The State and the Railroads

III.

No body of men in this country ever had so good an opportunity for the intelligent discussion of the railroad problem in the form in which it presents itself in America, as did that committee of the Chicago Board of Trade to which, in the winter of 1875—6, was referred the question of alleged railroad discriminations against Chicago as a shipping point. Not only were they sure of an audience, but their audience was of the best description,— the individually interested members of a most energetic business community. It was a well-informed audience, also; for those composing it had for years been vexed and wearied by a resultless discussion on ibis very subject, so that now they might fairly be considered as educated up to a highly receptive point. No seed thrown into that soil was in danger of a way-side fate. The investigation of the committee also involved, almost as a matter of necessity, every phase of the problem. For instance, no State had attempted more persistently than Illinois to regulate, through legislation, the working of its railroad system. Yet here was that railroad system obstinately refusing to be so regulated, and doing its best, in the face of all regulation, to destroy the commercial ascendency of the chief city of Illinois. More convincing proof of the utter failure of state legislation to compass the solution of the problem could hardly have been hoped for, or feared. But Chicago was more than the chief city of Illinois. Above all other places it was also the great point of Western railroad concentration. One mile in every four of railroad iron in the United States has probably been laid where it rests with a distinct reference to the geographical bearing of Chicago. Yet in the winter of 1875-6, from Chicago alone of all the cities of the West no competition between railroads existed. Natural laws as well as state legislation had thus failed satisfactorily to regulate the railroad system. The spirit of competition seemed no more reliable than the enactments of the statute-book. Under such circumstances as these, in what new direction was the community to look ? In the apparent general failure of all attempts at the regulation of the railroads, either through competition or statutes, was their ownership in whole or in part by the government worthy of consideration? And thus it seemed as though the whole subject of the relations of the railroads to the state, involving for their consideration, as they necessarily do, the most thorough insight into the principles at the base of our political institutions, was all a part of the answer to that simple question, What is to be done to prevent railroads from charging more for the carriage of a bushel of wheat from Chicago to New York, than they charge for its carriage from Milwaukee to Boston?

In two very important respects the work of investigation imposed by this inquiry was greatly simplified. In the first place there was no question about the facts; and, in the second place, there was no mystery about the causes which had led to the existence of those facts. The railroad corporations owning the through lines from Chicago to the sea-board had combined, and agreed upon a tariff on all Eastern bound freights from that city. On this point there was no concealment. The daily transactions at other places then made it notorious that these corporations had for one reason or another been unable also to agree as respected them; or else that these places, having other channels of communication with the East, were beyond their exclusive control. Consequently rates from Chicago were firmly sustained, while those from all other points were subject to fierce competition. So far, all was very simple. At this point, however, the investigation was brought face to face with the question of remedy, and with that question the difficulties began.

In the present somewhat confused and bewildered state of the public mind in respect to the railroad system, it is curious to consider what might have been the effect upon it had the Chicago committee, as the result of their investigations into the admitted state of facts, presented a bold, blunt, paradoxical report in lieu of the somewhat commonplace document with which they contented themselves. They certainly had the means of doing so, and no better text from which to preach is likely to offer. They might well have begun by reminding their audience of the simple principle, which the world is apt to forget in cases where railroads alone are concerned, that, wherever it is possible for them to do so, men engaged in any branch of trade will combine sooner than ruin themselves by unlimited and endless competition. They might have gone on to point out that Chicago was then suffering, in comparison with other places, under the effect of one of these combinations; but that, if Chicago was not suffering in this way, other places would be, for such inequalities and hardships always had been and necessarily were incident to the existing railroad system, and must remain incident to it just so long as it continued to exist. Just so long as railroads compete with each other, the points at which they compete must needs enjoy very considerable advantages over other points at which they combine. As there is no force known by which men can be compelled to compete with each other in spite of themselves, it necessarily follows that different places must take their chances. The remedy for this condition of affairs, in the case of Chicago, was obvious; that the community was ready to have recourse to it was far more questionable. That remedy lay not in limiting or temporarily breaking up the existing railroad combination, but in extending, perfecting, and regulating it. Under these circumstances the cry of monopoly was most shallow and senseless. On the contrary, the fact of monopoly ought to be recognized, and the effort should be to so systematize it as to make it subserve the public interests, and to so extend it that it should include in its operations Milwaukee and Peoria, and all other competing points, as well as Chicago. Then at last equality would be secured, while the regulation of a confessed and recognized monopoly, whether through the force of public opinion or the direct intervention of the government, might with confidence be relied upon as sure to follow. So far as the community as a whole was concerned, experience clearly showed that the difficulty lay not in the fact of the existence of this or any other monopoly, but in the other fact that although really existing it was not recognized and treated as such. In the case of the American railroad system, it had not yet had time, nor indeed had it been permitted, to pass untrammeled through its natural phases of development, in its own time and way, to assume its ultimate shape. Consequently, as recent experience shows, it has not yet been brought into a position in which it can be directly and effectually dealt with.

