mended for bringing it—if he is right, just see the consequences that are involved.

Now, it may be that the technicalities or the language of the antitrust law are violated in the one case and not in the other, but the principle involved is precisely the same in all of them; and if the combination which has been attacked can be broken up, then upon principle and upon grounds of public welfare every railway combination which has been effected in this country within the past ten years ought to be broken up; and with what result, to what end, to what good purpose?

Resolve these great systems of railway into their constituent elements, bring us back into the condition we were in twenty-five years ago. Why, the whole aim and tendency and effect of that legislative policy, if it could be adopted, would be not to perfect and develop our great railway systems of communication, but to bring us back to the disjointed and fragmentary and separated and warring elements we had ten years ago.

What ought we to do? Not merely recognize an inevitable tendency, but recognize the great public advantage of these railway combinations and then control them.

Let me put it in another way. Let me remind you of the fundamental difference which there is between combinations in the industries and in railway service; the difference is fundamental, gentlemen. It is fundamental in the constitution of society, and in the Constitution of the United States, when it comes to actual property, the things which we eat and use and wear, the products of human labor and skill; why, we do not want uniformity of price, if we can help it.

We want every producer to be perfectly free to get the most he can for everything that he has to sell and every purchaser to be equally free to buy everything as cheap as he can. That is, we want the utmost freedom of contract between buyer and seller in the exchange of property, and in the freedom of that contract rests industrial liberty. It may well be that those industrial combinations which have for their purpose temporary or permanent restraint upon that freedom

of contract, either by limiting tion or controlling prices, or

But when

anything of the kind, are against public welfare, and ought to be prevented if they can be. But when you come to railroad transportation, you have an entirely different situation. It is a public service. It is not a matter of contract at all, as I said to you the other day. You do not ride upon the cars as you buy flour, by contract, but you ride on the cars and have your property transported in the exercise of your political rights, and you do want uniformity, and if I am compelled to pay for a public service one sum and you get it at a lower sum, my political rights have been invaded.

I have been denied the protection which the Constitution undertakes to guarantee me, and if I could have my way I would have the prices of railroad transportation as certain and unchangeable as the price of postage stamps. I do not mean unchangeable from month to month or from year to year, but for the time being, as between man and man; and I would make it impossible for an Armour, or a Rockefeller, to get a car load of freight carried any cheaper than the humblest cross-roads merchant.

And to repeat what I said yesterday, for I am very much impressed with that, there is no influence which will so operate to bring down

railroad rates as the absolute maintenance of railroad rates. When you have the conditions which have heretofore prevailed, and which must prevail more or less under the competitive system, a railroad will yield to the powerful shipper, to great combinations, and hold up its rates as to everybody else; but when the big shipper, the largest company, can not get one mill off the rate, you have the approval of everybody to bring down the rate.

Let me put it in another way. What is at the bottom of our apprehension and our alarm as to these industrial combinations? Why, I suppose, I believe that it is the apprehension that they will so use their power and the degree of monopoly which they get by their combination as to extort from the public fairer prices than would otherwise prevail. Now, we can not reach the price of property; you gentlemen can not fix by legislation the price of sugar or cotton ties or flour or anything else-steel rails, for instance. So what do you try to do? You try to prevent the combination out of which those high prices result, because that is the only thing you can do. You can not go to the end you want to reach and control the sum which the consumer would pay, because that would far transcend your constitutional powers; so you try, and so the State legislatures try, to accomplish your result, or some measure of that result, by the indirect method of putting every obstacle you can in the way of combination. And I am not making any adverse criticism upon those laws, either State or national; but I want to contrast with that the railway situation.

When it comes to that, you can go right to the end in view nd co trol the pric. You have not got to resort to any indirect and unsuitable methods. The price of the thing in question is under absolute control. You can fix railroad rates. You can do it through the Commission, and you have absolute control over it, so that for the very reason you may be opposed to industrial combination you ought to be in favor of railway combination.

I am talking too much, gentlemen.

