the railroad problem is one of the most complicated and vital questions of the day. nothing, perhaps, is so typical of the ingenuity, skill and colossal power of our modern civilization as the railroad train—a solitary man holding the lever which controls this tremendous mass of wood and metal, with its freight of goods and passengers rushing past us at the rate of a mile a minute.
the growth of the railroad is one of the greatest marvels of this wonderful century. england got her first road from the romans in 415 a.d. to move the roman armies it was necessary to have the “roman way,” and the remains of those wonderful works still excite the admiration of all beholders. the dangers and delays of roads in the middle ages, and even in the stage-coaching days of our fathers, beset as they were with difficulties and terrorized by highwaymen, all seem to us to belong to some remote past.
it is a new tribute to the genius of that imperial{432} people who swayed the world in the earlier ages of christianity that even now, with all our facilities of modern travel, our people are beginning to realize the necessity of roadways approximating those which they constructed. the farmer often has to haul the products of his fields many miles to reach the railway station, and the time and the effort needed to get his wheat or corn over tortuous and defective roadways entails a very serious loss. in many parts of the country the roads in fact are so impassable in certain months that the farmer is unable to transport his grain to the railway at a time, perhaps, when the markets are high, and is forced to hold it until the season opens, and to dispose of it at a much lower price. there is a general awakening of public sentiment to the necessity for improvement in this direction, and for some years to come there will probably be quite as much effort expended in the bettering of country roads as in the further improvement and extension of our already colossal railroad system.
until the opening of the railway era, commerce and travel followed the natural lines of transportation—the water-ways. there were, it is true, a few exceptional instances like those of the ancient caravan routes which crossed the lines of the great rivers and built up inland cities, but the operation of natural laws in time{433}
image not available: horticultural hall.
horticultural hall.
prevailed, and these cities fell into ruins, while others sprang up along the coasts and water-ways. even after the introduction of railways, the cost of transportation thereby was so heavy that the water-ways still commanded the general direction of commerce, and it is only since the wonderful cheapening of railway rates—due to the enormous growth of the traffic and the introduction of more heavily loaded cars and other economies—that the iron way has dominated the water-way and subverted what had been one of the maxims of commercial development from the earliest times.
at the present time, where the question of time is not important, the carriage of passengers and goods by water is so much cheaper than by rail as to survive in competition. where the passenger’s time is of value, or perishable goods are carried, or the merchant is in a hurry to receive his consignment, the railway, following virtually the shortest distance between the two points—piercing mountains, spanning ravines and crossing the rivers, is, of course, the necessary means of communication. most of the great cities that have sprung up within the memory of people still living, like those of old, are reared on the sea-coasts or the shores of great lakes, or on the banks of navigable streams, the facilities of transportation by water conspiring to create these centres of activity and industry. where{434} a number of railroad lines concentrate, a great city may spring up—like indianapolis; or where great manufacturing facilities exist, as in the juxtaposition of the coal, ore and flux—as at birmingham, alabama. but these are comparatively few in number, and have not such limits of expansion as cities which may be reached by water. aside from their commercial disadvantages, the inland cities present difficult problems, among the most important being that of successful sewage and sanitation.
in this country, indeed, most of the earlier railroads were projected merely to connect navigable streams with one another, or with the coast, their founders evidently regarding rail transportation as an auxiliary of the natural ways, and not as a great rival which was in a very few years to dominate them. in other instances, railways in the early days were simply built along the banks of the rivers, because the people found that when the latter were frozen in the winter, they needed some other means of transportation. these scattered bits of road here and there were, in after years, as the possibilities of railroad development began to dawn upon the minds of far-seeing men, united by connecting links and reorganized into roads of much greater length. in fact some of the most difficult features of the railroad problem of the present day grew out of the failure of projectors of railroads{435} in the early days to grasp the meaning of the system which they were instituting. france, germany, belgium and other european cities have had no serious railway problem. the english people, however, have passed through very nearly the same experience as ours, and we are now solving the same questions which puzzled their heads nearly a generation ago.
the immunity of the continental nations from many difficult railway questions arises from the fact that they began building railroads after england and our own country had undertaken them, and after we had sufficiently developed their possibilities to show the absurdity of many of the ideas that prevailed when they were inaugurated. it was supposed that the first companies chartered would build a railway just as they would build a highway, and that the iron way would be open to competitive traffic by individuals or combinations of individuals, just as the ordinary highway was open. in the charter of the first railway company which built a line, the manchester and liverpool railway, and in fact in all the charters which were granted in england prior to 1829, and the charters granted in this country in the same period, this idea is clearly expressed. the ithaca and owego railway, now a portion of the great new york central trunk line, was chartered in 1828, and one section of the charter contains this provision:{436} “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 ninth section of this act.”
