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In one case which came before the Commission within the year complaint was made of certain rates made by a railroad company as being unreasonably and destructively low. The carrier making them was competitor to several others for the freight passing between large cities several hundred miles apart, and the others averred that if compelled to meet these rates, and to continue them, they would in time be forced into bankruptcy. The only alternative would be the putting up the rates to intermediate points so as to make the greater charges on the shorter hauls; and this the law would not permit. Under such circumstances the very low rates which were complained of were alleged to be neither just nor reasonable, and therefore it was claimed they were forbidden under the act to regulate commerce, and the Commission was asked to so decide. At the same time evidence was given which it was claimed tended to show that the carrier making the obnoxious rates was not obtaining from its business a revenue adequate to its necessities; but whether the evidence was convincing the Commission did not have occasion to say.

If it is important to the public that a railroad once constructed should be maintained, the ability to make charges that will render its maintenance possible is also of public importance. When, therefore, the rate sheets are such that reasonable returns are not probable, a public injury is threatened, and the injury is accomplished when the natural result of bankruptcy is realized. It is of little moment that in the meantime the public reap an apparent benefit from the very low rates; the apparent benefit is almost always illusory, for the unremunerative rate sheets are seldom evenly balanced; they favor particular towns or particular interests, or they go spasmodically up and down, and thus unsettle prices; they are commonly made quite as much to injure competitors as to benefit the party making them, and it will generally be found that reasonable rates adjusted equitably over the whole field of service would have been as much better to the community as to the carrier itself. This, however, may not at the time be apparent; the public perceives what seems to be a benefit from low rates, and the attendant evils, which are not so obvious, may possibly not be perceived at all.

The fact which the public mind does not readily grasp in such cases is that the very low rates may be made by the carrier with full knowledge that they are not remunerative. Even in the plainest cases the truth is not always generally accepted; the rates are very properly taken as prima facie evidence of their adequacy, and to the public the evidence seems conclusive. And why should it not when the only legiti mate business purpose in building railroads and operating them afterwards is to make money thereby?

Unfortunately the purpose to make money from railroads is not a purpose in every case to make money by legitimate operation.

A railroad may be built by those who calculate to make their profit out of the building and who expect the road, when built and paid for in money or available securities, to pass into the hands of others with whose profits or losses the constructors will have no concern. It is unquestionable that many roads have been built for which there was no legitimate demand at all adequate to their cost. The promoters may clearly perceive this and yet contemplate a profit to themselves; but the profit must then be looked for in the transfer of inevitable losses to the shoulders of others. If this is not accomplished before the road is

put in operation, the most feasible method of accomplishing it afterwards may be to make the road as injurious as possible to other roads, until some party having a valuable property to protect will take the obnoxious road in order to stop its destructive operations. Before the road is disposed of it is made use of with some such purpose in view; its rates are devised not in the expectation that legitimate revenue for its needs will be realized, but that competitors may feel its power to do mischief.

The public does not therefore misjudge when it assumes that the object the promoters have in view in building the road is to make money thereby, but it is altogether astray as to the particular means whereby the object is expected to be accomplished. Many very costly roads have been built from which the builders have realized large fortunes, but which, nevertheless, in the hands of stockholders are worthless as a source of profit. The contractors may have obtained their pay, but the foreclosure of mortgages given to secure the debt for construction has cut off the original stock, and eventually they become mere adjuncts to other roads which they might otherwise injure; as the New York, West Shore and Buffalo has become an adjunct to the New York Central, and the New York, Chicago and Saint Louis to the Lake Shore.

In estimating the public benefit from a road thus built it is necessary to begin by charging to the debit side the capital sunk in it and the damage, if any, which it has inflicted upon other roads. The benefits may be considerable. Every road supplies some local communities which would otherwise be without railroad facilities and gives to other points the benefits of competition, but the debit side is likely to be greatest until the time comes when, if it had not been sooner built the gradual increase in population and business would have created a demand for it. But so soon as the management has a legitimate revenue in view its rates must be so graded as to produce it, and they are very likely to be then made higher than would have been necessary had the road been demanded by business needs at the time of construction.

A road built in good faith and in the expectation of legitimate profits from its business is susceptible of being afterwards used for stock-jobbing purposes, and when it is so used its rates, instead of being calculated with a view to the permanent interest of the road, may be arranged with a view to make the results operate most effectually for the time being upon the judgments or the imaginations of the stock board. To this end the interest of stockholders may be sacrificed just as remorselessly as the interest of rival roads or of the general public. Roads from which no fairly-earned dividend could reasonably be expected have thus for many years been made the subject of stock speculation, and the manipulation of rates to that end has been productive of infinite mischief.