Nevertheless, though details are still obscure, it is now obvious enough to what result the ever-increasing pressure of the law of self - preservation is compelling the individual members of the railroad system. The movement is not only direct and irresistible, but it is also rapid, and it is always in the direction of a more perfect combination and concentration of railroad interests. It cannot be denied that hitherto this tendency has been regarded with great popular disfavor, and considered as opposed to every principle of sound public policy. The time, however, has now come in which the public mind should think of things as they are, and be disabused of this prejudice. Henceforward, so far from denouncing and resisting it, every facility and even encouragement should be given to the more rapid and complete combination of railroad interests. As, step by step, this works its way out, the system will be brought into a shape which will admit of something approaching to wise regulation in the interests of the public. Then, and not until then, will such unjust discriminations as Chicago has recently had cause to complain of cease to exist.

Such, or some such report as this, looking the inevitable — even though it be the undesirable — fairly in the face, could hardly have failed, under the circumstances, of one good effect. Emanating from a representative body, whether accepted in its reasoning or not, it would at least have set those to whom it was addressed on a course of vigorous private reflection. It would have suggested a line of thought in place of a string of hard words, — a substitution eminently desirable just now in this railroad discussion. The committee, however, did not arrive at any such conclusions as these, nor, indeed, at any remotely resembling them. On the contrary, perplexed apparently by the difficulties of the situation, when they came to making their report they fell stolidly back upon time-honored principles. The existing lines having ceased to compete and tried to combine, the one chance of salvation in the eyes of the committee was to go forth and to find other lines in which the spirit of competition should be more fully developed. This idea indeed led them, not to the definite promulgation, but to the very distinct suggestion of a new theory of railroad competition through the introduction of chronically bankrupt lines. These, having no dividends or interest to pay, could be depended upon to do business always at lower rates than solvent companies, and the presence of one such line at Chicago would, it was boldly urged, go very far indeed towards the solution of the difficulty. If nothing else, this proposition, emanating from such a source, strikingly illustrates the unsound way in which practical business men of the West —men who are neither Grangers nor demagogues — look upon any matter in which the pecuniary interest of railroad companies is involved. They do not look upon them as subject to ordinary rules. For them a life of uncontrolled competition resulting in a condition of chronic bankruptcy is not necessarily a disaster; and indeed some such condition might, it would seem, prove a not undesirable solution of the American railroad problem. Such is the new theory of competition stimulated by bankruptcy; a theory now in great vogue in the West. It is in fact a species of public management, devoid of the disagreeable incident of public ownership. There are objections to the assumption of the railroads by the State, which, however, do not seem to apply to their operation by receivers appointed by the courts of law. And experience is rapidly demonstrating the fact that roads thoroughly insolvent may be relied upon to accept all business which offers, without that perpetual eye to profit which is so disagreeably characteristic of the Railroad Kings. It would seem that in some quarters the great lesson remains yet to be learned that the laborer is worthy of his hire, even though that laborer be but a corporation operating a railroad.

Leaving, however, the committee of the Chicago Board of Trade and their report, it is now proposed to offer some considerations in support of the proposition that the obstacle in the way of any satisfactory solution of the American phase of the railroad problem by no means lies in the success with which those managing railroads have effected combinations, but rather in their inability to effectively combine. To the great majority of Americans such a proposition will at first sound not only paradoxical but absurd. The people of this country have been so thoroughly educated in the dread of great corporations and in a belief in the supreme efficacy of competition, that anything looking to the untrammeled growth of corporations and to the frank acceptance of the principle of private monopoly in place of competition in so important a branch of the public service as transportation, seems to combine with economical paradox a certain element of political treason. Nevertheless, not only is the course of events unmistakably setting that way, but both reason and experience begin to indicate with tolerable clearness that, for America at least, that way is the best way.

In the first place, as respects the course of events and the general conclusion to which it is tending. This subject has heretofore been referred to, and the process through which certain general results have been partially brought about has been described in some detail. The leading facts will, however, bear a brief repetition. No one can for an instant deny that free railroad construction and unchecked railroad competition have in this country been productive of very marvelous results; only, as now seen, it is equally undeniable that these results are scarcely less chaotic than wonderful. It may not unfairly be claimed that neither those owning the railroads nor those whom the railroads were built to serve are content. On the one side is an enormous financial interest, the most enormous interest of all, reduced to a position of great and pressing danger; one half of its members bankrupt, the bankrupt half seems bent on making the solvent half share its fate. Yet on the other side the community finds its work of transportation done in a manner which defies calculation. That business which has to be fought for is secured upon the best terms which can be got, — indeed, upon any and upon all terms; while that which does not have to be fought for is done upon terms not necessarily in themselves excessive, but still excessive when compared with terms that are competitive. The cases of New York and Chicago, as compared with Boston and Milwaukee, are illustrations directly in point. While the two former places were paying one scale of rates, the two last were for the same services paying on a much lower scale; and yet it was never maintained that the higher rate was excessive. The higher rate was simply unjust, owing to the fact that the lower rate was competitive. These cases attracted notice only because they were on a somewhat larger scale than usual, and the communities injured happened to be sufficiently prominent to make their complaints audible. The difficulty does not cease to exist because it is not heard of; it is radical in the system, and is felt somewhere all the time. Just at the present time, for very obvious reasons, it is felt more than ever. The results of the financial collapse of 1873 are seen in a railroad war of unusual length and severity, a war the end of which is not yet. The battle-field is full of bankrupt companies, and those which are solvent find themselves placed in the difficult position of having to elect between the surrender of their business or the doing it at a loss. Hence the confusion, for the time being, seems complete, and will probably prove to be that condition of utter chaos which usually precedes the genesis of a new system. It can result but in one thing, an agreement.

