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RAILWAYS, History and Political Economy of - John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States, vol. 3 Oath - Zollverein 
Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 3 Oath - Zollverein
Part of: Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States, 3 vols.
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RAILWAYS, History and Political Economy of. Of all the factors that have contributed, during this century, to the growth of wealth, to the increase of material comfort, and to the diffusion of information and knowledge, the railway plays the most prominent part. It has widened the field for the division of employments; it has cheapened production; it has promoted exchange, and has facilitated intercommunication. In its aggregate it represents a larger investment of capital than any other branch of human activity; and the service that it renders and has rendered to society is, both from industrial and commercial points of view, greater than is rendered by any other single service to which men devote their activities.
—Down to a very recent period in his history, man was remitted to water routes mainly for the transportation of goods. Migration of hunters and shepherds could and did take place over land from zone to zone even without roads; but the transportation of heavy goods, such as form the bulk of the consumption of mankind, after the agricultural period had fairly set in, was necessarily committed to the water ways. The lands bordering rivers and shores were therefore the first to be populated by agricultural tribes, which, by establishing communication with other tribes by means of the waterways, started an exchange of products. Primitive commerce thus took its origin along the lines of rivers and the lagoons of coasts, occupied by tribes which were the forerunners of civilization in its developed form.
—History gives us accounts of Assyrian and Persian roads that were at best not more than 200 miles in length, which were built for military purposes mainly. The Greeks made no contribution to the world's great highways; the roads to Olympia and Delphos comparing unfavorably with the roads subsequently built by the Romans. Rome was the first nation that appreciated the advantages of highways; and its great conquests of Gaul, Alemanin and of Britain, were due quite as much to the genius of the Romans for road building as to their prowess and skill in arms. The road made the forest insecure to the barbarian. From the fight in the ambush the road compelled the fight in the open, and gave to the higher civilization an immense advantage over the more primitive arms and the absence of tactical knowledge of less civilized man. The road, therefore, was the means of conquest of the Roman civilization over barbarism in the pre-Christian era.
—In the shape of the railway, the road has become the principal lever in man's conquest over want, distress from the accidents of birth in locality, and the disadvantages arising therefrom. It has diffused civilization, and has distributed the commodities of any one part of the civilized world over every other part, so that wants and satisfactions become substantially equalized throughout the industrial world. Famine and great general distress become impossible; by means of the railway a large degree of well-being has, with but slight modifications, mainly due to man's mistaken legislation, been diffused all over the world.
—The story of the mechanical means by which, in times within the memory of men of middle age, this great revolution was wrought, has been so often told, that it seems almost superfluous to repeat it here; and yet the requirements of the title of this article make it necessary that it should be briefly recounted once more.
—To England the world owes the railway. In the coal districts of the north of England, rails of wood were laid during the last century for the purpose of reducing the friction caused by pulling the coal cart from the workings to the mouth of the pit. About 1767 cast-iron rails were introduced. Stone props, instead of timber, were used by Outram for supporting the ends of the rails; hence the term, still used in England, of tram roads. Between 1784 and 1820, Murdock, Trevethick and Gray made experiments in steam engines. The modern railway, however, both by common consent and as the verdict of engineering specialists, owes its origin, as a success in transportation, to George Stephenson, who built engine No. 1 for the Stockton 8 Darlington railway, which was originally organized as a horse railroad, but which was authorized in 1823 to use steam as a motive force. Stephenson himself acted as the engineer on the opening of the steam railroad line in the autumn of the year 1825. Following this, came the opening of the Manchester 8 Liverpool railway in 1830, the first engine of which was also built by Stephenson, and which from the outset not only proved the success of the railway in the transporting of persons and goods, but also showed it to be a financial success to its promoters and stockholders in their investment of capital. Within the first year after the opening of the Manchester 8 Liverpool line, upward of 500,000 passengers were carried.
—That the railway was not introduced without much opposition would almost go without saying. The large interest in the stage coaches had either to be conciliated, bought off, or fought. The canal proprietors, who had just gotten well under way with their canal projects, and were making considerable sums of money out of them, when this formidable rival appeared upon the field, were opposed to the competition of the railway. In the third place, the rich landed proprietor regarded the railway as a devouring monster, which would not only destroy the value of his fields, but which threatened to destroy his game preserves and his beautiful lawns and flower beds, and, with but few exceptions, the rich landed proprietor opposed the railway. But stronger than all these special interests in opposition to the railway, was the conservative spirit of the English people, which found expression in the "British Quarterly Review," in the words, "We should as soon expect the people of Woolwich to suffer themselves to be fired off upon one of Congreve's ricochet rockets, as to trust themselves to the mercy of such a machine going at such a rate."
—London was first connected by rail with the interior of England in 1833, when the through line to Birmingham was completed. From that time forth English railways rapidly developed, so that at the close of 1881 the railway system of the United Kingdom consisted of 18,180 miles in a country of 120,000 square miles in area; representing a total capitalization of £746,000,000, and carrying annually 623,000,000 passengers, with yearly receipts of £64,000,000.
—The success of the Stockton 8 Darlington experiment produced in the United States a greater effect than it did in England. Before the Liverpool 8 Manchester line was built, in 1830, many lines of rail were already projected in the United States, and as early as 1825 what is now the New York Central system was begun to be built under the charter of the Mohawk 8 Hudson railroad. In 1827 Massachusetts authorized the appointment of a board of commissioners, and caused surveys to be made of the most practicable routes for a railroad from Boston to the Hudson river at or near Albany. Two reports were made by these commissioners in the winter of 1829, giving a survey of the road, accompanied with the recommendation to make the commencement of the railroad on both the routes at the charge of the commonwealth. In 1830 and 1831 the Boston 8 Worcester railroad and the Boston 8 Providence railroad companies were chartered, and in 1832 work was already under way to connect Boston with New York. Pennsylvania started its railway system in 1827, and Maryland and South Carolina in 1828. The Baltimore 8 Ohio railroad system was commenced in 1828. In 1830, almost simultaneously with the opening of the first railroad line in England, railways were being opened in the United States in every direction.
—The growth of the railway system in the United States is best indicated by the facts, that in 1828 there were three miles of railway; in 1830, forty-one miles; in 1840, 2,200; in 1850, 7,500; in 1860, 29,000; in 1870, 49,000; in 1880, 93,671; and at the close of 1881, 104,813 miles. In 1882 the increase was about 13,000 miles, making a grand total mileage in the United States at the beginning of the year 1883, of about 115,000 miles of rail.
—The capital account at the close of 1881 shows a total of $6,815,000,000. Adding, for 1882, $40,000 a mile for about 13,000 miles, increases the total capitalization $520,000,000, making a grand total of about $7,335,000,000.
—The gross earnings of the railways of the United States in 1881 amounted to $725,000,000, $552,000,000 of which was from freight earnings, and $173,000,000 from passengers; resulting in the payment of a dividend, over and above fixed charges, of $93,344,200 interest on the bonds absorbed, of net earnings of $276,654,119, the sum total of $128,587,302, in addition to what went into other sources. In 1881 the tonnage transported was not less than 315,000,000.
—France was much slower than England and America in adopting the railway system. Independent of the fact that the Latin race is not so alert in adopting labor-saving contrivances as the Anglo-Saxon, there was a cause for the slower adoption of the railway in that country, as it was better supplied with highways than England, and transportation charges in the early half of this century were comparatively much cheaper in France than in England. With the exception of some few small lines, there was no development of the railway system in France until about 1842, when nine great lines were established, which subsequently were amalgamated into six. These at the present day divide and occupy between them substantially the whole French territory. Besides these, however, there are a few state lines and branch roads of insignificant importance. The names of these six great lines are Chemin de fer du Nord, De l'Ouest de l'est d'Orleans, Paris-Lyons, Mediterranée and du-Midi. The extension of the railway system in France has not been so great as it has been in England or the United States, owing to circumstances which will be referred to in the latter part of this article.
—The railway system of Belgium is 2,000 miles in extent, in a country embracing an area of 11,373 square miles. Two-thirds of the whole of the railway mileage in Belgium is composed of lines worked by the state, and one-third by private companies.
—In the Netherlands, with an area of 13,000 square miles, there are 1,230 miles of road, of which the state owns 630 miles, and private companies 600.
—Germany, Austria and Russia were somewhat behind the western nations of Europe in their railway development, but within the last decade an enormous extension in their development has taken place, for the purpose of competing with France for the eastern trade, as well as for the purpose of military operations of an offensive and defensive character. In the Franco-Prussian war the seizure and management of the railroads by the state, for the purpose of aiding strategical movements, formed so important an element in the military operations of Prussia against France, that throughout central Europe a large number of lines have since been built, to secure strategical advantages.
—The following table, taken from "Spofford's American Almanac" for 1883, gives the statistics of the railways of the world to Jan. 1, 1881:
—In England, by reason of the high price of land which the railways must occupy and acquire, and a rigid application of the rule requiring the railway corporation to pay for consequential and indirect damages, its railways represent the maximum of capitalization. Taking this extreme of capitalization of the English railways, of $200,000 a mile, as a maximum, and the capitalization of the cheapest American railways, of $25,000 a mile, including equipment, as a minimum capitalization, it is fair to say that the average capitalization of railways the world over is not less than $50,000 per mile. Upon that basis the 264,000 miles of railway in the world would represent a total valuation, in the way of capital invested in these vehicles and means of intercommunication, of $13,200,000,000.
—Compared with all the debts of all the nations of the earth, amounting, in round numbers to $27,000,000,000, it appears that, within the period of the last fifty years, the industrial world has invested a capital in means of intercommunication alone, of about one-half the sum that has been raised by way of loans for the purpose of carrying on, during the last few hundred years, all the wars, and constructing all the internal improvements, of all the nations of the earth.