The chief evil has not been that the public has been misled as to what are reasonable rates; but the stock speculators controlling the roads have stood before the public eye as representatives of the whole class of railroad managers, and the devious ways of a few have been looked upon as characteristic of all. Declaring a dividend which has not been earned is among the devices to which persons who are at once managers of roads and stock jobbers resort. The persons likely to be most seriously wronged in such a case are those who are deceived into buying the stock for more than its value; and they are doubly wronged; first in the purchase, and afterwards in the road being charged with the burden of making up from subsequent earnings what has improperly been taken from the company's treasury. But every stockholder not a

party to the transaction and cognizant of the facts is wronged, with the sole exception of those who receive the dividend and who also dispose of their stock.

In all business corporations the stockholders are changing continually. By the rules of common right and justice the stockholders who are such at the usual time for deciding upon dividends are entitled to what has been earned during the period which the decision upon the question of dividends will cover, and they are entitled to no more. To pay a dividend not earned is to give money to some who have no just claim to it, taking it directly or indirectly from the property of others. But even if there were to be no change in stockholders, the very parties who received the unearned dividend would be wronged, since the power of the road to earn dividends in the future would almost necessarily be diminished. No effectual means of prevention has yet been suggested other than legislation to make such acts criminal, or the establishment of some public supervision of accounts and the sanction of the dividend by some public authority.

The reports which interstate carriers are required to make to the Commission may have a conservative influence, since they will increase the difficulty of making a show of profits when profits have not been realized, but accounts are easily manipulated so as to be made to tell deceptive tales, and nothing but an investigation that goes back of the . report to the original accounts will enable the deception to be uncovered. But in existing legislation we find nothing which seems to contemplate that special investigation will be entered upon with no other purpose than to prevent wrongs to the corporation itself or its stockholders.

The cases mentioned are far from being the only ones in which persons having control of railroads may deliberately make insufficient rates in the expectation of profits to be indirectly and improperly derived therefrom. Every case of rate war may be regarded as one of this character. Present profits are sacrificed on a calculation that by crippling a rival or forcing an agreement or compromise on some matter of contention the loss will in time be more than made up. In the great majority of such cases the losses are found in the end to exceed the gains, and the difficulty of getting back to reasonable rates after the war is ended is sometimes very serious. Then there are a great many cases in which very low rates may be given to build up particular places or interests when corresponding rates could not be made universal. Though rates which are unjustly discriminating are forbidden by law, the line between what is admissible and what is illegal is not so distinct but that serious errors may be and often are committed, perhaps without any definite purpose to disobey the law. In such cases, rates made even through error of judgment too low, are likely to be balanced by others made proportionately too high.

The statute, in its requirement of reasonable and just rates, has had in view the protection of the public from extortion and from unfair discriminations. It does not assume that railroad companies will need protection against their rates being made unreasonably low, and it has not conferred upon the Commission any power to order an increase of rates which it can see are not remunerative. In general, therefore, it may be said that railroad managers possess the power to destroy the interests not only of their rivals, but of their own stockholders, if they will recklessly make rates that lead to bankruptcy.

In some cases, however, the exercise of the authority of the Commission to prevent acts forbidden by the statute may indirectly have a

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conservative influence in respect to rates. This may be the case when discrimination between localities or between different kinds of business is complained of. A railroad company ever so much inclined to give ruinously low rates to one locality or to one species of traffic, will hesitate to do so when it understands that it will be done at the peril of having its rates to other localities or upon other kinds of traffic cut down proportionally. The liability to have this done is perhaps not as thoroughly understood as it should be. A railroad company can have no right to carry grain or dressed meats at nominal rates, and at the same time maintain highly remunerative rates on other articles of corresponding value, bulk, and ease of carriage. The law can not justify dealing with one species of the traffic by itself and waging a war of rates in respect of it, while at the same time keeping up rates upon other articles.