Mr. STEWART. We are very much interested, Judge.

The CHAIRMAN. Judge Clements, would it suit your convenience to be heard to-morrow morning?

Mr. CLEMENTS. Yes, sir; any time it suits the committee.

The CHAIRMAN. I have been notified that certain representatives of the railways will be ready to be heard on Tuesday, and if we can get through with the balance of the subject by that time we will do so. If not, we will give you such time as you need.

Mr. CLEMENTS. I certainly do not expect to take more than an hour and a half.

The CHAIRMAN. If it will suit you, we will be pleased to hear you to-morrow at half-past 10 o'clock.

Mr. CLEMENTS. Very well.

Thereupon, at 12.40 p. m., the committee adjourned until to-morrow, April 25, 1902, at 10.30 o'clock a. m.

WASHINGTON, D. C., Saturday, April 26, 1902. ". The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair.

STATEMENT OF HON. JUDSON C. CLEMENTS, INTERSTATE COMMERCE COMMISSIONER.

Mr. CLEMENTS. Mr. Chairman, I think I will be excused for speaking generally for a few moments, although it is not my purpose to go into the general question to any great length. There are some features of the general subject of regulation which ought to be referred to in connection with the practical details, which I suppose it is the object of the committee and of all of us to get down to, and only so far as I think necessary for a proper consideration of those will I refer to the subject in general.

The magnitude and importance of these questions and the difficulties and complexities surrounding them are not to be wondered at, and they are sufficient to caution anyone who approaches this subject, either from the standpoint of legislation or administration, against overconfidence in being able at once to formulate suitable and effective legislation in all particulars.

There are men living who were born before there was a mile of railroad built in this country, and yet we now have nearly 200,000 miles. It is a business which reaches everybody, touches every other business, and upon which everybody is more or less dependent. This immense property has been constructed under public franchises which have authorized the promoters to take private property for public use upon the theory that they perform a public service, and therein this business is distinguished in principle, fundamental principle, from the ordinary private business in which men engage without public regulation. Another feature distinguishes it, and that is that every railroad is of necessity to most people a monopoly. There are several roads for the same people at the trade centers. There were formerly more than there are now, since modern combinations have been perfected; but after all the great body of the people who need protection from injustice most are those who can patronize only one railroad.

Hence long since has grown up the idea that it is perfectly correct and necessary to regulate this business. It has more to commend regulation than many other things that have been regulated. From the beginning in this country it is a matter of history that public authority legislative authority of the States, at least has always regulated the tolls at grist mills, over turnpikes, and monopolies of that sort in which the public are interested, in which it was believed that the public was entitled to fair and equal treatment as between man and man. It is true that is a small matter now as compared to this business. It was an important matter, however, in the former days before railroads and the steam mills and merchant mills that have been brought about at trade centers; it was a vital matter then, and the public authority did not hesitate to regulate it on the sole ground that it was a monopoly, though a private business. In addition to the fact that the railway is a monopoly to most people there is the further I-C L -21

fact that it was created only by grant of public authority for a public purpose, to take private property in order to do the public business. But I will pass from that question, because it is settled by judicial interpretation that there is competent authority and adequate reason, both, for regulation.

Sometimes when these matters are presented those who oppose regulative legislation speak of it as a great innovation, as revolution, as something unheard of, and therefore I have made this reference to these matters. For a long time the people of the country got along without any demand for regulating railroads, although they had the authority in the Constitution, formed long before a road was built, for that purpose, and upon which the present law was enacted. But the warfare between railroads and between rival communities and markets and products had not been made so sharp that there was necessity for regulation.

The roads were far apart; they were separate lines. They had not formed these aggregations, and great trade centers had not been built up by the facilities of the railroads, and therefore the necessity for regulation for a long time did not exist, and for a still further time the sharpness of friction and warfare and strife between communities and individuals in business and carriers was not such as to make imperative the demand for legislation such as resulted in the passage of the present law, which was enacted in 1887. But for ten years before that time it was a matter of public agitation. It was before both Houses of Congress for about that time, and this law was the fruit of that agitation and contention.

