very sane man on that commission, a very wise and prudent man, they would have done that. But Colonel Dye kept it within certain limits, and the result was they only planed off about 13 per cent; and that is as near making a new schedule as anybody ever came.

Mr. SHERMAN. I guess we had better get a search warrant out for that man.

The CHAIRMAN. The hour for the meeting of the House has arrived, and will it please you to go on to-morrow at half past 10?

Mr. BLYTHE. It will suit me very well indeed, thank you. Indeed, it will be a convenience to me, because I would like to get through to-morrow.

(Thereupon, at 12 o'clock m., the committee adjourned until to-morrow, Wednesday, May 7, 1902, at 10.30 o'clock a. m.)

WEDNESDAY, May 7, 1902.

The committee met at 10.30 o'clock a. m., Hon. William P. Hepburn in the chair.

STATEMENT OF MR. J. W. BLYTHE-Continued.

Mr. BLYTHE. Mr. Chairman and gentlemen, yesterday I stated that the making of rates had been a process of evolution; that it had been a growth, but the making of rates in itself is not the only thing. The apparent making of a rate between two localities on one railroad is not in itself the most important thing in the fixing of rates, but the question of differentials, the question of the relation of rates as between communities and between industries and between different commodities, is the most difficult as well as the most complex feature of rate making.

These differentials-the relation which the rates from one community bear to the other, and from the same point of origin, perhaps, to a third community, or between two communities like Chicago and Boston on the one side and St. Louis or Newport News or Baltimore upon the other side-add vastly to the complexity and the difficulty of the question. The rates have been adjusted by this slow process of growth from the beginning, with reference not only to the incidentals. of a particular commodity being shipped between two points, but of that commodity with reference to other commodities in active competition with it for the same uses, not only between those points but from all points of origin to the markets which that commodity seeks. To illustrate, I have before me a tariff of the Chicago, Milwaukee and St. Paul made jointly with the lines east of Chicago upon flour for export. The rate from Baltimore to Minneapolis and St. Paul is 17 cents. That is the minimum rate to any seaboard point. The rate to Boston is 204 cents, a difference there of 3 cents between Minneapolis and St. Paul to Baltimore on one hand and Boston on the other hand at the seaboard. Now, those relations must be preserved, and if not preserved must be departed from for the gravest reasons, reasons which are not only influential to the carrier itself, but which will command the approval of the community served, and of other carriers. competing for the same business between the same points, or between rival and competitive points to those points.

The competition of markets, the competition of the sources of supply, and the competition of the markets, the points of consumption or distribution, are the material things which go into the making of rates, and so when a new enterprise is about to be started, if a new mill is to be built, if a new factory is to be put into operation, is to be constructed, whether it be a beet-sugar mill or a cotton factory or a draintile factory, or whatever it may be, the very first question which confronts the investor is, "What rates can I get from that point to the markets and territory in which I must sell my goods; will they be low enough to enable me to compete there on equal terms with other manufacturers producing the same articles at other points?"

So what does he do? He goes to the freight agent of the railroad or railroads which must serve him, perhaps only one, and perhaps several, and he says to them, "What can you do for me?" The freight agent says, "What is it necessary for me to do for you; what sort of competition have you to meet; what and where are your rivals in the production of this article," whatever it may be, "what are the competitive terms upon which you have got to get into the market?" And after a little while, by the process of negotiation, they ascertain what is the rate that that commodity most be subjected to in order to put the producer upon an equality with his competitors.

Now, perhaps the rate will be prohibitive, and if so the project will die right there, and perhaps a rate can be made with a just regard to the interest of the carrier and such that it will further and promote the industry. Usually the latter is the case, because the carrier is interested in promoting, to the extent of its ability, every industry that can be put upon its lines. In the building up of the regions served and of their industrial activities is to-day the most important part of a railway manager's duty, next, of course, to the maintenance of his property.

Now, this difficulty of the competition between the various sources of supply and the various markets which are sought, either of consumption or of distribution, is not purely theoretical, but has been fully recognized by the Commission from the very beginning. I wish to read an extract from the seventh annual report of the Commission:

To give each community the rightful benefits of location to keep different commodities on an equal footing, so that each shall circulate freely and in natural volume, and to prescribe schedule rates which shall be reasonably just to both shipper and carrier is a task of vast magnitude and importance.