Now, as the result of a long experience of these railroad wars, one thing may safely be predicted of them: the fiercer and longer the preparatory struggle, the more complete is the ultimate agreement. Sometimes, when the parties are worn out by years of conflict, it takes the form of consolidation ; at other times it is a combination; then again it is only a truce. In England they have now got as far as consolidation; in America, though the struggle has been long and destructive, it has as yet rarely resulted in more than a temporary truce, and at most only in a feeble combination. For this reason it is safe to say that the ruinous process of competition has in this country got to go on a good while longer yet. That the preliminary warfare with us should be longer, fiercer, and more destructive than has ever been experienced elsewhere, is in no respect matter for surprise. It is on the contrary perfectly natural, and due to obvious causes. Of these the most noticeable are the vast extent of the territory to be served, the perfect freedom of construction permitted, the number of competitors, the interest of each one of whom has to be taken into consideration, and last, though perhaps most significant of all, the fact that in the great majority of cases the stockholders live at a distance from their property, and in almost absolute ignorance of the real condition of its affairs. All these circumstances could not but combine to make of the United States a field in which the experiment of regulating the railroad system through competition could be tried under conditions which would insure success, if success was possible. It did, indeed, seem as if in so vast a field, and among so many competitors, the obstacles in the way of effecting a close combination of interest were too many and too great ever to be overcome. If, however, they were, or rather if they ever are to be overcome, it can only be as the result of a series of long, severe, and ruinous conflicts, exhausting to all and destructive to most. This series of conflicts has now been going on for many years, and is raging at the present time with a perhaps greater degree of fierceness than ever before. There are, however, many and obvious indications that it is drawing near to a close. In the first place it is too destructive to last, for, through the mere process of the absorption of the weaker by the stronger, power is rapidly centering in hands which know well how to use it, and which will not hesitate to use it effectively. The result cannot certainly be prevented by the passage of any act of legislation; it is questionable whether it could in this way even be greatly delayed. It will thus make very little difference whether what is soon to follow be consistent with, or opposed to, what are termed principles of sound public policy. It is a case of self-preservation, in which the ablest, the most energetic, and by no means the most scrupulous men in America have millions at stake.

Even though this agreement or confederation, which is destined to put an end to uncontrollable railroad competition, be inevitable or not, it is still worth considering whether any shape it is likely to assume is indeed opposed to the true interests of the people of this country, — those who, whatever form the railroad system may assume, must yet use it, and those for whose use it exists. The answer to this question necessarily depends in some degree, though in a far less degree than is usually supposed, on the form which the combination ultimately assumes. The great essential is that it should be so close and so real as to be, so to speak, tangible. It must, to be successfully regulated, be brought under one head. A mob is never responsible; a ringleader always is. In the case of the railroad system, this principle of concentrated responsibility involves all that is, from a public point of view, worth contending for. Fortunately, also, it is difficult to see how any combination strong enough to effect what the interests of the railroads themselves call for, the complete control of all irregular competition, can be brought about without involving a direct responsibility somewhere. The two things go together, — indeed they are inseparable, — power to control, and responsibility for the way in which the control is exercised .

Until very recently the railroad combinations in this country have usually taken one of two forms, both of them crude and manifestly little better than temporary makeshifts, rough antecedents of better things. Of these two forms', one was the ordinary common-tariff, which was agreed upon from time to time by the agents of competing lines; the other was the " pooling,” or, as it is called in England, the “ common purse ” arrangement. The first of these two methods of stopping competition is simply an agreement among a number of competitors to charge similar prices for the same services. It depends for effectiveness solely on the good faith of very unscrupulous men, thoroughly versed in every device of evasion. It knows no law but that of retaliation, and recognizes no authority but might. So far as the railroad corporations are concerned, this is the most elementary and the least satisfactory form of combination. So far as the public is concerned, it is open to the obvious objection that no one is responsible for it. It is the compact of independent agents recognizing no common and supreme authority.

