for less than the rate from many points west of the Mississippi River to San Francisco.1 These conditions have largely grown out of the competition of railways among themselves and with waterways.

The fact that distance is one element in the expense of carriage suggests that it should be taken account of in making rates, although there are many circumstances which necessitate a departure from the rule of a strict mileage rate. The fact that terminal charges, for example, are the same for a long as for a short haul justifies a decrease in the total charge per ton mile as distance grows. The great advantage of following a schedule of rates based on distance is that it affords some basis, although not an absolute guide, for settling sectional disputes concerning relative railway charges.

Government Ownership or Government Regulation? — With the decline of competition in the railway business, the alternative lies between private operation with government supervision on the one hand, and government ownership and operation on the other. There cannot be said to be any well-defined movement for government ownership in the United States. Socialists favor it as a step in the direction of their ideals, but conservative persons also have recognized that the difficulty of regulating railroads with sufficient stringency to prevent abuses and at the same time with sufficient freedom given to railway managements to develop their properties in the most efficient manner may make government ownership inevitable.

No convincing argument for either side of this question can be made by comparing the quality of railroad service and the rates charged in countries that have government ownership with the service and rates of railways privately owned and managed. There is little question that government ownership is feasible in this country and that good service might be expected. Greater pains might be taken to consider public convenience, and labor conditions might be improved for the lower classes of employees.

1 See City of Spokane v. Northern Pacific Railway Co., 21 I. C. C. 400 and 23 I. C. C. 454; United States v. Union Pacific Railroad Co., 234 U. S. 495; Commodity Rates to Pacific Coast Terminals and Intermediate Points, 32 I. C. C. 611.

Personal discrimination might be expected to cease altogether. It has been suggested that rates could be reduced because, owing to the superior credit of the United States government, capital could be secured at a lower rate of interest. But it is difficult to tell to what extent the credit of the government might be adversely affected by the issue of sufficient bonds to purchase the railways of this country. There might be economies in the elimination of some of the expenses due to the efforts of railways to get traffic away from each other, to roundabout hauls, and to useless duplication of facilities.

The political consequences might be unfavorable. It would be unfortunate to have sectional disputes as to rates thrown into politics. Railroad extensions might become “ pork," like our river and harbor improvements. The voting power of railway employees might be sought by politicians by promises of improved conditions of work.

A most serious consideration is the question of efficiency of management. A private and a public monopoly alike may become unprogressive. It may be that our system of regulation can be so developed that it will serve at once as a check upon abuses and as a stimulus to efficiency. It is not always best to decide today what can as well be decided tomorrow. Whether or not government ownership is coming, the perfection of the government control of our private railways would seem to be the wisest next step. Government regulation has already accomplished much in the United States. It has nearly eliminated rebates and personal discrimination; it has given stability to rates; it has strengthened railway credit; it has promoted uniformity in accounting; it has shown that it can raise rates as well as lower them and that it can settle sectional disputes as to rates in a comprehensive way. There still remains the task of determining the amount of railway investment entitled to a return, of devising a proper control over capitalization, of perfecting the rate system, and of working out comparative standards of efficiency. We may well hope that government ownership will at least be deferred until more has been accomplished along these lines.

Government Regulation of Railways in the United States. Railway corporations in the United States are almost all organized under the laws of the separate states. Formerly special laws were passed when a railway company was to be formed, but at the present time there are general laws specifying what conditions must be complied with in order that a number of persons may organize a railway corporation. The separate states have imposed a number of regulations and restrictions not only on the companies which they have chartered but also on others doing business within their borders. These relate to the safety and the comfort of passengers, train service, consolidations, pooling, ticket-scalping, discriminations between shippers and places, the issue of securities, and reasonableness of charges. Railway or public service commissions are found in all but a few states. That a railway corporation is subject to government regulation in the interest of the public welfare has been clearly established by a long line of judicial decisions beginning with the leading "Granger" case of Munn vs. Illinois. But the authority of the state governments has been greatly limited by two provisions in the federal Constitution. Congress having been given control over interstate commerce, the states must confine themselves in their regulations to commerce wholly within the state. And the Fourteenth Amendment declares that no state shall deprive any person of life, liberty, or property without due process of law or deny to any person within its jurisdiction the equal protection of the law. The courts have interpreted this provision to mean that neither a state legislature nor a commission created by it can fix rates even on intrastate traffic without a review by the courts. The courts have often declared rate legislation by states void on the ground that it confiscated the property of the stockholders.2