They state there the vastness and magnitude of this undertaking. Then, to show that the Commission itself did not shrink from this undertaking, they add: "In the performance of that task lies the great and permanent work of public regulation.'

That is what the Commission wants. It wants the power not only to say what the rates shall be upon products from Missouri, Iowa, and Illinois to the markets of the world, to regulate not only the domestic rates within the United States, but also to regulate the rates at which these products of the soil shall be exported; not only to say what the carrier shall charge, what differentials shall be between points on its own line, not only to prescribe the rates which may be excessive or extortionate in a particular case, but they undertake to say they are equal to deciding what is necessary to give to each community the rightful benefits of its location, and to keep different commodities

upon an equal footing, so that each shall circulate freely and in natural volume.

Was any power such as this ever granted to or ever demanded by any tribunal except this? Mr. Nimmo, in his remarks before this committee, spoke of this as an autocratic power, and said the Commission, if granted this, would be an autocratic body. Did his statement go too far?

Of course I do not say this offensively, for even the most upright, honorable, patriotic, and able men would not be competent to exercise such universal power as this. That an irresponsible body, extra-constitutional, not erected within the constitutional limits, not responsible to any department of government, should possess such power as this would transcend, I verily believe, anything in the history of the AngloSaxon people.

The magnitude of this task is such that to-day there are thousands. of men actively engaged in dealing with it. Every railroad in this country has a large staff of trained, expert men. Mr. Bird testified that he had been in the railway service, I think, for thirty-five years; beginning as a night watchman he has served through all the grades of the service. Mr. Bird is not an exception. Every railroad in this country has a man, not perhaps the equal, not perhaps of so long an experience as Mr. Bird, but similarly educated and similarly charged with the duty of superintending and looking after this rate problem as it affects the local conditions of that particular road. It is not done perfectly; it is done subject to the limitations of human nature, but it is not done arbitrarily. There is no such arbitrary power lodged to-day in the hands of the railroad companies, or in the hands of the men engaged in the superintendence of traffic, as this bill contemplates, because, as I have tried to show, the adjustment of every differential, every difference of rates, and every relation of localities to each other, and the commodities to each other, has not been due to the Voluntary and specific exercise of any will or any judgment, but it has been by the slow higgling in the market, extending over forty years.

Is this to be disturbed and to be brushed aside by the arbitrary judgment, or, if you please, the informed and patriotic judgment --I do not want to use offensive language, let it be the judgment of the best and most informed men-of three or five men substituted for what, after all, is the agreement of the minds of all the interests in the country upon what these rates shall be? What has been the result of this power? Take the Eau Claire lumber-rate case. In the Eau Claire lumber-rate case, what did the Commission attempt to do? They attempted to say that the Eau Claire rate should bear certain relations to the rate from La Crosse and other points at which different relative rates had for a long time been maintained, which had been established through a long process of negotiation and disinterested arbitration to which all the parties had consented.

What was the result? The St. Paul Railway Company decided, as Mr. Bird testified, to accept the ruling of the Commission.

its interest to accept it; to its interest because it was interested at Eau Claire, and in a less degree at La Crosse and Winona, and therefore its interest was to conform to the judgment of the Commission. It did conform, and what was the result? A condition of chaos throughout all that region, and the practical impossibility was demonstrated of carrying out the award of the Commission in that case, and

the former relation of rates was restored. And the Commission, by the way, never attempted to secure any judicial sanction of its order changing that relation. And the relation exists to-day as it did before under the Bogue award, substantially. Now, there was another case. What did the Commission attempt to do there? I refer to the case of the differential-the Chicago freight bureau case. It is what is called the maximum rate case (reported in 167 U. S.). Certain differentials prevailed from Chicago to the southern points-Atlanta, Augusta, Social Circle were the primary points named in the investigation, but it involved a very large region in the South. Differentials had been established and maintained from Chicago and Cincinnati on the other hand, and the region south of the Ohio River. They had grown up and had been evolved by a long experience, and had been acquiesced in not only by the rival carriers, but for the most part by all communities and individuals interested.