It is the absence of a central executive power, capable not only of deciding but of enforcing what it decides, which constitutes the essential weakness of the common - tariff combination. It is too weak and crude to bear the rough test of practical working. Accordingly, when the exigency is great, or when railroad managers really wish to agree, they are in the practice of making good this defect by supplementing the common - tariff by an arrangement for the division of the profits made under it. The earnings to and from competing points are paid into a common fund, or “pooled,” and divided. A consolidation, so far as certain points are concerned, is thus effected. A strong prejudice against arrangements of this character exists in the public mind, and they are uniformly denounced wherever they are suspected of existing. Indeed, distinct prohibitions of them have been incorporated into many statute-books, and even into some state constitutions. It is, however, very difficult to see what sound objections can be urged against them. That railroad corporations should agree upon a common-tariff at competing points is a mere matter of necessity. One cannot always charge for the same services more or less than is charged by others, without going out of the business wholly or securing it wholly, as the case may be. If all by agreement charge alike, therefore, it is difficult to see how the disposition they make of their receipts in any way affects the community. It is the common-tariff which puts an end to competition, and not the pooling of receipts. The only effect of this last is, through the substitution of something fixed in place of a reliance on good faith, to prevent the possibility of underhand dealing. By so doing, it certainly greatly strengthens the combination.

So far as the corporations are concerned, the real defect of the pooling, as of the common-tariff arrangements, is the absence of any supreme executory power. It is, after all, only a voluntary compact, and one liable at any time to be broken; — sure to be broken if any party to it thinks that by so doing he can secure the lion’s share. It is the absence of this executory power, also, which constitutes the real ground for objection to the system on public considerations. The contract is a secret one, and in the eye of the world no one is directly and immediately responsible for what is done under it.

The scheme matured at Saratoga in 1874 was a decided advance, both on the common-tariff and on the pooling arrangements, in the direction of a more perfect railroad combination. Its essential principle lay in the attempt to bring all of the railroads operating over a vast extent of country under an acknowledged system of external control. Boards of arbitration were to fix certain rules under which the business of transportation to competing points was to be done, and these boards were also to see that the rules were enforced. Unfortunately for the scheme, the duty of the arbitrators in this last respect was one thing, while the power at their disposal was altogether another. There was no outside agency upon which they could call, and, though the different members of the combination did indeed pledge themselves to respect and enforce their decisions, yet the pledges of railroad men constitute a somewhat notoriously unreliable basis upon which to found a confederate government. A certain proportion of uneasy, unreliable, and contentious men must always be dealt with in carrying out every scheme which involves any considerable degree of joint action; and in this particular scheme no provision was, or perhaps under the circumstances could be made, to force such into submission. There was no substitute for the constable. That substitute, if found at all, had necessarily to be found somewhere within the combination itself; nor, had the time arrived, would there have been much difficulty in finding it. Not that the members of the combination as a numerous whole could easily have been induced to surrender their rude independence and to voluntarily impose a yoke of subordination on themselves. On the contrary, they seemed to recoil from any suggestion of this sort, more as if they were the chiefs of so many wild highland clans in the sixteenth century than managers of peaceful railroads in the nineteenth. This general consent was not, however, necessary. The leading trunk lines were so powerful that their hearty cooperation only was needful. They had but to agree, to be able to compel. For this, however, they were not yet ready; and so the association speedily fell to pieces from its own weight, in the manner which has already been described. It was but the repetition of an experience as old as civilization itself; which forms the staple of Greek and German and American history, — the jealousy of petty independence, the fond secret belief which every man nourishes that some one else may obtain the advantage over him in time of peace, perhaps, but that he is especially qualified to take care of himself in a period of perpetual war.

Nevertheless, though it resulted in a speedy and to all outward appearance an irretrievable failure, the Saratoga combination was a natural outgrowth; and for that reason the experience derived from it could hardly fail to be of value. The attempt was both crude and premature, but the evil it was meant to remedy was real and permanent. Failure in one place only implied new attempts in another. Consequently, almost before that short-lived combination had ceased to exist, another attempt of a similar character was made, both in a new field and under far more auspicious circumstances. Uncontrollable and ruinous railroad competition was not at all confined to any single section of the United States, or to any particular system of railroads. It had been felt at the South even more than at the North and West, and the corporations there were in no condition to bear through any long period a heavy strain on their resources. It was in the South, accordingly, that the next attempt was made to reduce the railroad chaos to some degree of order. In principle this experiment was very like that which resulted from the Saratoga conference, but its working details had been much more carefully thought out. It assumed a definite shape under the name of the Southern Railway and Steamship Association.