it is obvious that the notion entertained by the founders of this railway was that they would simply own a turnpike with rails upon it, and would derive their revenue from the tolls charged upon the vehicles that should be rolled over it by individuals. it was not until railway building had proceeded for about a dozen years that it became evident, from the nature of the power employed and the higher rate of speed—unforeseen until then—that might be attained, that the railway company must monopolize the service over the road they built. this rendered necessary an entire revolution of the principles upon which all future charters should be granted. but the fundamental mistake was made. the continental peoples began to build their railways after this fact was discovered, and therefore had the benefit of their predecessors’ mistakes, and adopted precautions which have relieved them of many awkward complications.
besides this, another mistake of ignorance was the belief that railways would be used exclusively for the transportation of passengers, and it was long after the first rails had been laid that the{437} notion that “light goods” might be conveyed, dawned upon their minds.
any man who should have told these pioneers of the railway world that the united states would possess in the year 1889 a hundred and sixty thousand miles of railroad, enough to belt the world seven times at the equator, would have been regarded as a lunatic. the ownership of this vast property is represented by stocks and bonds aggregating $9,000,000,000. they receive yearly from the public for carrying passengers and freights the sum of $1,000,000,000 and, after paying the expenses of their operation, including the wages of more than 1,000,000 employés, they have left an available revenue of $415,000,000. more than one of the larger companies has a revenue greater than that of the united states government was thirty years ago. to earn this enormous sum the roads work night and day, seven days a week. through the darkest and stormiest winter midnight, as well as through the pleasantest summer afternoon, the locomotive fires are kept alight and the wheels revolve unceasingly along the rails. the work they accomplish is something startling in the aggregate. in the year 1887, the latest for which the complete figures are at hand, the railroads of the country carried 428,000,000 passengers, travelling 10,500,000 miles, a distance equal to 450 times around the globe. the freight carried in the{438} same year amounted to 552,000,000 tons, and the distance traversed 62,000,000 miles.
it is a commonplace to speak of what the railroads have done in the way of opening up the country and bringing the blessings of civilization into the wilderness. in the western country, where the people formerly wore homespun or the coarsest fabrics of eastern looms, the women now receive weekly fashion plates still damp from the press, and every cross-roads store has in stock the latest patterns, not only from the great cities of our own land, but from the centres of european fashion. the postal system follows along the iron way, the metropolitan newspaper reaches the most obscure hamlet daily, and a chapter might be written upon the growth of the railway postal service alone. the telegraph lines enter new territory with the railway, putting the dweller in the remotest regions within reach of instantaneous communication with all parts of the world.
the effect of the railroad in thus multiplying and exchanging not only material products, but distributing the news of the day and bringing the inhabitants of the pacific slope and those of the atlantic seaboard into daily intellectual intercourse, and thus welding all into one homogeneous people, is a theme which has yet to be fully dealt with by the pen of the historian. from maine to texas, go where you will, you find the people{439} read the same news, discuss the same questions, and are subjected to the same vivifying influences, the ideas of the farmer on the borders broadening in even pace with those of the dwellers in the cities until such a thing as provincialism is unknown on this continent. indeed, foreigners who visit our shores, who have a taste for the picturesque, complain of this monotony, and bewail the fact that the american town or hamlet, whether situated on the borders of the great northern lakes or on the torrid shores of the gulf, presents essentially the same exterior aspect and identical social conditions.
it would be too much to expect that this great railway system, with its unprecedented army of employés and the revenues of an empire, should be an unadulterated blessing; that it should not carry some alloy in its composition. like most humane institutions, even the most beneficent, it has wrought mischiefs as well as brought great benefits. until now the needs of our rapidly developing country were such that communities everywhere were clamoring for roads which would bring to them what they needed from the outside world and place within reach markets for their own products. consequently, every possible inducement was offered for the building of railway lines, and without surrounding their construction with such safeguards as had already been found necessary in old and thickly populated{440} countries. the result has been in many parts of the country an over-building of lines which has entailed subsequent losses and difficulties and the creation of abuses and complications which together constitute what has come to be known as “the railway problem.” it is clear that what might be broadly called the constructive period in our railway system is ended, and that we have now fairly entered upon a period of restriction and regulation. the people have now to learn to subdue and control these great frankensteins of their own creation.