It is not strange that Congress at that time did not make a perfect law. It was a great field, a great subject; there were great interests, great difficulties involved. It was tentative and experimental, and two years later, in 1889, following the provision of the statute which requires the Commission annually to report to Congress and make suggestions as to needed legislation to perfect the law, certain recommendations were made, and Congress took it up again and amended it in several particulars, one of which was to include the shipper under the criminal provisions of the law. He was originally not under the criminal features.

Another provision then added to the law was one making it a crime for a shipper to underbill or misdescribe the products he shipped so as to cheat the railroads by marking a package a certain kind of freight which would go at a low rate, whereas it was a higher grade of freight that went at a higher rate. Those were two important provisions put in at that time at the instance of the carriers and recommended by the Commission. They thought that was just and went toward making an adequate law protecting both interests with impartiality.

Since that time there has been practically no amendment to this law; none, I might say, except the supplemental act which relates to the matter of taking testimony, which grew out of what is known as the Councilman case.

It has been now about thirteen years since the law was overhauled in the particulars to which I have referred. The Commission has in obedience to a requirement of the act year after year made suggestions as to what it thought was necessary to give effect to the purposes of the law, and, as you well know, has annually provoked a campaign of criticism, which has already been referred to on the part of those

who undertake to defeat the proposed legislation by charging the Commission with greed and anxiety for unlimited power. I will not waste time on that. I think the committee understands that this Commission, acting officially and under oath, has no interest in the matter except to endeavor to carry out its duties faithfully as time and experience show them to be. That is what it is trying to do.

I will present a few figures which relate to the subject in general, not for the purpose of arguing from these that rates are or are not reasonable, but for the purpose of emphasizing the extent, the magnitude of this matter and the questions involved in it, whether viewed from the standpoint of the carrier or that of the shipper.

The gross earnings of the carriers, the railways alone, not including the water carriers, for the year ending June 30, 1901, were $1,578,000,000. This is equal to more than $4,000,000 a day for every day in the year. It equals about $175,000 an hour for every hour of the twenty-four in every day. The increase shown in these gross earnings from operations for the year 1901 over the year 1899 amounts to $265,000,000, which is an increase in two years of over $3 a head for every man, woman, and child in the United States.

The gross annual receipts amount now to more than $21 a head for the whole population, or $105 for every male adult, supposing there to be one in every five of population.

Now, of course a large proportion goes out as fast as it comes in, in the way of expenses of operation. Therefore I have said that I do not use these figures as applicable to the question of the reasonableness of rates, but I present them to emphasize the importance of the subject and of the questions that arise under it, because it is not to be conceived, in a business so large as this, conducted by so many people, where the carriers are left to fix their own rates, with reference to their own earnings, that the result of it will be that rates will in all instances be just and right and equal to everybody. It is impossible to conceive of such a state of things with such a result so long as humanity is what it is. Railroad carriers are made up of the same kind of people that the shippers are and every other class.

Mr. STEWART. What percentage on the supposed capital invested were those gross earnings?

Mr. CLEMENTS. The capitalization as it stands is about $11,500,000,000. That includes bonds, stock, and every class of so-called capitalization.

Mr. STEWART. About what percentage would the gross earnings be? Mr. CLEMENTS. The gross earnings would be something like 14 or 15 percent; but, as I say, something like $10,000,000 go out for operating expenses. There would still be left over $500,000,000 to go for other purposes. Not quite all of that is available for dividends and interest, however; but something like 44 per cent is available for interest on bonds and dividends on stocks.

After you

That is about what it figures down to in round numbers. take out expenses for operation, and taxes, and other matters that are proper to come out, there is still left some 4 per cent, or between 4 and 5 per cent, on the present capitalization, or about that. That includes the interest on funded debt and bonds, as well as the dividends on stocks. But the substantial ownership of railroads is largely in bonds. When you come to consider this, it is unfair to take simply the amount of dividends on the stock and say that is all they earn in