Pressed by an unendurable competition which threatened to them nothing less than common bankruptcy, the representatives of a number of independent railroad and steamship companies met at Atlanta, Georgia, in September, 1875, and regularly associated themselves. A formal constitution of some thirty articles, setting forth both the objects the association was designed to secure and the means through which it was proposed to secure them, was agreed upon and signed by the representatives of thirty companies. Under this constitution those signing it agreed upon a certain specific mode in which they proposed to transact that portion, and that portion only, of their business in which they might be jointly concerned, and to the proper conduct of which constant negotiations and even coöperation were necessary. A central bureau was provided for, which was in fact a species of clearing-house, through the agency of which all the joint business of the associated corporations was to be transacted, whether among themselves or with foreign corporations. A single official, with the style of general commissioner, was to preside over this bureau. The necessity of transacting business through the clumsy agency of conventions was thus obviated, and, as all matters in dispute had to pass through the hands of an experienced and impartial officer, that personal contact between incompetent and irritated subordinates which is the cause of at least one half of the railroad wars became wholly unnecessary. The general commissioner was intended to be the common executive officer of the association. As all negotiations were to be carried on through him, every difficulty as it arose necessarily came under his eye, enabling him to prevent many complications by judiciously acting as adviser and mediator. If, however, harmonious coöperation could not be preserved in this way, it then became the duty of the general commissioner, as umpire, to judicially decide questions at issue between the members of the association, though his decisions were at all times subject to appeal to a board of mutually appointed arbitrators. The next duty of the general commissioner was to see that all agreements entered into, and all his own decisions or those of the boards of arbitration, were fully and honestly carried out. In this respect, of course, he, like the Saratoga commissioners, could bring no legal power to bear on a recusant. Yet, though the force he could exercise was in main a moral one only, he was not confined to that. He could, in case of need, declare a partial or even a general war of rates, and the combined force of the association being thus wielded by one hand, it was in a position to practically enforce a policy, and, what was more, in doing so to expend only that amount of strength necessary to accomplish the end in view. Neither could the withdrawal from it of any one member, nor indeed of a number of them, dissolve the association. For, in spite of such withdrawal, the clearing-house and the agency for the transaction of joint business still remained in the service of those which were left. As other companies could also at any time join the association, the system admitted of indefinite expansion, and, indeed, could with mere changes in detail be made to include the entire railroad system of the continent, much as the similar German association includes all the railroads of Central Europe.

Next to the outside pressure which causes those managing the individual lines to yield something of their independence for the sake of order, the success of any such combination as this depends almost exclusively upon the ability, temper, and skill of the general commissioner, and upon the degree in which he is able to inspire respect and confidence in the minds of the associates. In this particular the Southern association was fortunate. Mr. Albert Fink, for a number of years superintendent of the Louisville & Nashville Railroad Company, in which capacity he had displayed qualities especially fitting him for such a post as he was now chosen to fill, became its general commissioner. He, if any man, could be expected to carry the plan of the association into successful working, for it was he who had devised and matured it. The experiment was thus inaugurated under the most favorable auspices, and, after six months of successful operation, Mr. Fink has recently reported that thus far experience has suggested no change in its constitution.

So far as the public is concerned, everything essential as a safeguard against abuse seems in this case to exist. It is a complete, but not a secret combination. It exists in the full light of publicity. The purposes for which it was organized are openly avowed, and its every transaction is, or may easily be made, matter of general observation. To secure this result it would only be necessary to give it legal recognition. It is, however, by no means generally appreciated as yet what an important matter as respects railroads this publicity is. It in fact overshadows everything else. It is not too much to say that from the moment the railroad system grows, or can be brought, into such a shape that its working is carried on without concealments, from that moment the most difficult phase of the railroad problem may be looked upon as solved. As a necessary consequence of their combining together, the members of the Southern association put forward before the community an avowed and responsible head, answerable for every abuse. Upon him, and through him upon each and all members of the association, the full weight of public opinion could be brought to bear. In case of discriminations or extortions the community, and if need be its political representatives, would know just where to look for a remedy.

Although hitherto reported as in successful operation, this experiment cannot yet be regarded as an assured success. Time is necessary to mature and strengthen it. For the present, at least, it contains within itself many of those germs of inherent weakness which so rapidly developed in the case of its Saratoga predecessor. Men accustomed to a sort of lawless independence remain for a long time restive under any sense of control. They need constantly to feel that a policeman’s eye is upon them, and that there is a station-house in the next street. There is no reason to suppose that any one or two individual parties to the Southern association are powerful enough to assume a protectorate over it ; and without the cohesive influence of some such protectorate there is in all voluntary combinations a sort of natural tendency to anarchy. In the absence, therefore, of any compelling force, the chances would seem to be that, in the South as well as in the North, the mill of competition has got to keep on grinding for some time yet. Its work is not done. Indeed it will not be done until, through the process of grinding, the great principle of the survivorship of the fittest is finally ground out.