—So great a manifestation of a social power, representing, as it does, a growth unprecedentedly rapid, must and does exhibit many peculiar phases of social and politico-economical problems, and must bring with it evils incident to its own existence which demand some form of intelligent treatment and cure. It would, indeed, be remarkable and without parallel, that any human instrumentality, however beneficial, could grow to such enormous proportions without having some shadow side in the way of defects, evils and even crimes attendant and concomitant to the immense good it brings forth. The first effect of the development of the railway system on the intercommunication of men, has been to give a great impetus to the transmission of intelligence and personal intercourse. One need but read the letters of Madame de Sevigny to see what an arduous task it was to travel during the middle of the seventeenth century. When she proposed to set out to visit her daughter, 200 miles distant, she prepared her will, and set about the journey with a solemnity of mind somewhat akin to that felt by a person at the present time who is about to investigate the sources of the Nile, or make a voyage to the north pole. But one need not go back so far for examples of the dangers, both anticipated and real, that down to within this century beset the traveler. The Newgate calendar is part of the history of the stage-coach, almost to the very time when railways were introduced. Highwaymen scoured the country round, within a radius of ten miles from London. Hounslow Heath, Black Heath, Epping Forest, Clapham Commons, all embraced post routes, and were the scenes of the exploits of many a man who, within this century, came to his end at Tyburn and at Newgate. The time occupied in moving from great centres to the capital is indicated by an advertisement of the York and London stage coach in 1706, in which the advertisers promise to be in London on the fifth day out from York, and to run from London to York in four days. It is said by Francis, in his "History of the Railways," that the abdication of James II. was not heard of in the Orkneys until three months after his flight. He says: "In the seventeenth century the charge for conveyance amounted, in many instances, to a prohibition. Heavy goods cost, from London to Birmingham, £7 a ton; from London to Exeter, £12 were paid. Coal was rarely seen, save in the neighborhood of the district which produced it. Pack horses, strong, enduring animals, the breed of which is now extinct, were employed to carry the produce of the weaver's patient skill, the pottery of Staffordshire, and even the coals of Newcastle, laboring along heavy roads, toiling beneath a burning sun, wending their way through bare, bleak moors, down steep descents, by dangerous rivers, on narrow tongues of land, between masses of mire and mud so deep as to be dangerous if they entered—a leading horse bearing bells to intimate the approach of the party he heralded. The group formed a most picturesque accompaniment to the wild, weird scenes it enlivened. * * The private carriage, if such, indeed, should chance to approach, left the track at the risk of never returning to it, while more numerous parties either resisted the cavalcade, or moved, like the solitary passenger, out of the way, as their weakness or strength might dictate. With such difficulties before them, few persons left their homes but those who were called by some most special reason."
—Macaulay says that the inhabitants of London, in the seventeenth century, were farther removed from Edinburgh than they are now from Vienna; and, indeed, it might be said, farther removed from Edinburgh than they are now from St. Petersburgh or New York. The reason why, to this very day, parliament sits in summer, is because the roads in England were so bad, and the difficulty and danger of getting to the capital so great, that it was impossible in the midwinter months to convene a parliament with any expectation of having the members attend from the north, from the extreme west of the kingdom, from Scotland, or from Ireland.
—In the early part of the nineteenth century the difficulty of moving bulky articles was somewhat overcome by MacAdam's invention for improving highways, and by the introduction of canals. Part of the politico-economical results in the way of cheapening and distributing products was already under way by the creation of artificial waterways, which were introduced into England, France and Spain in imitation of the Netherlands.
—In fixing the price for the sale of every commodity, the element of cost of transportation must be considered, with but the very slight exception of articles that are consumed on the spot where created, like the food raised by the farmer for his own family. As the great bulk of commodities consumed in this world is transported from one point to another, it is obvious at a glance how important is the rôle that transportation plays in the work of production as well as of consumption. Indeed, transportation is a factor which enters into both the consumption and production of commodities as largely as money does into the exchange of commodities, and it plays even a more important rôle than money does in determining the price of commodities.
—The certainty, diminished cost and rapidity with which commodities could be transported from place to place by the introduction of the railway, not only increased the exchangeability of commodities, but also made it possible to forward to distant places, theretofore unsupplied with such commodities, products which formerly were consumed only at the spot where created, and the increased facility of transportation created values which could not have existed at all but for such improved methods of transportation. A familiar illustration of this fact is the great industry which had been created in Brittany and Normandy in producing eggs and butter for the London market; and vegetables even for Edinburgh's daily consumption. Before the existence of the railway, the rich dairies of Normandy could give to Normandy alone the enjoyment of fine butter, and there was no possibility for the Londoner or the Scotchman to enjoy a French egg or a pat of French butter at his breakfast table without going personally to France. For 600 or 1,000 miles the railway now carries the Frenchman's dairy and farm-yard products as easily as to the neighboring town. The prices of those commodities have gone up in France, because a market has been found for them. But, what is of greater importance, their enjoyment is possible to a greater number of people. Waste, that great destroyer of human efforts, is eliminated, and unsatisfied wants in the particulars above mentioned, can no longer exist. Through the instrumentality of the railway, the law of competition gets its widest possible extension, restrained and hampered only by limitations put by human law, in the way of tariffs, on the full enjoyment of the results of such competition. With the extension of the lines of commerce, within which a given commodity can find its market, comes an increased demand, which not only again reacts to produce an increased supply, but equalizes prices, so that the element of chance is eliminated as much as possible from human affairs. French history gives us the fact, that during a period of 300 years, there were about 100 years of famine in one or another part of France, while absolute abundance contemporaneously prevailed in other districts. Such a condition of things, even long before the railway, has not only become impossible for France by the development of means of intercommunication, but is now made impossible the world over by reason of the railway, connected with rapid steam communication by sea. That periods of famine and distress arise in India, in an abnormally situated community living upon one vegetable product alone, and prevented by superstition from varying their food, does not diminish the force of the fact that such things are impossible in any community which has emerged from a semi-barbaric condition, Also, in India, the periods of distress are rapidly diminishing, and are becoming considerably less in intensity when they occur. An exaggerated picture of the evils incident to the present civilization is given by the colors in which the sensational modern press paints the distress and crimes of the day; and the inquisitorial and searching character of the correspondence produces a vividness which makes the superficial observer imagine that both crime and suffering have increased, whereas, in point of fact, they are constantly decreasing. What has increased, is the power and opportunity for observation and giving detailed results of such observation to the public eye and ear.
—That the several results of the introduction of the railway have become a common heritage of the great mass of mankind, and that its introduction benefits the laborer more than it does the millionaire, is indicated by the fact that the cost of transportation, which bears a greater and greater relation to commodities which are bulky and coarse and of general consumption, and forms a less and less ratio or element of expense in commodities which are easy of transportation, and not bulky in form, has been considerably lessened by the railway. Even during the middle ages the laces of Mechlin and of Brussels, and the tapestries of the Netherlands and of France, could be transported the world over. At the courts of Europe specimens of the art handicraft of the then known world could be found. Gems, laces and velvet could be transported on horseback without difficulty; but no food or clothes produced for common use or wear could be brought from a distance, the cost of transportation, added to the original cost of the article, increasing the price to such an extent as to make it beyond the means of the common man. Hence the individual born to a particular spot of earth, thus became the inheritor of all the evils and all the disadvantages incident to that spot. What the average man could not there produce, was not for him to enjoy. What his neighbor could not produce for him, he could not obtain in exchange for his own products. The cost of transportation served as an impassable barrier to placing himself in more comfortable condition, either by removal to lands more favorably situated as a market for his labor, or by bringing within his reach such more favorable condition in the shape of the importation of commodities.
—But even in India, the famine of 1873-4 was counteracted, the distress overcome, and the consequences removed, with a rapidity never before known in Indian history. Theretofore, the distress occasioned by a famine ordinarily lasted upward of ten years. In the following year (1875), when the actual season of dearth ended in India, and some favorable results in the way of weather and crops were produced, the consequences of the famine were quite removed. Neumann is authority for the statement that in consequence of the development of the railway system, upward of 21,000,000 hundred weight of rice was distributed within eleven months by the English government during the prevalence of the famine. Even in the decade 1860-70, before the railway system was developed in India, several years of dearth and of famine occurred in the same district, and it is estimated that from two and a half to three and a half million people died during that period. The drought and failure of crops in 1873 and 1874 were greater than before, and authentic accounts show us that there were not at the utmost more than 20,000 persons whose death can directly be attributed to insufficient food. The accessibility of the newspaper correspondent, by means of the railway, enabled the world at large more thoroughly to realize the distress that occurred during 1873 and 1874, but the actual death rate, as compared with that from 1860 to 1870, from famine, was not 1 per cent.
—As the difficulty of transportation is an element of cost in the exchange of commodities, a saving in the cost of transportation, producing an increased market, results also in the additional effect that the capital which otherwise would be expended upon transportation is available for other purposes. It is true that the medium of transportation in itself is a costly contrivance, and that it has swollen, as we have seen, to $13,000,000,000 for railway purposes alone; but as the great majority of these enterprises pay a return to those who have invested their moneys, the capital is productively employed, profitably expended, and constantly being reproduced by the return. The railway, therefore, in its general effects upon mankind and the investors, has been a blessing.
—The general result of railway construction has been an enormous increase of production and productive power on the part of mankind, and has also resulted in an enormous development in the character of productions, particularly in the direction of producing, for general and popular consumption, commodities which, until the railway was introduced, were in many cases impossible of transportation, except along the lines of waterway.
—One of the most interesting illustrations of the condition of life before the railway, is given by the philosophical agriculturist, Von Thünen, and quoted by Sax, in which, assuming as a central point, a city, he places around it, within a radius of fifty miles, an agricultural district, composed of six zones, for products which the farmer may raise with profit for the consumption of the city. In the first zone, lying closest to the city, he places the production of garden vegetables, fruit and milk; in the second zone he places the production of commodities which cost more to transport, such as potatoes, carrots, etc. In the third zone the production of wood is placed. In the next three zones, in certain proportions entered into too minutely for citation here, cereal productions and animals are put.
—The vast benefit conferred by freedom to cultivate land with alternate crops and with whatever suits the land best, has become possible only by the increase of means of transportation. Doubtless the rules laid down by Von Thünen were practically adopted in consequence of difficulties of transportation, which, once wiped out, now not only makes the farm fifty miles remote as profitable and valuable as the one close to the city, but enables the latter in compensation to produce whatever the land is best fitted to produce, instead of simply that which proximity to the market compels. In other words, the natural advantages of production have, by the wiping out of the element of transportation, or rather, reducing it to a minimum, been permitted to come into full play. The producer was conditioned, by proximity or remoteness to the market, as to the proper use of his instrument, the soil. He now produces that which his soil is best capable of producing: all the markets have become near, by the railway. No better illustration can be found of this than in the development of the fresh fruit industry of the world within recent times. With the exception of those that ripen on the stem when detached from the tree, as oranges and bananas, but a very few years ago the consumption of fruit other than at the place where it was grown was almost impossible. To-day, however, the fruit of California can in lusciousness and perfection be better found on the tables of the inhabitants of New York and London than in San Francisco. Thus the trade in products which require to be consumed fresh has, by the increase of means of communication introduced by the railway, been added to the commerce of the world; and a vast addition to the world's wealth has been made by the exchangeability of natural products which either would not have been produced at all, or which, being produced in excess of the local demand, would have rotted upon their stems or upon the ground.