The tendency of the unreasonably low rates on the one species of traffic is in the direction of unreasonably high rates on others, and those who are charged the high rates, even though the charges are not at the same time increased, have a right to demand that the burdens of transportation be more equally distributed. A few years since one or more of the trunk-lines were carrying immigrants from New York to Chicago for $1 each. When all commissions are deducted it is doubtful if they are obtaining very much more now. What legal right a carrier can have when making a charge like that to one class of passengers, to charge another $18 is not very obvious. If the one charge is admissible on business rules, the other must be extortionate. The question whether the larger rate is not reasonable "in and of itself" is not the question which such a case presents. The true question is one of unjust discrimination. And the fact can not be ignored that the losses suffered from the unprofitable traffic must somehow be made up, and all paying traf fic may in some degree be assumed to share them.

The importance of steady rates may be shown by placing in juxtaposition expressions of views on the subject made by persons speaking from altogether different standpoints. The president of a leading railroad line, in a recent public utterance, speaks of "the enormous importance of reasonable public and stable rates to the whole business of the country. Credit and prosperity in every business are dependent upon the credit of railroad securities, and those securities have now reached such an enormous volume that they furnish the real basis of our whole financial structure." A business man of Kansas City, not connected with railroads, and desirous of bringing them under further control, writes to the Commission:

The frequent and violent changes in railway rates which have taken place during the past few years, and which seem likely to be unabated, seem to me to call for new legislation in the way of amendment of the interstate commerce bill. These changes are ruinous to all business men, as well as the railways, and are the cause of great discontent among shippers everywhere, and especially to the farmers. What is needed is a fixed permanent rate, which shall be reasonable, and which can be counted upon by any one engaging in business.

Such views are being continually expressed, and they well illustrate the opinions which prevail generally in business circles.

Steadiness of rates, then, is an object to be kept in view in the public interest. In a recent passenger-rate war between roads extending east from Saint Louis joint rates were in some instances reduced several times in the course of a single day, until they were made absurdly low, the reduction being sometimes made without even waiting for the consent of connecting roads, so that parties who had purchased tickets

would have found them not honored before they reached their destinations, and been subjected to great annoyance before redress could be obtained had the connecting roads declined, as they might have done, to accept the tickets and share the losses. When the general passenger agents had sufficiently subdued their belligerent mood, the rates were suddenly advanced, with the inevitable result that parties who had calculated on the low rates and been enticed from their homes or seduced into taking any action in reliance upon them, found themselves compelled to pay more than they had reason to expect; they doubtless felt something the same sense of being wronged that the people of a neutral territory may be expected to feel when it is overrun by the armies of belligerents.

Very low rates may possibly be injurious to the public interest even when they are relatively just and are steadily maintained. This may be so irrespective of the fact that it is always for the interest of a country that the capital invested in any great and necessary industry should be reasonably remunerative. Independent of any returns to stockholders it is important that rates be remunerative, because of the effect that insufficient revenue may have upon the service performed for the public. No State, in the exercise of its controlling authority, would ever deliberately prescribe for a railroad company a tariff of charges which would fall below a reasonable compensation for the service performed. Abundant reason for abstaining would be found in the fact that it would not be for the interest of the citizens that it should do so. The people want good railroad service, and they ought to have it at fair rates; but to give them this it is needful that the road be kept in good condition and well equipped; that the trains be sufficiently manned and well handled; that competent servants be employed and fairly paid, and that the company avail itself of all new appliances which are calculated to make the service more speedy more convenient or more safe.

But good service and unreasonably low rates are antagonistic ideas; if the latter are insisted upon the former is not to be expected. Many times in railroad history it has been found on inquiring into the cause of some great railroad calamity that it was due to the fact that some bridge had become weak, some tunnel was insufficiently guarded, some machinery defective, or some employé incompetent or wanting in vigilance because of overwork. If the road was prosperous the management would thus be shown to be inexcusable, perhaps criminal; but if the road was not prosperous, and for some reason the management had been forced to make such rates as would not give the necessary revenue for a safer service, the blame for such a calamity may be fairly subject to apportionment. The public can never be in the wrong in demanding good service when fair rates are conceded; and an enlightened public sentiment will never object to fair rates when it is understood that good service is conditional upon them.

But the public sentiment will never be enlightened as to what are fair rates, and disposed steadily to assent to their maintenance, so long as railroad managers in their absurd and destructive wars are perpetually and in the most emphatic manner, by cutting fair rates, informing the public that something less-perhaps greatly less-can be afforded.

This general subject of reasonable rates is one that addresses itself to share-holders in railroad corporations quite as forcibly as to the offi cial boards or managers. It has been observed in some instances that

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