Federal regulation of railways is based on the Interstate Commerce Act of 1887, which has been repeatedly amended, most extensively in 1906 and 1910. The following is a summary of the amended act, as in force in 1916:

194 U. S. 113 (1876).

'The Fifth Amendment imposes similar limitations upon the federal government.

The Interstate Commerce Commission consists of seven members appointed by the President with the " advice and consent " of the Senate, with terms of seven years, not more than four of the commissioners being from the same political party. The jurisdiction of the commission extends not only over steam railways but also over electric railways, telegraph, telephone, and cable companies, pipe lines, express and sleeping car companies, and to some extent over water carriers. The control in these cases extends to interstate traffic merely.

All charges and practices must be reasonable, but no general standards of reasonableness have been prescribed by Congress. Certain specific things are prohibited. There can be no discrimination between persons or places and no free passes or free transportation except to classes of persons specified in the act. The giving of rebates renders both shipper and carrier liable to punishment. Pooling is prohibited, and no railway may have any interest in any competing water carrier. When rates have been reduced to meet water competition they may not be raised again without permission. No common carrier may make any greater charge for a shorter than for a longer distance in the same direction, the shorter being included within the longer, unless authorized to do so by the commission. Carriers must file with the commission copies of all their rates and fares, and no carrier may make charges different from these published rates. Changes in rates require thirty days' notice unless a shorter time is permitted by the commission. The commission may suspend rates for a period of 120 days and a further period of six months.

Any person may make a complaint regarding rates or practices and the commission may institute inquiries on its own motion. It has power to fix maximum rates for a period of two years and may award reparation to shippers who have been overcharged. The orders of the commission may be reviewed by the courts as to questions of law but not as to findings of fact. A Commerce Court was created in 1910 to hear appeals from the commission's orders but this court was abolished in 1913, its jurisdiction being vested in the several district courts.

Section 20 of the act empowers the commission to require annual and special reports from transportation companies and to prescribe the form of the accounts which may be kept. Under this provision uniform classifications of accounts have been worked out in coöperation with railway accountants.

In 1913 Congress directed the commission to ascertain the value of all the property of every common carrier subject to the act. As to every piece of property there is to be ascertained the original cost to date, the cost of reproduction new, the cost of reproduction less depreciation, and other values, if any. In 1914 the commission was given authority to enforce the Clayton Anti-trust Act so far as it applies to common carriers. The main purpose of this part of the act is to prevent those intercorporate relationships which tend to lessen competition.

The commission is also charged with the enforcements of safety appliance and boiler inspection provisions and with matters relating to hours of service of employees and to railway accidents.

The Interstate Commerce Commission regularly employs about 700 persons, but the work of valuation has temporarily greatly increased this number. A general survey of its work each year is given in its Annual Report to Congress. Its 30 or more volumes of decisions, published as the Interstate Commerce Commission Reports, contain a vast amount of descriptive material concerning the rate structures and the practices of railways in the United States. Information concerning the mileage, capitalization, revenues, expenses, and traffic of railways will be found in its annual volume called Statistics of Railways in the United States.

QUESTIONS AND EXERCISES

1. Write a description of some railway system, giving its organization, capitalization, earnings, dividends, nature of traffic, territory covered, etc. 2. Make a digest of the opinions in the Northern Securities Case, 193 U. S. 197, and the United States vs. The Union Pacific Railroad Company, 226 U. S. 61.

3. If you have paid $200 for a share of stock in a monopolistic enterprise, have you a right to complain if government regulation so affects its earnings that the price of the share falls to $100?

4. Discuss the conflict of authority between state and federal commis sions (Shreveport Cases, 234 U. S. 342).