This process is not likely to prove a rapid one, for order is not easily established in any community which has been long in a state of anarchy. In such cases the demoralization becomes general; the tone of the individual deteriorates. This is what is now the matter with the railroad system in America. Lawlessness and violence among themselves, the continued effort of each member to protect itself and to secure the advantage over others, have, as they usually do, bred a general spirit of distrust, bad faith, and cunning, until railroad officials have become hardly better than a race of sublimated horse-jockeys. There are notable individual exceptions to this statement, but, taken as a whole, the tone among them is indisputably low. There is none of that steady confidence in each other, that easy good faith, that esprit, du corps, upon which alone system and order can rest. On the contrary, the leading idea in the mind of the active railroad agent is that some one is always cheating him, or that he is never getting his share in something. If he enters into an agreement, his life is passed in watching the other parties to it, lest by some cunning device they keep it in form and break it in spirit. Peace is with him always a condition of semi-warfare; while honor for its own sake and good faith apart from self-interest are, in a business point of view, symptoms of youth and defective education. Under such circumstances, what is there but force upon which to build? It was the absence of the element of force which caused the failure of the Saratoga association, and probably will cause the failure of that at Atlanta. Taken as a whole, the American railroad system is in much the same condition as Mexico and Spain are politically. In each case a Cæsar or a Napoleon is necessary. When, however, the time is ripe and the man comes, the course of affairs can even now be foreshadowed; for it is always pretty much the same. Instead of the wretched condition of chronic semi - warfare which now exists, there will be one decisive struggle, in which, from the beginning to the end, the fighting will be forced. There will be no patched - up truces, made only to be broken, for the object of that struggle will be the complete ruin of some one in the shortest possible time. Then will come the combination of a few who will be sufficiently powerful to restrain the many. The machinery through which this can be done will be found simple enough, and, indeed, it is all in use in the Atlanta association. The protectorate only is there wanting. That machinery consists simply of a clearing - house through which all joint business between the corporations would be carried on. To be thrown out of this might be made to entail for a railroad corporation the same consequences which being thrown out of the clearinghouse now entails on a bank; it could no longer make through or joint rates, or sell through tickets. Shut up within its own territory, its whole business would be local business. As a competing power, therefore, it would cease to exist. The result, expressed in few words, would be a railroad federation. The united action of the great through lines is necessary to bring this about; and how to secure that action is now the problem. If the elder Vanderbilt were twenty years younger than he is, he probably might be relied upon to solve it speedily and decisively. As it is, however, there does not appear to be any man upon the stage distinctively equal to the occasion.

It is neeessary, however, to return to the past and the experiments which have already been made. Whether either of them is to be accounted a success, or whether both are to result in failure, the Saratoga and the more recent Atlanta combinations were both of them distinct attempts to bring about a result than which none has been hitherto more popularly dreaded in America,— a general railroad combination. The alarm and bitter denunciation with which the Saratoga effort towards the same end was received is too recent to be yet forgotten, and, even if it were forgotten, it would be unreasonable to expect a community to abandon at once the ingrained convictions of forty years. The time has not yet come for the people of this country to cut loose from their reliance on the competition of railroads with each other. The point in connection with railroads which now stands in greatest need of thorough discussion is therefore, after all, a new one. It is whether such a combination as that effected at Saratoga, or that now in existence in the South, is indeed opposed to any sound principle of public policy; whether in fact the community would not derive benefit rather than suffer injury from it should it naturally come about.

There are three familiar grounds — the economical, the political, and the sentimental— upon which the popular apprehension as respects the combining together of railroads is based. It is now proposed to examine each of these grounds of apprehension in some detail; and first, the economical. After all is said and done, it is the pocket nerve which is the most sensitive in the human system. In the popular mind, and with good reason, the idea of any industrial combination is closely connected with that of monopoly, and monopoly with extortion. Why then, it is most pertinently asked, should a railroad combination, avowedly intended to hold competition in check, if not to put an end to it, produce any re-

sult other than the natural and obvious one of raising prices? Who is to protect the community against the extortions of these great corporations, should they cease to quarrel and compete with each other? The question is direct and practical; an answer, to be satisfactory, must be not less so. The answer, then, simply is that — what ought to be, or what the economical treatises tell us ought to be, to the contrary notwithstanding— practical experience has shown, and is yearly showing with more and more clearness, that there are limitations even to the economical working of the principle of competition in trade. These general principles, however, were sufficiently discussed in the last number of The Atlantic, and it now remains only to make a direct application of them to the subject in hand. And in the first place it must be frankly acknowledged that the argument against railroad competition can only bo advanced subject to great limitations. Undoubtedly the fierce struggles between rival corporations which marked the history of railroad development, both here and in England, were very prominent factors in the work of forcing the systems of the two countries up to their present degree of efficiency. Railroad competition has been a great educator for railroad men. It has not only taught them how much they could do, but also how very cheaply they could do it. Under the strong stimulus of rivalry they have done not only what they declared were impossibilities, but what they really believed to be such. None the less, extraordinary as these results have been, they have been reached only at an excessive, cost; a cost so excessive as to show clearly that the process is one which cannot be continued indefinitely. Under the excessive strain of competition the number of competitors is being steadily reduced. The present question, therefore, is not whether good results have ever been secured through railroad competition, but whether the same or even better results may not now be secured through other and less costly processes. During the last twenty years the railroad system has grown, and experience has grown with it. During that time, also, competition has to a degree expended its force, and is now obviously working its way out to a final result, of which the Saratoga and Atlanta combinations are very definite indications.