as mr. frederick taylor, president of the western national bank of new york, who has all his life been a close student of the railway question, says: “though the railroads have probably contributed more than all other agencies combined to make the united states what they are, no one will deny that the incalculable benefit which we have derived from their growth and development has not been, and is not, wholly ‘unmixed of evil.’ leaving out other considerations, it is not unfair to say that three-quarters of all the legislative corruption from which we have suffered during the past fifty years have been directly chargeable to the railways; and that a very large proportion, perhaps nearly as much as half, of the litigation that has occupied our courts during the same period has been directly connected with railway matters.”{441}
the great panic of 1873 was directly due to the over-building of railroads. following it came several years of terrible business depression throughout the country, in which time and money was spent in trying to clear away the wreck. hundreds of railroad companies were bankrupted and loss and suffering were entailed upon hundreds of thousands of persons who had invested their savings in these enterprises. in no end of instances the stocks of the companies were wiped out of existence entirely, the roads sold under foreclosure and reorganized. again, in 1877, when the country was just beginning to recover from the shock, it was disturbed and depressed for a long time by the trouble between the railroad companies and their workmen, which in some cases culminated in riot and bloodshed. another period of artificially stimulated railroad building reached its culmination in the panic of 1884, and two years later widespread strikes among railway operatives again disturbed the entire business of the country. during all this period the legislatures of the various states and the national congress were busy with legislation intended to modify or remedy the evils complained of.
the question presents such difficulties that many students, including mr. taylor, can find a solution of the question only in the suggestion of national control of the railroads throughout{442} the country. mr. taylor’s idea, however, is that they should not be owned and operated by the nation, but that the government should have the same sort of control which it now exercises over the national banks; in other words, that the national railway commission should supervise the railroads with the same authority which the treasury department exercises over the national banking system.
the unrestricted building of railroads under the provisions of the general railroad acts passed in most of the states, following that adopted in new york in 1850, has given rise to destructive competition and brought about some of the knottiest points in the railroad problem. it was held for many years, and is even now contended by a great many people, that the building of railroads, like any other business, should be left free to the unrestricted enterprise of individuals and associations of individuals. “if a lot of fellows see fit to put their money into building a railroad where there is not enough traffic to sustain it, and the road goes into bankruptcy, that is their affair, not ours; it is their money that is lost.” that is about how the average citizen talks on this subject. there could be no greater mistake.
in the first place the railroads are public highways, and as such must be supervised by the community. when in ordinary conversation in this country we speak of a “road,” from chicago{443} to st. paul for instance, it is always understood that a railroad is meant. in the older countries the mention of “roads” is understood to refer to a turnpike. the reason for the difference of usage is obvious. in old and settled countries the highways were in existence for centuries before rails were laid, and the word “road” therefore continues to hold its primary meaning. with us it is the railroad line which first enters into new territory, and it may be years before the contiguous region is sufficiently settled to render an ordinary wagon-road necessary.
the vital fallacy in the popular argument that “competition will settle this question of too many roads” lies in assuming that a railroad is, like an individual, private enterprise. if a man starts a hat shop in a neighborhood already well supplied with hatters, and he is bankrupted in the struggle for business, that is the end of him. he has lost his money and the shop is closed and the equilibrium of supply and demand in hats is restored. but when a railroad becomes bankrupted it does not go out of existence in that way. where is there an instance in this country of a road, once built, having been abandoned or obliterated? no; the bankrupted road is placed under the protection of a court and in the hands of a receiver. it conducts a fiercer warfare than ever against its solvent rivals; for the bankrupted road is relieved from the necessity of paying interest{444} on its mortgage or paying its debts, and continues to do business at lower rates than ever, for the receiver must keep it a-going pending its reorganization or whatever disposition is to be made of it.
the english people long ago reached a point which we are approaching fast, in that before a railroad is built its projectors must obtain a special charter, and in order to obtain that they must prove that there is a public need of the new line. any one who has read the papers for the past few years will readily recall many instances of the destructive effects of building lines in territory already well supplied with transportation facilities. take the west shore road, which paralleled the new york central, and not only sunk the capital of its own builders but forced a decline of fifty per cent. in the market price of new york central, which from an eight per cent, dividend-paying corporation practically ceased to earn more than its fixed charges. the “nickel plate” road, paralleling the lake shore from buffalo to toledo, is another glaring instance in point. and still later we have the building of an unnecessary line from kansas city to chicago by the atchison, topeka and santa fé railroad, which has resulted in the fall of the stock of the latter company from about par to less than fifty cents on the dollar, with a coincident cessation of dividends.{445}
a host of mischiefs and evils have sprung from the almost unrestrained power of railroad officials in the matter of their charges. by charging some shippers more and others less by means of secret contracts, the officials opened to themselves a field of unlimited profit. an awkward fact, which there is no denying, is the large fortunes, in most cases running into the millions, possessed by men who are or who have been railroad officials on modest salaries, and who had nothing before entering upon these positions. the cost of transportation being such an important factor in the price of commodities, it was quite easy for the railway to enrich one man and beggar or drive out of business another in the same trade, and this was done according to the personal interests of the man or men who could thus make rates. more than this, it was not at all difficult for the railroad to impoverish one town or city and build up another by discriminating in rates.