—A like addition has been made to the commerce of the world in the power of transporting cereals and bulky productions, such as grain, iron, wood, etc. The time is not far behind us when the locomotives of Illinois burned corn for fuel, in consequence of the high price of fuel, and the low price of corn, and the high price of the one and the low price of the other arose from the insufficient means of transportation of both to the localities where they could best be used.
—The diminishing of the cost and the increasing of the facilities for transportation introduced by the railway, have likewise substantially added to the world's mineral products. In parts of this country where the railway has not yet penetrated, it does not pay to open mines of silver-bearing ore yielding less than sixty dollars to the ton. The moment that a railway is opened to the point, bringing fuel thither and taking away either ore or base metal, the mine that was valueless before, becomes a valuable property if it yields forty or even twenty dollars per ton, and thus its treasury is added to the world's wealth.
—The rapidity of transportation has another effect. It diminishes the risk of capital, and increases its fertility, by securing a speedy return for money invested; and inasmuch as the return of the capital comes back more speedily, it lessens the rates of profits, thereby securing lower prices to the consumer. The effect which the production of our Kansas, Nebraska and Dakota wheat fields has had upon the English farmers, is a result, only on a wider field, analogous to that which has been had on the narrower field of Von Thünen's concentric lines.
—The influence of the railway upon manufacturing industries has been almost as great as it has been upon agriculture. In ante-railway days the furnace and the smelting works were of necessity compelled to be close to the ore. It may now be situated close to where the capital, which contributes to establishing the works, is located. Although such industries suffer somewhat from the higher price of labor incident to the denser centres of population, yet the better supervision and more intelligent workmanship that is contributed to the manufacturing process by reason of the capitalist being able to superintend the operations of his factory, enable such works to find, by the securing of a larger application of capital, compensation, and even profit, notwithstanding their distance from the mine, owing to the absence of waste due to personal supervision. We therefore find the great manufacturing industries, though being at some distance from the actual output of raw material, gradually establishing themselves in the large cities, which are the centres of capital. Denver, in Colorado, is rapidly becoming the centre of the smelting operations of the state, for ores bearing precious metals. St. Louis is an important ore-reducing point, and successful reductions of precious ore are carried on in Philadelphia and in the city of New York, thousands of miles away from where the raw material is obtained. Equally true as to textile fabrics is this condition of things. Whether in the shape of wool coming from the cape of Good Hope, cotton from India, South America or from our own cotton states, hemp from the far west or from Hungary, the raw products are all used up at the same manufacturing establishment, at Manchester or at Paisley, at Cohoes or at Lowell, and but for the tariff the cost of distribution of the raw material would form but a small item compared with the advantages obtained from water power, proximity to ships and to coal, and, more especially, facilities for the obtaining and the supervision of the capital employed. By delocalizing the working up of the raw material into its finished product, and giving to capital the advantage of immediate personal supervision, a tendency has been produced which has been a puzzle to many economists—the centralization of industrial employment and the driving of the smaller handicraftsmen from successful competition by compelling them to become a part of vast industrial establishments. The controlling of millions of dollars of capital gives to such capital great advantage over the individual more favorably located as to territory, but less favorably located in the employment of the more expensive labor-saving machinery, and facilities for carrying on large enterprises at the lowest possible rates of interest. The result of this tendency is not an unmixed good. It causes cities to become overcrowded; it takes away the independence of the individual workingman; it makes the handicraftsman part of a huge machine, and compels the workman to give his time more and more to smaller and smaller parts of the whole operation necessary to produce a given result. The smith of the middle ages would produce an armor, and would even ornament it with devices. He would also shoe horses. To work in iron and steel in all its departments was his occupation, and he was probably a larger man in his development than the smith of to-day. But society is called upon to pay a penalty for the enormous counter-advantages of the division of employments in the decreased development of the workman. The division of employments of course increases considerably the output of each workingman, and as the sum total of output is thus enormously increased, the sum total of exchangeable products is enormously increased. A given amount of labor will at the present period produce to the smith of to-day an exchange of products many times greater than could be obtained in the middle ages, by the smith of that time, notwithstanding the superior general skill and workmanship of the latter.
—Frederick List, in urging upon Germany the necessity for developing the railway system in 1841, sums up in the following order the advantages to be derived from the development of the railway system: "1. As a means of national defense, it facilitates the concentration, distribution and direction of the army. 2. It is a means to the improvement of the culture of the nation, as it facilitates the distribution and promotes the rapidity of distribution of all literary products, and the results of the arts and sciences. It brings talent, knowledge and skill of every kind readily to market, and increases the means of education and instruction of each individual and of each class and age. 3. It secures the community against dearth and famine, and against excessive fluctuation in the prices of the necessaries of life. 4. It promotes the hygienic condition of the community, as it destroys distances between the sufferer and his means of cure. 5. It promotes social intercourse, and brings friend to friend, and relative to relative. 6. It promotes the spirit of the nation, as it has a tendency to destroy the Philistine spirit arising from isolation and provincial prejudice and vanity. It binds nations by ligaments, and promotes an interchange of food and of commodities, thus making it feel to be a unit. The iron rails become a nerve system, which, on the one hand, strengthens public opinion, and, on the other hand, strengthens the power of the state for police and governmental purposes."
—One of the first pathological symptoms that this great, beneficent growth has produced, was the speculative spirit that it promoted and fed. The era of speculation, however, does not begin with the development of the railway. Great speculative manias, destructive in their consequences, and of as far reaching and disastrous results, form part of the history of trade and commerce of the past two hundred years. The Mississippi bubble, under law, the tulip mania in Amsterdam, and the South Sea bubble in England, were eras of as wild speculation as the railway mania in England, and were much more disastrous in their consequences. When the shares of Law's bank declined, and the South Sea bubble burst, all money values represented in those elements of speculation were destroyed beyond repair. Wild as was the speculation of 1844 and 1845 in England, and culminating as it did in a great financial crisis in the winter of 1845 and 1846, the railway, the subject-matter of the speculation, still remained; and although shares were frightfully depressed during the crisis, they ultimately rose to something approaching their true value, the excessive premiums paid by individuals being all that was wasted. Every country which has allowed the railway to be built by private enterprise, has had its share of speculative ventures and speculative prices. Railway building has certainly fostered a class of unscrupulous operators as well as tricky and reckless railway officials, who found larger profits in the share market, and more rapid means of achieving great fortunes, than in finding capital for railway construction, or honestly and efficiently administering the railway properties and trusts in their hands. Absence of governmental supervision as to stock capital of railways, has caused the placing on the money markets of the world of a vast quantity of fictitious values, not representing actual construction in money value, but possible value to result from the development of traffic and anticipated dividends.
—In many instances the seemingly excessive profits made in the United States by railway building were but a fair and natural return for the great risks incurred. In the event of success the men who had the foresight and boldness to invest their capital in building lines like the Transcontinental Pacific through the territory of hostile tribes of Indians, across plains and over deserts, at the risk of life and fortune, deserved considerable remuneration for their boldness and their enterprise. Differences of opinion may honestly be entertained whether they have not been overpaid, and whether the methods adopted through the instrumentality of political chicanery were in the least justifiable. These matters apart, however, it must be conceded, that but for the inducement held out of very large profits through the instrumentality of fictitious capitalization and subsidies of land or money, many of the newer territories of the United States would have been unsupplied by railways.
—What is here said is not meant to be a justification for fictitious capitalization, which is an evil of such great and wide-bearing consequence that it were better if railway building were somewhat delayed than to allow it to come into existence under such conditions. The writer simply desires to draw attention to the fact, that the absence of governmental supervision over capitalization leaves individuals or corporations free to devise whatever scheme they may think best to enhance profits in conducting doubtful enterprises, and results inevitably in railway management regarding no interest except that of the promoters and capitalists who respectively lay out the scheme and find the money, and in such a case the public will be wofully left out of sight. At the very outset of railway development, Stephenson, who was, from all we can learn of his career, as wise a statesman as he was an engineer, insisted that railways should be taken in hand and operated by the government, claiming, that, from its nature and character, it was a highway which would in time become more important than the ordinary road, and which also possessed the peculiarity that the owner of the road would, in time, do the business of transportation thereon. In terse language he expressed, before a committee of parliament, his opinion that competition would not be the means of producing in this case, as it does in others, the cheapest and best results for the community, because, said he, "where combination is possible, competition is excluded."
—Railway development took its origin in England and in this country contemporaneously with the growth of the democratic spirit, and with the dissemination of politico-economical ideas. The democratic spirit was jealous of governmental power, and aimed at its reduction and decentralization. The politico-economical doctrines taught, as an axiomatic truth, that the government performed its operations at greater expense than the individual, and that whatever could be left to individual enterprise should be excluded from the domain of government. Political economy at the same time asserted as an axiomatic truth the proposition that competition was productive of unmixed good; that it was universally applicable; that governmental regulation and interference tended to diminish or destroy competition; and that it would subserve the best interests of mankind if government would let things in commercial and industrial enterprise work out their own salvation.
—In England and America, therefore, railways were placed in the hands of corporations, which had power, on paying its value, to condemn property. In England, maximum rates of charges were in every case prescribed by the charter constituting the corporation, but these maximum charges were generally made so high that they practically did not interfere with the railway corporations; within the limitation of these maximum charges the railways were free to make such discriminations or modifications as they deemed necessary to meet particular exigencies. For every addition to its public powers and for every extension of its line, the railway was compelled to go to parliament for powers. The opposition of the landowner and canal proprietor once overcome, however, the great benefits conferred from the very outset by the establishment of railway communication became so apparent, that parliament was but too willing to grant additional powers without inquiring very closely as to what use would be made of them.
—Both in England and America the legislatures of the period from 1825 to 1835 made the mistake of supposing that the railway bore an analogy to the canal, and traces of this mistake appear in almost all of the early charters. It was supposed, that, like the canal, the railway would be built by one class of capitalists, but that also, in the same manner as over the canals, the traffic over the railway would be carried on by another class of individuals or corporations, of forwarders and common carriers, who, under regulations and charges for toll established by the railroad company, would do the transportation business over the line. It was supposed that the railway was merely an improved highway, the carriages of which would run within certain grooves from which they could not depart, and that in all other respects the railway corporations would be one function and the business of transportation over it would be in the hands of others.
—The charter of the Ithaca 8 Owego railroad contains the following language: "Sec. 12. All persons paying the toll aforesaid may, with suitable and proper carriages, use and travel upon the said railroad, subject to such rules and regulations as the said corporators are authorized to make by the 9th section of this act." (Laws of N. Y., 1827, p. 17.)
