Commerce,

United States Senate, Washington, D. C. SIR: The record of the proceedings of your committee for May 23, 1905 (Hearings before the Committee on Interstate Commerce, United States Senate, Regulation of Railway Rates, Vol. IV, p. 3496), shows that while I was making a statement before the committee, one of its members, Senator Cullom, of Illinois, addressed me as follows:

Since you have brought the Georgia rate into your statement, perhaps it would be well for you to file a supplementary statement on that subject for our benefit.

Subsequently another member of the committee, Senator Foraker, of Ohio (ibid., p. 3591), said:

I would like to suggest, if it will not be too much trouble, that when you give us the information I asked for in regard to the operation of the State commission in Georgia, you also give us the same information as to the commissions in other States, in so far as you can.

The statement which I had made that resulted in these requests for further information, as it appears in the published record (pp. 3494 et seq.), is as follows:

The principle involved is not a new one. The legislative bodies created by Englishspeaking peoples have on many occasions attempted to modify by statute the natural relations of trade and commerce. When the Black Death diminished the number of English workmen, and wages rose so that the landowners felt an unaccustomed economic pressure, Parliament sought to fix the wages of labor and thus to deprive workingmen of the increased earnings which the market justified, but these laws only furnished an instance of the impotency of human intention when it seeks to repeal or modify natural laws. A more familiar example is found in the almost universal effort to regulate interest on loans, and it is notorious that laws against usury have had little effect except to accentuate the burdens of borrowers.

More nearly akin to the experiment now proposed are those undertaken by the American States, which have sought to regulate railways by the direct or delegated exercise of the legislative authority to prescribe rates for the future. The meagerness of the evidence concerning the results of this sort of legislation seems to me to challenge the attention of those who realize what a flood of light it might throw upon the legislative proposals now under consideration. Although the Interstate Commerce Commission has for years demanded rate-making power, I know of no competently conducted effort to discover whether rate making by legislatures or by commissions has worked successfully where it has been tried. Such study as I have been able to give convinces me that it has not.

IN GEORGIA.

The experiment has been tried in Georgia about as long and as consistently as anywhere else, yet Georgia shippers are not satisfied. Their attitude is well expressed in the following extracts from a recent editorial in the Atlanta Journal:

"A merchant in Marietta can ship certain goods to Chattanooga for 15 cents per hundred; to Knoxville for 19 cents per hundred. To ship the same goods to Atlanta

he must pay 30 cents per hundred; to Macon 70 cents per hundred. Atlanta is 20 miles from Marietta, Chattanooga is 128 miles, and yet the Chattanooga merchant pays just one-half the freight the Atlanta merchant does. Why? Because Chattsnooga is out of the State and Atlanta is in it. This is merely one of a hundred instances where Georgia points are placed at a positive disadvantage in freight rates because they are located in the State."

Senator CLAPP. What were those three Georgia points?

Mr. NEWCOMB. Marietta, Macon, and Atlanta.

The editorial from which the foregoing is an extract shows clearly that the results of a drastic regulative system are not now wholly satisfying to the people of Georgia. It has been suggested that the psychological aspect of railroad regulation of this sort is too often ignored, and that where the reduction of rates is more or less vigorously looked after by public authorities, railroad officers are not unlikely to leave the duty of looking for desirable reductions wholly to the body with which the legislature has required them to share it. Something of this sort seems to have occurred to the shippers of Georgia, for in the editorial already quoted there appears the following explanation of the situation against which the complaint is made:

"When a merchant approaches the railroad for rates in Georgia, he is met with the reply that the railroad commission regulates that, and he can get no reduction. "If, however, they are asked for rates to towns outside of Georgia, the application receives immediate and favorable consideration, and the best rates are granted, because the point of destination is beyond the limits of the State and, therefore, not controlled by the State commission."

In another paragraph of the same editorial the situation is summarized with similar effect, and perhaps even more forcibly, as follows:

"As matters now stand, the plain logic of the situation is that within the State of Georgia, rates being regulated by the railroad commission, shippers are powerless to receive fair treatment from the railroads, where to points just beyond the limits of the State they can receive the most favorable rates, and shippers from these points into the State receive the lowest rate that can be obtained; much lower, as a rule, than the Georgia shipper can get."

Anyone would underestimate the significance of the foregoing who failed to note that the State rates and the interstate rates are over the same railroads and must be promulgated by the same officers, the controlling and, in fact, the sole difference being that in the case of the interstate rates the shippers deal at first hand and face to face with the railroads and their officers, while in the case of the State rates the legislature has interposed its authority and that of the State commission between the two actual parties to every contract for railroad service, thus requiring the negotiations to be conducted at much more than arm's length. The method of doing business thus imposed upon the shippers of State traffic and the railroads carrying it is cumbersome and absurd. It is only natural that its consequences should be

burdensome.

Senator FORAKER. What is the basis upon which they fix rates in Georgia?
Mr. NEWCOMB. The commission establishes a complete schedule of rates.
Senator FORAKER. Is that on a distance basis?

Mr. NEWCOMB. Largely on a mileage basis.
Senator FORAKER. It is not an arbitrary rate.

Mr. NEWCOMB. The rates, as given in the schedule, are in cents per hundred pounds between the different stations, but the rates are understood to be, and are, in fact, based upon the mileage, but possibly with variations in individual cases, not extensive at all in number.

Senator DOLLIVER. Why does not the commission fix reasonable rates in Georgia? Mr. NEWCOMB. I think that a commission always has great difficulty in seeing any consideration except distance. They can appreciate distance. They can see a mile when they can not see a mountain.

Senator DOLLIVER. Mr. Watson, in the April number of his magazine, says that the railroads control the commission.

Mr. NEWCOMB. I presume Mr. Watson knows more about the Georgia commission than I do.

Senator CULLOM. If the rates are 30 cents a hundred pounds for the short distance from Marietta to Atlanta, it seems to me it would be a pretty stiff rate from Atlanta to the outer edge of the State, or from the north line to the south line of the State, for instance.

Mr. NEWCOMB. That is probably a rate on goods taking one of the higher classes, and perhaps it is not extraordinary for that distance. But under that adjustment it seems as if it could not be a very satisfactory adjustment for the Atlanta merchants.