In endeavoring to forecast the probable results of having the railroad system assume the form of an organized combination, we are by no means without analogous cases having a very close bearing on the argument. In our cities, for instance, as regards the supply of gas, it is found cheaper and better for the community to have to do with one company than with several. So also as respects the supply of water. In this country it is now usual for cities and towns to construct their own water works. If this, however, were not the case, few would be disposed to deny that a city having to do with a single aqueduct company would be apt to have a much more satisfactory service than one which sought to divide it among many. Carrying now the argument directly into the case of railroads, and having recourse again to experience, we find, as was shown in the March number of The Atlantic, that railroad competition has been tried all over the world, and that everywhere it is now, consciously or unconsciously, but with one consent, slowly but surely being abandoned. In its place the principle of responsible and regulated monopoly is asserting itself. The same process, varied only by the differing economical, social, and political habits and modes of thought of the people, is going on in France, in Belgium, in Germany, and in Great Britain. The experience of the three first named countries bears much less strongly than that of England on the particular conditions existing in America, yet even for us their experience is not without its significance. In France we see five great corporations dividing the country into distinct territories, and each of the five directly responsible for the territory served by it; while both these corporations and the government view with undisguised apprehension the recent appearance of a competing, though subsidiary, system which must ultimately be absorbed, though perhaps only as the result of more or less complete bankruptcy. In Germany the lines are rapidly passing into the hands of the government. Apart, however, from this aspect of the question, which, for the present generation at least, has little direct significance for Americans, the German experience in one respect deserves peculiar notice. The local and governmental subdivisions of Germany, more than those of any other country of Europe, resemble our federated system of States. Placed in the centre of Europe, Germany is a species of thoroughfare, while at the same time the individual members of its railroad system belong under different jurisdictions. Here, then, every condition was found which was likely to incite an uncontrolled railroad competition. To a degree it existed, at one period, but the German temper and habits of thought are so different from the American that competition there speedily resulted in combination. The German railroad union was referred to in The Atlantic for March. Including nearly one hundred different managements, operating twenty-six thousand miles of track, this association actually accomplishes all the results which the Saratoga and Atlanta combinations were designed to accomplish. It makes all necessary arrangements respecting joint traffic, settles questions of fares and freight, and substitutes arbitration in place of wars of rates. It has introduced uniformity and stability into the system, and rendered the tariffs at once intelligible and equal. The fact that such an association is easily formed in Germany, and is formed only with the greatest difficulty in America, proves nothing except the powerful influence of national thought and temper. A certain amount of waste and confusion sufficed to bring a system into being in the one case; the present question is, how much more waste and how much greater degree of confusion will be necessary to bring a somewhat similar system into being in the other case?

In Belgium alone has railroad competition proved a permanent advantage; and it has proved so there for the simple reason that the competition between railroads in Belgium, unlike that in the United States, was never uncontrolled. The hand was ever on the regulator. The government, as the largest owner of railroads, was itself the chief competitor, and as such its action was certain, equable, and justly distributed. It could not show preferences, or discriminate, or make good the losses sustained in fighting over a divided business out of profits extorted from an exclusive business. Regulated in this way, competition could be kept alive and made beneficial. It did not wear itself out by its own excesses.

Of all foreign experience, however, that of England most resembles our own. The only essential difference is that England is wealthier and infinitely more compact than the United States, so that, as respects railroads, causes produced their results much more quickly there than here. Nowhere, however, is the present tendency towards the concentration of railroad interests in a few hands more apparent than in England. The mill of competition has there about fulfilled its allotted work. The whole English railway system has now passed into the hands of a few great companies, by whom the country is practically divided into separate districts. These are literally in the hands of monopolies. The practical result of this consolidation, as compared with the old-fashioned competition, was set forth in two concrete cases by the recent parliamentary committee on railway amalgamation, in language which has heretofore been quoted, but which in this connection will bear repetition.