—Certain members of parliament foresaw, that, as a means of protection of the public, the limitation upon excessive profits imposed in these undertakings by fixing a maximum rate of charges was insufficient. Pre-eminent among those members of parliament was Mr. James Morrison, who, in a speech delivered in the house of commons May 17, 1836, said: "The limitation of the rates of charge is in a progressive country good for little or nothing. The increase of population and trade has been so very great that a toll that would have yielded an ample profit on a railway constructed a dozen or twenty years ago, might now perhaps yield an equal amount of profit were the rates reduced a half. Nothing in fact can be more improvident or more absurd than that parliament should once for all fix the rate of toll when an undertaking is entered upon, and divest itself, unless by violating the right of property, of the power to reduce that rate in all time to come, how greatly soever it may exceed what would be a liberal return for the capital invested in the undertaking. I need not add that it is of the greatest importance to the interests of the public, that the cost of internal communication should be reduced as low as possible. The limitation of the dividend is a practice found to be as ineffectual as the fixing a maximum on the rate of charge. The public has no check on the system of management, nor can it explore the thousand channels in which profits may be distributed, under other names, among the subscribers, nor has it any means of preventing the wanton and extravagant outlay of money on the works, etc. To make the provision for limiting the dividends good for anything, it would be necessary that all the proceedings of a company so limited should be controlled by commissioners appointed by the government." He therefore insisted that in every case a clause should be inserted in parliamentary concessions to railway corporations, by which parliament reserves to itself the right to revise the rates of toll every decade, or oftener. Mr. Morrison also deprecated the idea that competition would prevent excessive charges, and even at that early day he foresaw that a vast amount of capital would be expended unnecessarily in making duplicate lines, whereby the public would not be benefited by the securing of lower rates of charges, but the existing traffic would be divided in combination by the new lines and the prior existing lines, even though the roadbed of the latter was by no means taxed to its maximum capacity in doing the traffic on the line. He urged upon parliament the necessity of preventing such a waste of capital, claiming that by a reckless chartering of new lines competition was not secured, and that the new lines when built would by combination with existing lines prevent the public from securing the benefits to be derived from the chartering of the new lines.
—In a speech delivered in 1845, nine years after the former speech, Mr. Morrison, after showing the gradual reduction in the cost of and charge for transportation, and the enormous benefits which the railway system had conferred upon England, as well as the great social changes which were taking place in consequence of the existence of the railway system, continued: "These various circumstances prove that the question now is no longer one of private consideration, but one of great public policy, a matter not to be left to the control of inferior boards or private companies, but one which ought to be subject to the interference of parliament, and guided by the wisdom of the government. A great social change is in the act of taking place, and it is to this great subject that I invite the attention of the house, of the government, and more particularly of the right honorable baronet (Sir Robert Peel) at the head of the administration, and I entreat him to look at this question as one great whole, and not to regard it in detached, isolated details and fragments. If he will view it in all its many and important ramifications, if he will estimate the combined effects of all sorts that are certain to follow from this extraordinary combination of influences, he will, I think, agree with me in believing the subject to be one of the greatest moment, one fraught with unspeakable benefits if properly directed, but, if neglected or mismanaged, threatening us with evils of portentous magnitude."
—He then entered upon the question of tolls. He said: "I may here be asked the principle upon which I would regard the rates of toll. My answer is, that I would determine the rate of toll in every case by the sum at which the particular line of railway could now be constructed. The public are not bound to inquire what the line really has cost, but merely to ascertain the sum for which it could at the present time be constructed, and the railway proprietors ought to be compelled to carry the public and their goods for such fare as would yield a fair profit upon such outlay." "So little, indeed," he concludes, "was the subject of railways understood in its commencement that the original rates were fixed upon the supposition that the railway proprietor would be the proprietor of the road only, and that the persons using it would pay merely for the means of transit, as upon the canals. It is well known that such has not been the case. Railway proprietors are almost universally not only the owners of the line, but the carriers upon it. Still, strange as it will seem, the legislatures have continued, in every railway bill down to the last bill of the last session, to repeat these lists of tolls, although in no single instance, I believe, has it been found practicable to carry them into effect. These rates of tolls are practically a mere delusion. In truth, parliament might just as well have ordered the several companies to exhibit in their stations a set of old sheet almanacs. They were a mere useless incumbrance."
—These were the utterances of a member of parliament of extraordinary intelligence, of a man who had worked his way up from a clerkship to the position of being the richest merchant in England, where he occupied a position somewhat akin to that held at a subsequent day by A. T. Stewart in the United States. To him England, and indeed the commercial world, owes the system of charging in retail transactions one uniform and undeviating price, without cheapening or bargain, a system which has since his time been adopted as the sound commercial rule in England, in America, and in the leading cities of France and of Germany.
—In this country, a few of the early charters, copied somewhat from the English parliamentary acts, contained maximum rates of toll in a schedule of rates. In some of these early charters the state reserved the right to purchase within twenty years the railway thereby authorized to be constructed. No general act then existed indiscriminately granting the right of way and the right to condemn property to any persons who saw fit to organize a railway corporation, but in every instance an application had to be made to the respective legislatures for the various powers to be exercised by the corporation. Some little safeguard was therefore left in the hands of government against too great an abuse of public power.
—In 1846, owing to the spread of the politico-economical doctrines before referred to, and to the corruption incident to the railway lobby in the legislative halls, the new constitution of the state of New York required its legislature to pass general laws under which corporations may be formed (Art. viii., § 1), and, acting in the spirit of this requirement, the legislature of 1848 did pass a general railroad act substantially like the one reenacted in 1850, except that the legislature, by the act of 1848, did, in each particular case, reserve the power to grant by special act the right of eminent domain, and give to corporations about to build and operate railways a means only, under the general law, of organization and of powers. In 1850 that safeguard was surrendered by the passage of a general railway act omitting such reservation. Thereafter twenty-five persons could, by the mere filing of articles of incorporation in the office of the secretary of state, become a railway corporation, endowed with power to take property in invitum, and to run lines wherever and in whatever form they saw fit, subject only to certain restrictions as to rights in cities, and to condemn property for such purposes. This placed railway corporations upon the footing of any private enterprise in the hands of corporate management, and, except as to passenger traffic, was a complete surrender of every attempt on the part of the government to supervise, regulate or control the railway corporations of the state, or to subject them to any conditions securing, without discrimination and injustice, fair and proper rates to the public. This general railway law did away with the railway lobby; and the immediate benefits in the way of extensions of the railway systems, and the freedom from public corruption resulting from this railroad law, caused other states to follow in the wake of the state of New York, and state after state passed general railway acts in imitation or modification of the one enacted by the state of New York in 1850. This introduced the era of what was supposed to be competition, with results which we shall presently examine in detail.
—Now let us look at the course that the railway question took in other countries.
—Belgium. In Belgium all concessions for constructing railways are granted by the minister of the interior, subject to the ratification of the chamber of deputies and of the king. The expectant corporators deposit a plan, giving the line of the route, estimates of its revenue, and the probable expense of the undertaking, together with a tariff of tolls for passengers and freight traffic, at which they propose to carry. The project is then submitted to the department of roads and bridges, or to a special commission of engineers for report. All inquiries to verify the calculations and the statements of the projectors are made at the expense of those who deposit the plan, and for that purpose they are required from time to time to pay in to the ministry such sums as they may be called upon to contribute. Then for a period of from one to three months the whole plan is advertised in the locality to be affected by it. The local councils of the municipalities through which the road is proposed to be laid, consider the project, and report to the ministry. After these reports have been presented, a hearing is had, either before the commission on bridges and roads, or before the minister himself, at which the engineering work, the guarantees for its execution, the objections to its being undertaken, etc., are discussed, and the manner in which the government is to exercise surveillance over it is fixed. The rate of charges by the company, the time for which they may be demanded, and the time within which the work is to be commenced and finished, are also specified. After all these questions have been settled, the whole matter is then submitted to the chamber and senate and the king, either of whom can after it before it passes as a law.
—In Belgium the government itself, however, built the principal lines, or bought them up, and it now in theory allows private companies only to build extensions and developments of the main lines. In 1850, of the lines of railway in Belgium, 64 per cent. of the whole were owned by the government, and 36 per cent. by private individuals. After the construction of its main lines, however, the Belgian government retired from the work of constructing new lines, and in consequence there was, in 1860, 67 per cent. of the mileage in Belgium in the hands of private individuals, and only 33 per cent. in the hands of the state. By amalgamation, however, these small feeders in the hands of private individuals in process of time have developed into trunk lines, competing with the government lines on their own field.
—The Grand Central Belge, a private company, was formed out of seven companies, and the Societé General d'Exploitation, another private line, was formed out of nineteen companies. So long as the government owns, controls and works its main lines of railway, and keeps down the interest upon the outlay to 7 per cent., no dangerous combination, however, is to be feared. It may at any time, if any line becomes very profitable, buy it up, as, under the terms of every concession, a railway line in Belgium is subject to purchase by the state for the benefit of the commonwealth. The purchase price is the net receipts of the seven last preceding years of the company's working, from which the receipts of two most profitable years are deducted, and an annuity, equivalent to the average dividend of the five remaining years, with the addition of 15 per cent., is paid for the road.
—One of the peculiarities of the Belgian system is, that the government guarantees the line it allows to be built interest at the rate of 4 per cent. on its actual outlay; it thus has full justification for supervising the construction of the railway, and insisting upon the fullest possible reports, prescribing the method of its book-keeping, designating some of its officers, and generally regarding the railway corporation as wards of the state. This method of guarantee also prevents the undertaking of lines which do not promise to be fairly remunerative from the start. The rates of charge of both the passenger and freight traffic of all the railways of Belgium are fixed in the concessions themselves, which are limited to ninety years. The rates are, of course, maximum rates, the companies being at liberty to reduce their rates to any point below the figures set forth in the law. But when the state has guaranteed the 4 per cent. of the capital, the consent of the minister of public works is, however, necessary, before the tariff is permitted to be lowered. A very active competition was carried on in past years between the railways owned by the state, and the railways owned by individuals, wherever the lines touched the same points. This competition has resulted in the corporate railways being permitted to make special contracts in the same manner as the state railways did down to about 1864, when a law was passed forbidding the making of special contracts; and compelling both the state railways and the individual railways to carry all their freight at schedule rates.
—By this system of state guarantee of investment, the state is prevented from carrying its competition with the private lines beyond a certain point. The fact that the private companies must be permitted to earn a net revenue of 4 per cent. upon the capital invested therein or the state must make good the deficiency, serves as a check upon the competition of the state.