But that was not all. All the Atlantic coast and all New England was competing for the same business, and long experience had shown that certain differentials should be maintained, so that not only the carriers might have a margin of profit, but also that the communities served should prosper. There was very little complaint. There was no complaint in New England, and none from Chicago, and none from Cincinnati, except that the freight bureaus of those places were complaining a little because they were trying to get an advantage over each other, as in the La Crosse and Eau Claire case; but there was no substantial complaint from the people. The complaint came from the South, from Social Circle. That was its origin. The Commission undertook to make an order there changing the differentials which had been for years in effect. But the Supreme Court said they had attempted something they had no power to do, and of course the judg ment of the Supreme Court in that case is the gravamen of the complaint to-day; it is the burden of the cry coming up to this committee that the Commission must be given more power.

I cite these cases to illustrate the kind of power that the Commission asks. If it were possible to give the Commission the power to fix the rate in a particular case, after a particular investigation from which it should appear that a rate was so obviously extortionate that it should be corrected, this would not be such an enormous task. It would not be so full of menace for the future. Its presage of turning everything upside down would not be so apparent. But that is impossible. These roads are all involved and the rates are all involved; not only the rates upon particular railroad, but the rates on one railroad affect necessarily and involve the rates upon a railroad hundreds of miles away. For example, the rates upon the Great Northern Railroad carrying wheat into all the markets, primarily into Minneapolis, St. Paul, Milwaukee, and Chicago, but ultimately into all the markets east of there, must bear a certain relation to the rates charged by the Santa Fe Railroad, 500 miles away, carrying wheat from Kansas and the Indian Territory and Oklahoma to the same markets. These rates are all necessarily dependent upon one another, and all have been established by a long series of considerations and a long experience. I can not dwell too much upon that, that they have been established by a long process of experience and evolution, and they have been adjusted so as to bring about a relation between widely separated sections of the

country and markets which must necessarily compete for the consumption or the distribution of products.

Such a task as this can be satisfactorily worked out only by the methods which have heretofore obtained-the free competition of the carriers, of the producers, and the open markets. Even so, it has not been perfectly done; that is, absolute mathematical justice has not always been attained. But there has been as near an approach to exact justice as ever is attained. Indeed, I do not suppose that there is any business in the world that is conducted relatively to its importance and its magnitude as fairly, where there is as little friction, where there is as little just cause of complaint, as in this business of the carrying trade. I think it is not without the knowledge, perhaps, of the chairman of this committee, that through all the vast region in southern Iowa and Nebraska, with which he is very familiar, there is absolutely no complaint to-day of the service or the rate charged by the railroads serving that country from the producers of the country. A few years ago the conditions were very different. There was an excited public opinion growing out of causes, some of which were imaginary and some of which were real and some of which were like other phenomena produced by the hot winds blowing up from Kansas; but that has all disappeared. We have no trouble and no litigation in that country to speak of; we have no litigation with the producers and only a little with middlemen. But except for middlemen the whole country is quiet on this subject of freight rates, and not a complaint has been made to this committee, and, as I believe, not a single complaint has been made to the Interstate Commerce Commission of extor- . tionate rates or discriminations.

Mr. STEWART. Is not that due to the fact of the producers not having any immediate connection with the railroad companies he deals with the middlemen?

Mr. BLYTHE. He deals to some extent with the middlemen, but I believe there is no sentiment which is expressed so quickly as a sentiment of injustice on the part of the producers of the land. It is reflected at once in political agitation. If there is a discontent, if there is a grievance, if there is really anything to be complained of on the part of the people it is at once reflected in political discontent, and a few years ago a wave of agrarianism passed over the West, resulting in the Potter law in Wisconsin and the maximum rate law in Iowa and similar legislation in many of the States.

Mr. STEWART. Tending to correct-intended to correct--those evils. Mr. BLYTHE. That political agitation has all disappeared. There is nothing left of it. If there were a grievance, if there were faults to be found, it would be reflected to-day in the politics of that country just as it has been in the past, and just as other evils affecting the producers are reflected in the politics of that region to-day.

In the making of rates there are a great many elements, of course, to be borne in mind. Not the least of those is the cost of carriage to the carrier. That exact and careful computations of cost are ever now made with reference to a particular commodity occurs only in those cases where new industries are to be erected, or where commodities, for one reason or another, must seek a very low rate. For example, the promoters of the "good-roads movement" asked the railroads to make low rates upon road material, which the railroads were glad to do, but when the traffic managers investigated it they