The North Eastern Railway “ is composed of thirty - seven lines, several of which formerly competed with each other. Before their amalgamation they had, generally speaking, high rates and fares and low dividends. The system is now the most complete monopoly in the United Kingdom; from the Tyne to the Humber, with one local exception, it has the country to itself, and it has the lowest fares and the highest dividends of any large English railway. It has had little or no litigation with other companies. Whilst complaints have been heard from Lancashire and Yorkshire, where there are so - called competing lines, no witness has appeared to complain of the North Eastern; and the general feeling in the district it serves appears favorable to its management.” ¹

There is probably scarcely a section of the United States which has not at some time had an experience very like the English one just referred to. Massachusetts, for instance, could supply a well-known case in point, of very recent date. Of the two sections of that State lying north and south of the city of Boston, the one known as the Cape Ann and the other as the Cape Cod district, the first has from the beginning been served by two rival lines whose whole history has been one long trial of strength, resulting at last in the absolute ruin of one line and in the severe crippling of the other. How many millions of dollars were recklessly squandered in the long course of the struggle, it is impossible to compute. While the Cape Ann district has thus enjoyed the benefits of railroad competition, the southern, or Cape Cod district has, on the other hand, been served by a single consolidated corporation, the cardinal principle with which has been monopoly. It took to itself a well defined district, and that district it undertook to furnish with all reasonable railroad facilities; but within the limits of its own territory it did not propose to tolerate any rival. The result in these two cases, whether in accordance with theory or not, is confirmatory of experience. Between its two rival corporations the northern district was through years converted into a battleground and turned upside down; rates fluctuated wildly and varied everywhere; common tariffs were made and not observed, and profits were pooled; bits of connecting road were seized hold of by the one combatant or the other and were perverted from serving the community into being engines of attack or defense. As to the two companies, with that impenetrable stupidity which usually characterizes the lover of petty independence, they sturdily preferred to lose thousands in conflict rather than incur the risk of being overreached in negotiation by so much as a dollar. Meanwhile, in the southeastern section of the State peace certainly prevailed, if not absolute contentment. As respects railroads this last it is not well to expect, and, if expected, it will not be found. Nevertheless it is certainly true that, according to general experience, the nearest approach to it is reached, not only abroad but here, through the course pursued in this case. The reliance on competition seems to give throughout a false direction to public opinion as respects railroads. They are looked upon as something alien, if not hostile. On the other hand a unity of interest is generally followed by a sense of responsibility on the one side, and of ultimate friendliness on the other.

Leaving, however, the economical objections to any recognized railroad combination, the political objections are yet to be considered. It is certainly not too much to say that jealousy of great corporations is a cardinal article in American political faith. There is reason for it, too, and in this respect recent scandals have given to railroad corporations a peculiar and unpleasant prominence. Neither is this instinctive jealousy confined to America. It is only a very few years since Captain Tyler, in one of the reports of the Board of Trade of Great Britain, formulated the proposition that the time was at hand when “ the state must control the railroads or else the railroads would control the state.” Yet when the parliamentary committee on amalgamations considered this question in 1872, they were obliged to report that the “ growth of the corporations had not brought with it the evils generally anticipated.” The fact is that in this, as in so many other instances, the truth of Mr. Disraeli’s aphorism that " in politics it is the unexpected which is apt to occur ” received strong illustration. In this country, as well as in Great Britain, those wise people who so earnestly pointed out the dangers incident to railroad concentration wholly ignored the important practical fact that concentration not only brings with it a corresponding increase of jealousy, but also an equally increased sense of responsibility. It is not the few great corporations which are politically dangerous, but the many log - rolling little ones. No one who has had experience in dealing before a legislative body with questions affecting railroad interests has failed to realize this fact. The burden of responsibility — almost of popular odium — which the large corporation bears, the ease with which a senseless cry can be raised against it, is even, as compared with smaller corporations, out of all proportion to its increased strength.

Finally it remains to consider the sen timental objections. The combination of railroads, it is claimed, is unrepublican,— through it the dynasty of the Railroad Kings is insidiously asserting ing itself. This argument is of the kind which sets refutation at defiance. Not infrequently it is met with in the columns of the press, but it is an argument appropriately addressed only to that discouragingly large class among whom words are money and not counters. There is, however, a principle much nearer the foundation of republican institutions than any jealousy or apprehension of Railroad Kings — the great principle of not unnecessarily meddling. After all, men and systems can best develop themselves in their own way, and it is hardly worth while either to continually prognosticate evil, or to pass one’s life in fighting shadows.

If the solution, for the time being at least, of this American railroad problem should indeed prove to be near at hand, and should come through a more perfect concentration of railroad interests, like most solutions of great questions it will have come in its own way and from the quarter least anticipated. It will not have been reasoned out, but practically evolved. Indeed, the long public discussion of the subject has in fact done little more than sweep away a vast quantity of rubbish through the process of showing by experience what cannot be done. It has been a sort of long-continued attempt to organize chaos through the instrumentality of ignorance. It now remains to be seen whether in settling itself this question will leave a single anticipation in regard to it fulfilled, a single argument unrefuted. The next few years will probably witness great changes. Should, as now seems most probable, the excess of competition speedily force the railroads into the position of one subordinated whole, the problem will for the first time have assumed a shape which makes a solution of it possible. Combination involves responsibility. By it the system will be brought into a position where it can at last be reached. This result once arrived at, the task of perfecting the machinery necessary for its just regulation will be comparatively little more than matter of detail.

Charles Francis Adams, Jr.