in fact, the railroad had the power to say whether a merchant should or should not succeed in business, whether a town should or should not grow in population and prosperity. in the hepburn committee’s investigation of the new york railroads in 1879 it was shown that the milling business in certain towns of northern new york had been killed by railroads granting rates which favored minneapolis and other western points.{446} in one town all the millers but one were obliged to go out of business, and it was elicited in the investigation that this man had a secret contract with the railroad by which they carried his commodity for much lower rates than any of the others. the merchants of new york at that time complained that the discriminations of the railroads against the metropolis were driving away its trade to baltimore and other points. the nefarious contracts made by the railroads with the standard oil company were discovered so recently as to be still fresh in the public mind. it will be remembered that the railroads not only carried the standard’s oil for a fraction of that charged a certain individual oil refiner, but actually paid over to the standard oil company the overcharges of which they mulcted the unfortunate individual refiner.
the creation of railroad commissions in the various states, and the more recent establishment of the interstate commerce commission under the provisions of an act prohibiting these discriminations, forbidding the charging more for a longer than for a shorter haul, and inflicting a severe penalty for making railroad pools, goes far to remedy many of the most glaring evils complained of. but laws after all cannot make men moral, and, as president charles francis adams, of the union pacific railroad, said recently, “one of the chief causes of the railroad troubles is the{447} low standard of commercial honor among railway officials.” the opportunities for personal profit possessed by dishonest railroad officials, while somewhat diminished by the prohibition of discriminating rates by which they were enabled to build up one town in which they had an interest, or to favor certain firms in which they or their friends were partners, have been removed; but the avenues of unlawful gain still open to them are almost innumerable. as herbert spencer remarked in dealing with this same subject in england a quarter of a century ago, “corporations have no souls.” a combination of men will stoop to acts which the conscience of no one of them would sanction as an individual act. so, too, a man will deal with the rights and property of a corporation as he would never think of dealing with those of an individual.
among the more frequent abuses of their official power, we find railroad officers personally buying lands in new territory or mining lands, and then building at the expense of the corporation branch lines to reach these properties and enhance their value; the establishment of manufacturing or business enterprises, in which the railway men are often secret partners, and securing for these enterprises favorable terms, and then contracting with the railroad to do business for less than cost; the fast freight lines, which ply over many roads, and which have exceptionally{448} easy contracts with the corporations and are in many instances the individual enterprises of railway officials. it was not long since shown that some of these lines were actually competing with the railroad proper for freight, and carrying it with express speed as low as the railroad could afford to carry it in ordinary freight cars.
many of the swindles and abuses in railroad management owe their conception to the scandalous example of fisk and gould in the erie railroad. one or two of the little tricks played by gould and his partner in that road, will give an idea of the possibilities of profit in dishonest railway management. when gould became president and treasurer of the road twenty years ago, the erie had a very favorable and longstanding lease of the chemung and canandaigua roads. the rental was exceedingly low, having been made at a time when the leased lines were in financial trouble. by the terms of the contract, if the erie should at any time fail to pay the rental, the lease was to be thereby abrogated. under the circumstances, the securities of these roads were naturally selling for a mere song. gould, through his agents, quietly bought up these securities for about their weight in waste paper, thus becoming the sole owner of the roads. then, in his capacity as president and treasurer of the erie, he deliberately failed to pay the rental, thus cutting off the road from its lease and leaving him free to dispose of it as he pleased. he thereupon sold the roads to the northern central railroad of pennsylvania for three million dollars.
again, the northern railroad of new jersey had a stock capital of $159,000 and $300,000 of bonds. it had never been able to earn dividends on this small amount of stock. it was leased to the erie on favorable terms. here was another example of gould’s genius. four million dollars in bonds were issued on the property, and a million dollars of stock, which was divided among the conspirators; and then, to give these securities a market value, a new lease was made to the erie by which the latter guaranteed thirty-five per cent. of the road’s net earnings—enough to pay interest on the enormous creation of new bonds and four or five per cent. on the stock.
one more instance: the national stock yard company was organized by the conspirators. the erie company advanced a million dollars, taking bonds to that amount. a million dollars of stock was then issued, representing not one cent of money paid, and was divided among the gang.