—This system resulted in giving to Belgium the best, and in every way the most efficient, network of railway service on the face of the globe. It had low rates of passenger traffic, and low and certain rates of freight traffic. The private companies were earning good dividends upon their capital. The state, on the one hand, prevented the private companies from becoming a dangerous monopoly; and, on the other hand, the constant competition with private enterprise compelled the state to manage its own property with frugality and intelligence, to be able to sustain the competition with private enterprise. The state reserves to itself the regulation at all times of the number of trains to be run upon the private roads; their connections with other railways, and the amount of the terminal charges, are likewise under state control. Before any contract between two different companies can be acted upon finally by the companies themselves, it must be submitted to the department of public works and the department of roads and bridges, and receive their approval.
—In every concession, clauses are introduced, requiring the companies to take the cars of other companies at certain rates, and to furnish the motive power for them to some point upon their own line, and the state can interfere authoritatively in the event of any company refusing to comply with these conditions.
—Besides the competition of the governmental railways, the private railways of Belgium are subjected to the active and constant competition of the numerous canals, which form quite a network of waterways throughout that little kingdom. From 1850 to 1860, the tendency in Belgium was toward private ownership; since 1860, the tendency has been toward governmental ownership, and this so strongly that probably in a few more years the government will be the owner of substantially all the main lines of rail. In 1870, about 400 miles of railway were bought by the government, and since that time, about 600 miles more have been purchased. Competition, however, can scarcely be said now to exist in a country where the conditions of the competition are fixed by so powerful a corporation as the state has become, and the private owner is helplessly impotent, and has no alternative but to sell out. Yet the public in Belgium is well and satisfactorily served by its railway system, and none of the disgraceful conditions of our own railway system are known there. The overpowering force of the competition of the state, of course, causes considerable criticism and dissatisfaction on the part of the investors in the shares of private railways, but this competition on the part of the state is not a new matter, as the projectors of the private lines invested their moneys and built their lines with a full knowledge of the competition to which their lines should be subjected. In 1870, the net result exhibited by the state railways was a return of 6 per cent. upon the capital invested, being, on the whole, as great a net result as any railway system in the world exhibits.
—France. To each of the great French lines, now six in number (originally nine), a distinct territory was laid out, in which it could construct its trunk line, which was supposed to be a profitable one; it was then required as a condition for having the district handed over to it, also as part of the condition on which it was to operate their main lines, to build a number of feeders and local lines, which were supposed, on the whole, not to be profitable. It was soon found, however, that these secondary lines were so unprofitable and burdensome, that, if they were to be built at all, without danger to the abandonment of the main lines, the state would have to come to the aid of the railways. The state, thereupon, did advance large sums of money to the railways, for the purpose of constructing their loop lines, and made the concessions upon the condition, that, at the end of ninety years, all the lines should become state property, and the state was to take the rolling stock at a low valuation.
—All the rates of charges, for both passenger and freight traffic, are regulated with the utmost minuteness in France. At any time before the ninety years expire, the government can purchase the whole of the road at a capitalization of an average of fifteen years' income, after disregarding the two worst years, and taking as the minimum figure of the capitalization the lowest year immediately preceding the purchase, below which figure it may not be capitalized. This is done to prevent the state from resolving upon the purchase immediately after an exceptionally good year. The rates of fare and of freight traffic are, of course, mere maximum rates, the companies being permitted to go as far below such rates as they see fit. Every tariff of charges must be submitted to the government for the purpose of receiving its sanction, and a month's notice must be given of any proposed change.
—France has a perpetual committee to supervise its railways and to arrange the tariff of charges, to settle disputes between competing lines, and between the public and the railways. This committee is composed of the following persons: A president—the minister of public works; a vice-president, who is the director general of bridges, roads and railways; three experts appointed by the minister of war; three experts appointed by the minister of finance; one expert appointed by the minister of the interior; one expert appointed by the minister of commerce; two inspectors general of bridges and roads; one inspector general of mines, the inspector general of railways, and a secretary. This commission exercises both a commercial and a technical control.
—In France, every company is bound to receive and carry forward all goods tendered to it, and to publish, one month in advance, the mileage rate at which it will carry them, and the time within which it will deliver them, varying according to the distance carried. No private arrangement of any kind is permitted to be made with any organization. The terminal charges are all prescribed. No one, interested in the stock of the railway, or in its direction, is permitted to make any contracts with the railway for supplies, and even every passenger time-table is submitted to the government for approval.
—In France two tendencies have in recent years striven for precedence; one, the extension of the ownership by the state of the railway system, and the hastening of the right of the state to purchase, in less than ninety years, the rolling stock of the railways, and to acquire the rights of way of the existing lines; the other, a tendency to postpone the acquisition by the state of the railway system of France, coupled with the attempt, on the part of the railway corporations, to make themselves intermediately less dependent on the state. M. Leon Say, a well-recognized authority in matters of finance and political economy in France, recently became minister of France. His relation to the house of Rothschild is a well-known one, and it is also known that the house of Rothschild is the largest owner of the share capital of the most important and richest line of France, the Chemin de fer du Nord. In his budgets Leon Say devoted considerable space to the financial complications which may arise in consequence of the large additional outlays that may be required by the French government to acquire the existing lines of rail, and discouraged as much as possible additional outlays by the state, for the present, either to extend the system of existing lines of state rail, or to make any further attempts to acquire such transfer by anticipating the time for the acquisition by the state of the railways. Notwithstanding his powerful influence and the ability which all France recognized in him as pre-eminently the best qualified statistician and financial administrator, the French chamber of deputies refused to give countenance to his suggestions, and he was compelled to relinquish power mainly by reason of the unpopularity of his position on the railway question.
—The railways owe the French government about 600,000,000 francs, and the French government is now in process of investing additional sums of money, not only for the purpose of building its own lines, but to enable the railway companies to build lines of intercommunication in territory which is admittedly unprofitable.
—The ablest and strongest opponent to Say's project was Allain Targé, who, in concluding the discussion in 1881, said: "You want to temporize with the financial power of the great railways. Know you, gentlemen, what this power is? It is the greatest which now exists in France, next to the state and the order of Jesuits. You are their confederates (addressing the ministry), and do not as you should stand in a perpetual condition of warfare with it. You can not deal with the railways as individual associations which are to be regarded each by itself, but you must regard them from the point of view that they have an interest in common, and that this common interest is so great as to make it a serious competitor to the state. They are indeed an imperium in imperio. They have a combined debt of 10,000,000,000 francs, and employ 280,000 officers. They stand in relation with all the trades, industries, commerce and agriculture of the community, and in their hands rests the fate of all laborers. This enemy you must fight, and the single weapon that you have in your hands is the right to acquisition and purchase. Their first word is, 'No purchase, no acquisition.' You must never surrender this weapon if you desire to hold power against them." The chamber, by an overwhelming majority, defeated Say's proposition, and France has again determined that nothing shall interfere with the ownership by the state of the railways at the time originally fixed by the concession, and that if possible that time shall be cut short, under the power of the French government, by a purchase long before the ninety years of the original concession shall expire.
—North Germany. All concessions are made by the minister of commerce, unless there is to be a guarantee of interest, or a subvention of some kind, in which event it must pass through the form of a law. Since the formation of the German empire, the separate states have agreed to concede to the empire the power of expropriation, and the new lines are to be constructed under the empire. This means under the chancellor of the empire, who thereupon, through a reichsgesetz, may authorize the construction of any line involving the interest of the state or of trade.
—Prussia. At the commencement of its system of railways, Prussia consciously renounced, as to this service, all the benefits that are supposed to flow from competition. The laws of 1838, section forty-four, enacted that no second railway running in the direction of the first one, and touching the same principal points, should be allowed to be constructed by any promoters or corporators, other than the promoters and corporators of the first railway, within a period of thirty years from the opening of such railway. The state, for a due consideration, by the very same law, however, reserved the right to purchase the property of all the railways and appurtenances organized under that law, after the lapse of thirty years. When such authority was to be exercised, the state was to pay twenty-five times the amount of the annual average dividend paid to the shareholders during the last five preceding years. It was also to pay the debts of the company in the same manner as the company would have paid them.
—A number of railways were built by governmental subvention in Prussia, and many of them have since that time become by foreclosure the property of the state. To a great many others large loans were made by the government, subjecting them to such a measure of governmental control as practically to make them state roads. As to all others, the state claims a right of a third part of the net revenue of the lines, beyond 5 per cent.
—In 1870 there were in Prussia 3,204 miles of rail which belonged to the state, and 3,595 miles of rail which belonged to private lines. All tariffs, both for freight and passenger traffic, must be submitted to the government, and receive its assent. These tariffs must be published, and can not afterward be raised without the consent of the minister of commerce. At the rates adopted, the companies are bound to convey, without distinction of persons, all goods delivered for conveyance, the transport of which is not forbidden by police regulations.
—Since the war with France, and the consequent acquisition by the empire of the Alsace and Lorraine lines of rail, by successive enabling acts, the governmental acquisition of railways proceeded with great rapidity, so that each year circumscribed the number of private lines, and now there are but very few lines to be acquired to make the whole railway system of Prussia a strictly governmental institution. Indeed, the railway directory never fully survived the decree of June, 1870, by which the minister of commerce took possession of the railways for military purposes, and held possession of them during the war with France. At the close of the war, the state claimed and exercised the right to supervise the expenditure of railways and to take part in their deliberations, also to determine the amount that they are to carry to the sinking fund, and the amount they are to pay as dividends. From that time forth the paternal and inquisitorial power of the government was so relentlessly exercised against them, that all power of resistance to state absorption was undermined, and they fell an easy prey to the will of the iron chancellor Bismarck, who had determined that the lines should become the property of the state. The directors of the private roads protested at first against this interference, claiming that under the laws creating them they were exempt from supervision of that kind. To this the minister of commerce answered, that he claimed the right of the royal commission, to take part at the meetings of the boards of the private railway companies, so as to see to it that the object of the meetings was in the interest of the public. He said that the railway administration could rest assured that the supervision of the state would make itself less and less felt in proportion as the railway administration, by a prompt, cheap and safe service, gave evidence to the public that they rightly comprehended and were endeavoring to fulfill, to the satisfaction of important public interests, the trust placed for public purposes in their hands. The minister of commerce closed his answer with the following significant admonition: "I can not, therefore, but recommend that the Prussian railway administrations press no further the opinion of the narrow limits of state supervision over private railways, as expressed in their memorial presented to the chancellor, as it is a position which certainly is not pressed in the interest of the shareholders. This much is certain, that for a long time past the commercial public has demanded the restriction of the independent power of railway administration, which went beyond the restraints hitherto enforced."