it is well known that in nearly every large railroad company there is a construction ring which builds all extensions and feeders on the{450} most extravagantly profitable terms granted by the railroad company, the officials of the railroad being the chief parties in interest in the ring.
aside from all these rascalities in the actual management of the properties, is the deplorable fact that the officials and directors speculate in the shares of their own concerns, thus betraying the interests of the bona fide stockholders, whose trustees they are. it is more than suspected that the chief bears who have been active in depressing the securities of some of the western roads during the past winter were in partnership with the directors and other officers of these corporations. it is easy to see that those in a position to know the exact earnings of a company and to foresee the possibilities in the way of dividends have the advantage of everybody else in estimating the future market value of the securities.
while the holders of railroad bonds and shares, however, display so much apathy with reference to the management of their properties and the election of proper men to administer them, they deserve little sympathy. it is notorious that the annual elections of most of our railroads are the merest pro forma affairs. the men who are in power send out blanks every year asking for the proxies of shareholders, and the latter forward them, and thus enable these men to continue in power and practically own the corporations they{451} control. where there is a contest for control, it usually lies, not between the shareholders, on some kind of principle in the administration of the property, but is found to be between two speculative wall street factions, each of whom is anxious to secure the pickings. until the shareholders of american roads take an active interest in their properties, as do english shareholders for instance, and insist upon the publication of the annual reports in advance of the meetings in order that they may attend the meetings and question their officials upon all dubious points, there can be little hope of permanent reform. in cases where there is a contest, it is not at all uncommon for an interested faction to pay stockholders a small sum for the proxies on their stock—a proceeding which has been aptly compared to a merchant selling to a burglar for a dollar in cash the use of the key of his safe every night. so much for the relations of holders of shares and bonds to the men who manage the corporations. as to the relations of the railroads to the public, it is clear that the recent widespread discussion and the salutary influence of the interstate commission must lead to beneficent results.
aside from the great majority of the people, whose interests are indirectly but surely affected by any juggling with railroad properties and principles, is a great army of men who obtain{452} their livelihood and that of their families by work on or for railroads. an army? yes; more men than ever were seen in the largest army in the world. all of them are “effectives,” too—none of them can be found among “the sick, lame and lazy.” chauncey m. depew, president of the new york central road, says truly: “with those who are actually in the service, and those who contribute by supplies, one-tenth of the working force of the united states are in the railroad service; and that tenth includes the most energetic men and most intelligent among the workers of this magnificent country. there are ten million working men in this country, and six hundred thousand are directly employed in the railway service. with their families they constitute a larger population than the largest of the states.”
mr. depew further says, with equal truth: “there is no democracy like the railway system of this land. men are not taken out of rich men’s parlors and placed in positions of responsibility. men are not taken because they are sons of such, and put into paying places in the railway systems; but the superintendents all over the country, the men who officer and man the passenger, the freight, and motive power and accounting departments, all of them come up from the bottom. are you going to stop this thing? no! there are no men being born or to be born{453} who are to be by inheritance the superintendents, treasurers, comptrollers, auditors, the freight and ticket agents, the conductors, the yard masters, who are to be the master mechanics, the foremen of the shops, of the future. they are not born. they have got to be made and come from the bottom up. and in every one of these departments to-day, in every railroad in the united states, in the humblest positions, earning the smallest salaries, are men, who within the next twenty-five years, are to fill all these places by promotion. don’t tell me there is no chance to rise in this country.”
when this army grumbles, as once in a while it does, there is good cause for alarm; not that they, like the disaffected of other armies, may do damage to life and property, but because their troubles are almost always traceable to stock-juggling rascalities, from which the men have no hope of redress. some of the companies allow no business operations to interfere with the rights of their employees. mr. cornelius vanderbilt is probably the most extensive owner of railway stock in the world, but he finds time to see his own employees frequently, and has even built and furnished a handsome club-room for them. he has also been active in assisting the young men’s christian association in establishing reading rooms at railway centres. president charles francis adams, of the union pacific company,{454} found time not long ago to publish, in a magazine article, the outline of a system for retaining and encouraging competent employees. president roberts, of the great pennsylvania road, is as proud of his men as any general ever was of his army.
these railroad magnates, and others who might be named, are setting a good example, which it is to be hoped some other officials will have sense enough to follow. it is bad enough for stockholders to be annoyed and impoverished by stock-juggling operations, but when the employees also suffer the whole country suffers with them. it is an unpardonable crime for any company, managing a road which deserves to exist, to take such good care of its managers that its employees must strike and even fight to be sure of living wages. railway strikes hurt every traveller, every shipper, every receiver in the country. they never would begin if managers were honest. stick a pin here and keep your eye on it.