—The rapidity with which the acquisition of the private railways by the Prussian government has proceeded is indicated by the following figures: At the end of 1879 there were 3,800 miles of state railways; 2,170 miles of private lines under state control; and 6,200 miles of private lines under state supervision. At the end of 1881 there were 7,070 miles of state lines; 2,170 miles under state management; and 3,110 miles of private lines. At the end of 1882 there were 9,500 miles of state lines, 1,320 miles of private lines under state management, and 2,400 miles of private lines.
—The control of all this great system of ownership of railways in Prussia is given over to a special administration, at the head of which is the minister of public works, and under him are all the administrative officers, who respectively are located at Berlin, Bromberg, Magdeburg, Hanover, Ehrfurt, Frankfort, Elberfelt, Cologne and Breslau. These directors are appointed by the crown, and are special administrators to take the place of the private and individual administrators of the lines to which they respectively relate. These administrators have in charge the expenditure of moneys necessary for the establishment of new lines, and by the law of 1883 10,000 miles of new lines, to belong to the state and to connect with the existing lines, were devised. Mr. Von der Leyen, himself one of the most intelligent co-operators in this system of state acquisition, and holding a position of great trust under the minister of public works, in an article published in 1883, in the "Annual of Legislation, Administration and Political Economy," Berlin, says that "the first beneficial effects of the acquisition of the railways by the state in Prussia, was the uniformity of tariffs throughout the empire, and the impossibility of obtaining special rates or personal favoritism; also the extension of the through ticket system, and the cheapening of transportation for workingmen and persons of moderate means." The beneficial effects of these reforms is indicated by the increase of business. From 1879 to 1882 it rose from 12,000 car loads to 15,000 car loads. The surplus available for general state purposes, arising from the administration of the railways, over and above interest on money expended by the state on its state lines and operating expenses, was, in 1878-9, $1,660,000; in 1879-80, $3,450,000; in 1880-1, $9,575,000; in 1881-2, $7,862,500.
—Nearly all railway concessions contain clauses making it incumbent upon the board of administrators of the railway in all cases to come to proper agreements as to correspondence of time tables in the administration of railways joining each other. The time tables can only go into force upon the consent of the government. Persons and merchandise must be conveyed in the order in which the application is made. No difference is to be made between passengers and goods which come directly to the lines, and those which come to them in transit from other railways. A special tariff is also prescribed. The state, therefore, in addition to being represented on every railway board, and being in itself an administrator of railways, enters to a large degree as a member into all the councils of railway management in fixing rates and in determining through traffic.
—A writer in the "Quarterly of Political Economy," Berlin, 1876, in an argument against the maintenance of private control of railway property, says, "the example of the United States affords nothing to the point. There, the administration and construction of railways in the hands of private individuals and corporations is so bad, and so utterly irresponsible, that that country affords no argument in favor of private enterprise, and yet, notwithstanding this condition of affairs, no one seeks a remedy for the evils there existing by placing the railways in the hands of the state, because corruption has eaten so deeply into the government that its ethical regeneration is scarcely to be expected as long as it has a quadrennial rotation of office, and the state treasury is regarded as the general pocket from which each one is to abstract as much as he can." The reviewer then speaks of the system in England, in which the railway has, by amalgamation and consolidation, extended itself and become a power within the state so great as to be dangerous to the state. He refers to the speech made by the president of the chamber of commerce of Plymouth, who says that "the railways have become our great highways, and should be regarded from an entirely different point of view from any other undertaking." The writer further refers in his article to the opinion of the royal railway inspector of Canada, in which he says that the monopoly of the railway in that province has become so great that the question will very soon be debated, whether the railway should own the state, or the state the railway. From all the conditions resulting from allowing free scope in private enterprise in railway construction and management, the reviewer comes to the conclusion, that on the whole it would perhaps be better for the German states to own the railways than to allow them to continue to be private enterprises, though subject to state control.
—Austria. This country followed the course of France, by making concessions for the period of ninety years to the railways. The government built several important trunk lines at the expense of the state, some of which are operated by private corporations, but it still owns its main trunk lines. Its system of supervision of state lines, as to the tariff of both passenger and freight traffic, is complete.
—Switzerland. No state lines exist in Switzerland. The republic has allowed private enterprise to build a net-work of railways. It has, however, and extremely effectual system of supervising the tariff of charges which must exist thereon. A perpetual commission regulates the relations of the corporations to the stockholders and the public, and provides for a thorough investigation of their affairs, and their constant publicity.
—Italy. This country owns of its lines about 1,000 miles of rail, and is in negotiation for about 4,000 miles more, so that within a very short time it will possess a large majority of the mileage of rail within its own territory.
—In all these countries, therefore, even including England, the railway has never been regarded wholly as a matter of private enterprise. In the majority the state built or assumed ownership of the trunk lines, and in all of the nations of continental Europe the proper conduct of these corporations has been regarded as so bound up with the welfare of the community that they could not safely be left wholly to private enterprise, but that the state, representing the public, should exercise continuously a more or less rigid control over their construction and administration.
—Taking up the history of the relation of the government to the railways in England, where we left it with Mr. Morrison's speech in 1839, let us look at the steps taken by the English people and government to reacquire, as to railway enterprises, the control which, notwithstanding the warnings given by men like Stephenson and Morrison, they had allowed to slip from their hands.
—In 1839 an attempt was made by royal commission to subject railway schemes to some harmonious direction as to the points from which the roads were to radiate and to which they were to go, so as to make them somewhat analogous to the French system; but the reply came that it was already too late, because so many railroads had already been constructed and projected, that it would be an unjust impairment of the rights of property to interfere with them; that the roads were already built, and could not be removed, and that others were too far under way to have their powers changed. Between 1836 and 1839 public agitation was directed mainly against excessive charges for passenger traffic; as to which, limitations were there upon fixed. The powers of the railways had already become so great that many members of parliament were directly under their influence, and many others owed their seats to the railway power. Notwithstanding this influence, however, a bill was introduced in 1840 to create a commission for the superintendence of railways, the commission to be a kind of sub-organization to the board of trade. This bill, after several amendments, was carried, mainly through the influence of Sir Robert Peel, who, although a few years before bitterly opposed to any interference with private control of the railway system, now admitted "that they were monopolies, and that it was necessary to create some tribunal as a standing investigating committee for parliament, to prevent too manifest and too great an abuse on the part of these powerful and moneyed organizations." The bill was considerably modified during its passage through the house, more especially in the second section, which, as originally reported, had provided for a uniform system of book-keeping, and for a very thorough system of reports on the part of the railways to the board of trade. This provision, however, in the bill that eventually became law, was so emasculated as to require simply reports in such manner as the railways saw fit to make them. The bill as passed embodied a clause which established a bureau of railways as a part of the board of trade.
—A glance at the 55th volume of "Hansard's Debates." p. 125, etc., will show how greatly the ablest men in parliament were, at that time, under the influence of general phrases in relation to the non-interference of government, and how completely they misunderstood the essentially monopoly character of the railway corporation, interference with which was, in this case, a duty which, if neglected, was a renunciation of one of the chief functions of government. It was assumed in the debate, by those who were opposed to the bill, that the right of the state with reference to the railways was entirely limited to securing the safety of the traveling public, and that as to the carrying of freight or goods the railway was an entirely private enterprise, like any other common carrier. The first protest of moment against this view, in addition to Mr. Morrison's efforts, was the publication of William Gault's pamphlet on "Railway Reform" in 1843. After a very thorough examination of the whole subject, and recognizing fully the fact, that, in its importance, the railway bore the same relation to the highway that the highway bore to the footpath, inasmuch as the traffic of the country was being carried, to a very considerable degree, almost wholly by rail, he came to the conclusion that the existing lines of rail should be acquired by the state, and that all further extensions of the railway system should be carried on by the state as the owner of the public roads.
—At the beginning of the session of 1844, Mr. Gladstone, then president of the board of trade, requested the house of commons to appoint a committee to report what, if any, changes should be made in relation to the consideration of railway bills; what amendments should be made in the railway concessions and franchises already granted, and what changes, if any, should be made in the standing orders as to the manner of the consideration of railway bills. Mr. Peel objected to the extent of the inquiry, claiming that it was an interference with vested rights, to consider grants already made. He expressed his conviction, at that time, that the further development of the railway system would bring about a competition which in time would do away with much of the monopoly character of those enterprises. A committee of fifteen was appointed, and testimony was taken, mainly upon the question of the absence of competition and combination between railways, the building of loop lines for subserving special interests without regard to the public needs, and the tendency to amalgamation which then had begun to make itself felt. A large proportion of the time of the committee was taken up in the examination of the question of minimum rates for passenger traffic. Mr. Glyn, the banker, who, next to Hudson, the railway king, was, at that time, the largest share proprietor in England, and who had been for many years, and was then, the president of the London 8 Birmingham railway, stated his conviction that no corporation ought to have any larger powers than were absolutely necessary for the profitable working of its line; he conceded that if the matter were an entirely new question, he had no doubt whatever but that the best way of dealing with it was for the state to own the railways, because, he said, the people as a whole had as much right to their great public highways as they had to the light of heaven. On economic grounds, however, he disapproved of the purchase of the railways by the state, saying he feared the state would be cheated in the transaction, and intimating that the roads had not cost what they were capitalized at; but he believed that thenceforth it was the duty of the state to control the railways with greater rigor and force. The report finally made by this committee contained a severe criticism upon the then existing mode of considering and passing railway bills, which the report suggested should all be submitted to the board of trade for criticism before being entertained by the proper committees of the houses of commons and of lords. Parliament took up the report for action in 1844. The suggestion was then made, that, when any new railway shall, after fifteen years, pay for three successive years, consecutively, 10 per cent dividends, it shall be in the power of the board of trade to revise its tariff, but in that event, that parliament must guarantee the 10 per cent. dividend to the railway. This suggestion was again modified by the further suggestion that the board of trade could demand a rebate of the guarantee by reason of bad management. A further limitation was made by providing, that, during the existence of the guarantee, the corporation shall not increase its capital stock, and that at the end of fifteen years the board of trade might purchase every new railway at twenty-five times the average dividends of the last preceding three years, from which, however, a deduction was to be made for insufficiency of the permanent way, and the rolling stock being out of repair.
—Against the passage of this bill the railways fought principally for time. In this they were aided by the powerful Sir Robert Peel, who suggested that a year's notice, at least, should be given before a bill of such magnitude could be passed. (Hansard's Debates, vol. i., 76, p. 482.)
—Mr. Gladstone referred to Mr. Saunders' testimony and to that of George Hudson, showing that the railways did not consider them selves free from competition and opposition by other lines of rail, and his admission was used by the opposition to show that the natural law of competition would apply to cure the evils that were complained of. Mr. Gladstone, in a speech, showed that the threat of the passage of this law did not prevent new railways from being organized; that fifty new bills, representing £20,000,000, had been filed since the report was made. He stated, that, though he knew the railway had become sufficiently powerful to send representatives into parliament instead of having them hang around the lobby, he did not believe they would become so formidable, or that parliament had sunk so low, that its members would, at the bidding of the railway interests, refrain from giving their sanction to the bill unanimously reported by their own committee.
—John Bright was the most formidable opponent to Mr. Gladstone's suggestion. He was a free trader, flushed with the great victory which had just attended his efforts in the establishment of his principles, and was ready to apply these principles to the most incongruous subjects. He was in the full vigor of his power, and had already made for himself a great reputation for honesty of purpose and for oratory. He dwelt upon the enormous benefits which railways had conferred upon society, showed that they were the benefactors of mankind, and that monopolies had always been the enemies of mankind; and therefore, he argued, it was monstrous to apply the term monopoly to them. He showed that the railways then already represented, in the way of vested capital, £60,000,000 in England; that they were carrying 25,000,000 passengers annually; and that it was extremely dangerous to interfere with so great and constantly growing an interest.
—Sir Robert Peel argued on both sides of the question, but insisted, almost in the spirit of apology, that the government had a right to provide the same sort of publicity, with reference to the railways, that it had provided with reference to the bank of England's accounts, and he concluded with asking a vote in favor of the bill. The bill obtained, on the second reading, 186 votes in its favor, against 98 in opposition. Among those who opposed it were Messrs. Bright, Cobden, Milnor Gibson, Ricardo and Macaulay. The bill was then considerably amended before it obtained its third reading, all the amendments being in favor of the railways. As modified, it was passed, but the modifications made it useless legislation. The changes that were made in it gave the railways twenty-one years instead of fifteen, before their railway tariff could be changed, notwithstanding the payment of 10 per cent. dividend. It was then provided that the guarantee of the state should run for twenty-one years after the 10 per cent. annual dividend, thus making it quite certain that the state would never interfere with the tariff. All the deductions which, in the event of purchase, were to be made, by reason of bad management and restrictions upon increase of capital, and for want of repair, of permanent way and rolling stock, were struck out. The provisions with reference to the purchase by the government were thus made extremely onerous to the state. As the provision in relation to state acquisition was further modified, so that before it could take effect it required another act of parliament to guarantee the purchase money, the act has remained ever since, to all intents and purposes, a dead letter.
—The discussion on this bill did, however, direct public attention to the question, and the "Quarterly Review" of 1844, in an article on "Railway Legislation," (pp. 224, 280), says in conclusion: "It is perfectly clear that sooner or later this great public trust can not remain in-the hands of private corporations. The railways themselves have given the best evidence of their desire and of the necessity for amalgamation, by which they admit that the individual corporation can not, in a system which requires uniformity and harmony, exercise absolute sway; and when the time shall have arrived that this amalgamation will bring the railway into the hands of the fewer corporations, or of a single corporation, which means into the hands of a few individuals, it is then but a step to the suggestion that the state, for its own safety, is compelled to take possession thereof; for a system of transportation which permeates every part of the land, which destroys and devours every other system of intercommunication, which incorporates itself into every public and private interest, which is as universal and all-present as the arterial and venous systems of the human body, sooner or later will come under the general control, for better or worse, of the state organization."
—In 1844, a special act was passed (8 and 9 Victoria, chap. 96) by which general leasing powers in private railway acts were restricted, and all powers granted by any private act of that session, to lease, were repealed.
—Pursuant to the act of 1844, a railway board, which existed just one year, was constituted as part of the board of trade, the duty of which was to report upon new railway schemes and purchases, and upon proposed extensions, amalgamations and competition. The board reported by giving its decisions without assigning reasons. It sat in secret, and published no debates. This un-English proceeding subjected it to a degree of criticism and animosity that compelled the government to recommend that the board be abolished, which was accordingly done in 1845. In that year the competition between railway corporations became so keen, and the canal companies suffered to such a degree from it, that a law was passed authorizing the canal companies to vary their tolls, and to borrow money so as to maintain the competition. The railways thereupon rapidly bought up the canals, and canal and railway amalgamations went on with great vigor. In 1846, one year thereafter, a committee of parliament reported, that within that year a large number of canals had passed practically under the control of the railway corporations, and were working under joint management. This committee recommended that all amalgamation between canal and railroad companies should be forbidden, except under the sanction of parliament. They also recommended that it was absolutely necessary that some department of the executive government should be so constituted as to command general respect and confidence, and to be charged with the supervision of railways and canals, with full power to enforce such regulations as might, from time to time, be indispensable for the accommodation and general interest of the public. They particularly recommended this in view of the fact that the private arrangements which are made between railway companies and railway and canal companies, and which may or may not be ultra vires, do not come under the supervision of parliament at all, and expressed their belief, that, with a properly constituted executive body, it would come under their supervision, and could be subjected to restriction.
—Between 1844 and 1846, came the period, already referred to, of the railway speculative mania. The influence which that had upon parliament is given by Francis, in his "History of the Railway," in these words: "Members were personally canvassed, solicitations were made to peers, influences of the most delicate nature were used, promises were given to vote for special lines before the arguments were held, advantages in all forms and phases were proposed to suit the circumstances of some and the temper of others. Letters of allotment were tempting, human nature was frail, and the premium on five hundred shares irresistible. The 'Athenæum,' about that time, said: 'It is the fashion to assume that our legislators are not now open to pecuniary bribes. It may be so, but we must leave that question to be decided by our children's children. If public rumor be no more than usually scandalous and false, there are some curious revelations yet in store for these youngsters, relating to railway bills.' The curious revelations had not to be waited for until the birth of our children's children, but they came in 1845, and in the winter of 1846, with the railway crash. A return called for by the house of commons, of the dealers in railway undertakings, formed a very remarkable blue book. The noble, who, in the pride of blood and birth, had ever held traffic in contempt, was there blazoned as a trader. The priest, who, at his desk, prayed to be delivered from the mammon of unrighteousness, was there revealed in the city to sell his scrip at a premium. There were 900 lawyers, and 364 persons connected with the banking interest, who subscribed contracts for above £2,000; one solicitor was down for £154,000. There were 157 members of parliament, of whom one signed for £290,000, one for £250,000, and one for £171,000; while the remainder were down for sums which must have influenced their feelings to a degree which might have influenced their votes." (Francis' "History of Railways." vol. ii., pp. 188-190.)
—In 1846 an act was passed constituting the railway commission, which was composed of five persons, the president of which was paid £2,000 a year, two members were paid £1,500, and two others received no pay. The main purpose of this commission was to take into consideration all schemes which were to be submitted to parliament, to make special inquiry and reports, and formally to report upon all bills before parliament on railway matters, so as to guide the parliamentary committee. But as the railway committees of the house of commons and house of lords refused to be guided by the recommendations of this commission, it was abolished, and their duties were once more transferred to the board of trade. A series of bills was passed to prevent the absorption of lines by rival companies, but the ingenuity of railway counsel was superior to the ingenuity that drafted these bills, and by the purchase of stock of other railways and appointing railway directions who were mere simulacrums, the railway corporations absorbed each other's lines without having parliamentary powers so to do.
—In 1853 another railway special committee was appointed by parliament. This committee, after taking testimony, recommended the appointment of a committee of a more permanent character than had theretofore been in existence, to consider all schemes submitted to parliament at every session, and that a railway department of the government should be created for the purpose of affording assistance and advice whenever the committee might desire it. It then pointed out that amalgamation of railways had proceeded to such a degree in England, that each particular part of England had become the centre of a system of railway management of its own, and that the great railway corporations had swallowed up all the competing and intersecting lines. It suggested the passage of a bill relating to the traffic arrangements between different companies, and submitted a plan of a measure by which the canals were to be maintained. The result of these recommendations was the passage of the canal and railway traffic act of 1854 and a prohibition of preferences in traffic contracts given by different railways. Part of the scheme of the act of 1854 was to submit grievances to the board of trade only, after the court of common pleas, sitting as a court, assisted by an engineer and barrister, had determined that an actual grievance existed. This part of the act proved inoperative. Lord Campbell foresaw and foretold that it would become inoperative, insisting that a lay tribunal should be created for the investigation of such questions, and that judges were not the proper persons to consider mattes of that kind, as they were naturally disinclined to act in an advisory manner to governmental bureaus, and that such disinclination would render resort to them well nigh useless. However, the law of 1854 contained one very useful provision, to the effect that no preferences of any kind should be given by railways for services of a like character, and forbade all discrimination between individuals as to traffic of like character.
—In 1865 a royal commission was appointed to consider the subject of railway communication. It made its report in 1867, after taking a great mass of testimony as to British and foreign railways. As regards legislation, this commission insisted upon the expediency of requiring the board of trade to assist the parliamentary committees by reports. It made many valuable suggestions as to interchange of traffic; it considered the subject of amalgamation, and the necessity of checking it; nothing was done, however, to prevent the proceeding of the amalgamation and consolidation of English railways, as is shown by the fact, that, in 1845, the London 8 North Western railway had owned but 379 miles of road, and that in 1870 it operated and owned 1,507 miles. The Great Western, which originally consisted of 118 miles, operated and owned 1,370 miles in the year 1870. The North Eastern, which in 1846 owned 274 miles, had, in 1870, extended its line so as to be the owner of 1,281 miles; and the Great Eastern, which originally had 138 miles of road, operated and owned 874 miles in 1870. Amalgamation had therefore proceeded in England to such a degree, that, in 1870, the field was practically divided between the great lines of railway, so that, somewhat like France, England had seven great systems of lines brought into existence without concessions of fields of territory by the state, but which by the natural course of development and consolidation, and the economy produced by such consolidation, divided the field of railroad enterprise in England, and created a concentrated power that presented at that time to the English government the formidable question, whether ultimately the state should control the railways, or the railways control the state.
—We now come to the most important epoch in the English railway history, one reversing the policy which, down to that period, regarded the railway as private enterprises—the appointment of a joint select committee, in 1872, of the house of lords and house of commons, to consider the subject of railways. This committee was composed of Mr. Chichester Fortescue, Lord Derby, the Marquis of Salisbury, Earl Cowper, Lord Redesdale, Lord Belpur, Mr. Hunt, Mr. Childers, Mr. Cross, Mr. Dodson, and Mr. Stephen Cave.
—After taking testimony, covering, with appendix, upward of a thousand pages of an English folio blue book, the committee recommended the organization of a new tribunal to consider railway grievances, constituted both as a court and as an advisory committee on railway legislation. The committee recommended this course in preference to fixing tariffs by statute, as the change of circumstances often makes such tariffs inapplicable or impossible. This was not only the recommendation of the committee, but followed the opinion of almost every leading railway official of England who was examined as to the proposed remedies, among whom were Mr. Allport, Sir Edward Watkin, Mr. Price, Mr. Broughton, Mr. Dawson, and others.
—The committee conceded that it was difficult to provide any fixed or self-regulating rules which would, through the medium of selfinterest or of the ordinary action of law, protect the public. They recommended that the proposed tribunal should be endowed with certain functions, among which were, to see to it that railways publish rates and fares and live up to them, and to consider and act upon such alterations as from time to time are adopted in the classifications; to examine into every case of undue preference; and to investigate complaints of unfairness between traders or between towns and districts, so far as they can be raised under the railway and canal traffic act (Lord Cardwell's act of 1854, and amendments). It having been found that the expense of going to the court of common pleas was so great as to give the wealthy companies great advantages over private traders, and that the nonpublication of rates prevented the trader from knowing whether he had a case or not, the committee recommended that exclusive jurisdiction be given to the tribunal to examine into cases of preferences, and that appeals from these decisions be limited to such cases as the special tribunal should certify involved questions of law which should be considered by the Westminster tribunals. A further function with which, according to the recommendations of the committee, the tribunal was to be clothed, was to see to it that proper facilities be given for the forwarding of passengers and goods under the provision of the railway and canal traffic act relating to that subject.
—It was conceded in the report of the committee by Mr. Broughton, Sir Edward Watkin and Mr. Price, that the courts were incompetent to deal with the subject, and that arbitration was unsatisfactory; hence the necessity for the organization of a tribunal to secure those ends.
—The committee also recommended the control of tolls on canals by the tribunal, and the enforcement of any obligation imposed on the railway companies to secure the proper maintenance of free navigation on the canals. The tribunal was to settle questions between the local authorities and the companies concerning new branch lines, and also to settle all disputes between railway and canal companies. They were also to settle all questions arising between the war and postoffice departments on the one hand, and the companies on the other.
—The additional duty to be conferred on this special body was to advise parliament in reference to railway legislation. As to the necessity for constituting this court, the committee say: "No existing institution possesses the necessary qualities. The board of trade has not the requisite judicial character or means of action, a court of law fails in practical knowledge and administrative facility, and the committees of the houses of parliament have no permanence." A new body, therefore, was, in their opinion, to be constituted for all these purposes, and to wield all these powers, to be called the railway and canal commission, and to consist of no less than three persons of high standing, one of whom should be an eminent lawyer, and another a person well acquainted with railway management, their proceedings to be as simple and inexpensive as is consistent with giving due consideration to and hearing questions openly and fairly. In conclusion, the committee state that "competition between railways exists only to a limited extent, and can not be maintained by legislation; that combinations between railway companies were increasing and likely to increase, whether by amalgamation or otherwise; that the self-interest of the companies alone was not sufficiently protective of public interests, and that their interest was only to a limited extent the interest of the public. And it therefore becomes necessary," they add, "to consider what can be done in the way of enforcing statutory obligations." As to the ineffectual character of past legislation, both in limiting dividends and creating a maximum of rate of charge, the committee were by no means mealy mouthed in the way of condemnation. They say of the railway companies. "They are monopolies who are unlimited in their charges for carriage except by the parliamentary maximum, and who are restricted by no definite limit whatever as regards terminal charges; these two charges they mix up together, and under the present system do not separate. They are practically under no restriction except that of their own interest, which may not be the same as that of the public. They claim and exercise the right to vary their charges to any extent they please within the parliamentary maximum, to favor one set of men or description of goods at the expense of another; to charge high rates for short distances, and low rates for long distances, or to charge two different rates for the same service if they think it to their interest to do so; and not only do they claim to exercise all these powers, but they refuse to tell the public how they exercise them or why they exercise them. The remedies given by the canal and traffic act of 1854 must, under such circumstances, fail for want of the requisite knowledge; and the recent act, by which companies carrying goods are bound, on application made within a week after payment, to give an account distinguishing between rates for conveyance and terminal charges, is wholly useless, because, in the first place, the trader is practically unable to enforce the law against the rich and powerful company; in the second place, he wants to know what he has to pay before paying it, and also what his neighbors and rivals are paying; and in the third place, because the companies do not themselves distinguish accurately between terminal charges and mileage, and, when an inquiry is made, can only give an approximate answer."
—Upon the question whether the interest of the public and that of the companies are identical in the same sense that they are in the case of a private trader, the committee say, "That it must not be hastily assumed that self-interest will play the same part in these large undertakings which it plays in ordinary trading concerns. There is a powerful bureaucracy of directors and officers. The real managers are far removed from the influence of the shareholders, and the latter are, to a great extent, a fluctuating and helpless body. The history of railway enterprise shows how frequently their interests have been sacrificed to the policy, the speculations or the passions of the real managers. On the other hand, the directors and principal officers of these great undertakings are often men of high standing, who feel that their position is something different from that of mere managers of a trading concern, and become in a certain sense amenable to public opinion, and especially to its expression in parliament. Thus for good as well as for evil the management of railways differs from that of an ordinary trade or manufacture, and approximates in some degree to the business of a public department." And, as a summary of the history of legislation preceding the sessions of the committee, they state "that committees and commissions carefully chosen have for the last thirty years clung to one form of competition after another, but that it has nevertheless become more and more evident that competition must fail to do for railways what it does for ordinary trade, and that no means have yet been devised by which competition can be permanently maintained."
—This report, made under a liberal government, and one which was, therefore, considerably under the influence of the very men who opposed all interference with railways, on the ground that such interference was, in one form or another, a violation of the principles of free trade, marked a complete change of the views of the leading political thinkers of England. Even Mr. Bright no longer opposed the formation of a railway commission. Experience had taught the English people that in many departments of human activity the doctrine of non-interference of government would not apply, and not only were railways rapidly being subjected to governmental supervision and control, but also factories, merchant shipping and other industrial manifestations. The report of the railway committee of 1872 resulted in the law of 1873, creating the tribunal recommended by the commission. The gentlemen appointed by the crown under this commission were Sir Frederick Peel (the second son of Sir Robert Peel), Mr. William Phillip Price, who was for many years the chairman of the Midland railway company, and Mr. Macnamara, who held the position until 1877 (the time of his death), when his place was filled by the appointment of Mr. Alexander Edward Miller. Mr. Balfour Browne became the registrar of the railway commission. A large number of cases were brought before the commission, which were promptly and ably dealt with.
—The commission was originally appointed for five years. During those five years the railroad companies tried two different methods of discrediting the commission. One method was, by carrying cases up on appeal, to show that the commission acted arbitrarily and against law; the other was, to avoid as much as possible resort to the commission by complying with all the laws, and settling cases before they could be brought to the commission's attention. By the one course they tried to prove that the commission was composed of men not well qualified for the work, and by the other, that it was superfluous. In both attempts they signally failed. The cases carried up on appeal by them were generally affirmed in favor of the commission, and the fact that the fear of the railway commission induced the railway companies to behave with proper regard for the laws which constituted them and in the interest of the public, did not prove that the rod was superfluous by reason of it not being necessary to apply it, but proved that the very existence of the commission had a wholesome effect upon the railway companies. In 1878, therefore, notwithstanding the efforts of the railway corporations, and more especially the strenuous opposition of Sir Daniel Gooch, chairman of the Great Western railway, the commission was reconstituted by an act enlarging its powers, and the same commissioners were continued in office. The railway commission is now a permanent tribunal of the English judicial and administrative system, and will in all probability be made, within a very short period, one of the branches of the supreme court of judicature, with the power of appeal limited so as to avoid the expensiveness of protracted litigation ruinous in England to a private litigant against the practically illimitable purse of a great corporation such as the London 8 North Western or London 8 Midland railway.
—With the appointment of the commission of 1873, the English railway system entered upon a new phase. A proposition of the ownership by the state of the railways of England, which twenty years ago was almost looked upon as chimerical, is now regarded as a very possible, and will very soon be regarded as a very probable, contingency. The amalgamations which have been going on have somewhat facilitated this possible acquisition by the state. Lord Derby, in a discussion at a meeting of the Society of Arts in 1873 upon that subject, stated that he had not the slightest doubt, that, if the public really wanted the railways purchased by the state, it could be done, and the question of price would not present any insuperable difficulty. The first step in that direction has already been taken in England by the purchase of the telegraph lines and adding that service to the postal department of the government.
—Mr. Joseph Parsloe, in a monograph on the railways, says upon this subject, after weighing the arguments pro and con, as to state purchase, "that an endeavor has been made to show that enormous benefits would accrue from the management of railways by the state. At the same time it should be only after the very fullest consideration of the question, in all its multitudinous bearings, that such a change in working the system should be introduced. It has been a common practice on the part of some critics to characterize as visionaries any who have urged the adoption of a scheme of state purchase; or the ability to form a correct judgment upon the matter has been questioned. For the most part such criticism has originated with those interested in keeping things as they are, and who, while questioning the usefulness of one proposal, have not been prepared with any other to put in its place. It will scarcely be questioned that our railways have in them the material from which it is possible to obtain a much larger amount of national benefit than is now derived. What remains to be done is, that the best means shall be adopted for the attainment of the greatest public good, and if any plan preferable to state management can be devised, it will doubtless be received with satisfaction." He himself seems to be doubtful as to whether any such plan can be devised.
—One of the dangers apprehended by the opponents of state interference in England was, that in the creation of a special tribunal to supervise railway administration the individual shareholder would be injured. The very opposite has been the result. Apart from the fact, that from 1873 there was considerable additional activity in the commerce of England, a great general rise in the value of railway securities has taken place since that time, not entirely attributable to the increased activity of trade and commerce, but due in great part to the fact, that in England, as in all other countries where private administrations were freed from the direct supervision of the state, the indirect and comparatively remote supervision exercised by the shareholders over the corporate managers was not sufficient to insure the most economical and wisest administration. Special interests of railway directors would interfere with the administration, would cause the building of loop lines for the purpose of benefiting special local investments by them and their friends, and even the management of English railways is not entirely free from jobbery to benefit members of the boards of direction. The supervision of the state has made this so difficult and almost impossible, that the administration of those trusts has sensibly and visibly improved. No interest has reaped a larger benefit, not even the public, than the shareholder himself, from the reversal of the policy of the English government. Greater certainty and publicity of railway charges, and the system of interchange of traffic, facilitated and enforced by the railway commission, have been of as great a benefit to the stockholder, on the one hand, as the holding of boards of direction to a rigid amenability to the public has been of benefit, on the other hand, to the people.