ing law; and second, the so-called railway-rate law, which amends the Interstate Commerce Act and acts amendatory thereof.

The total appropriations for the Bureau for the said fiscal year were $217,879.40. The amount of $136,535.80 was expended. The appropriations for the fiscal year 1906 to 1907 are $185,920.

The number of persons employed by the Bureau on June 30, 1906, was 73. The estimates for the year ending June 30, 1908, are $248,220. As the investigations conducted by the Bureau often expand in unforeseen directions it is impossible to estimate with accuracy the specific work which will be done in a given period. It has been, therefore, wise to keep the organization in a flexible condition, so that its force may be applied as the exigencies of the work develop; with the lump sum appropriation it has been possible to adapt the means to the end desired with comparatively little waste of time or money.

The legal work of the Bureau in the past year has been largely concerned with the interpretation of statutes relating to transportation, together with a consideration of numerous proposed forms of legislation on this subject. Considerable time also has been devoted to laws relating to railway discriminations. The report of the Commissioner on the Transportation of Petroleum, which dealt almost entirely with railway discriminations in favor of the Standard Oil Company, has led to a very careful consideration of the interstate commerce act, the Elkins Act, and various other laws affecting transportation. Pursuant to the letter of the President, submitting the said report to Congress, the Department of Justice has taken up the discriminations set forth in the said report and assistance has been given by this Bureau to the Department of Justice in preparing criminal cases in connection therewith.

Digests of the various State corporation laws in the Bureau have been kept up to date and compilations have been made of certain branches of such laws.

During the course of the investigation of the oil industry it was discovered that a very widespread system of railway discriminations existed in favor of the Standard Oil Company, affecting a very large proportion of the country and resulting substantially in giving to the Standard Oil Company an overwhelming advantage in transportation in almost all sections of the country; that this system had been in existence for a number of years, and that largely by virtue of it the Standard had been able to restrict or eliminate competition throughout many parts of the country and thereafter reap the benefits of monopoly. These railway discriminations took various forms, often very ingenious in their nature, and so skilfully concealed that their existence was very rarely suspected even by the active competitors of the Standard, although such competitors knew that in general they were doing business at a disadvantage. This system of discriminations was discovered by the agents

of the Bureau when examining the oil-shipping records and accounts of the various railroads.

So important was the effect of these discriminations that it was deemed best to make a special report on the Transportation of Petroleum. This report was submitted to the President and by him transmitted to Congress on May 2, 1906. The regular adjournment of Federal Courts for the summer has made it impossible as yet to secure the trial of any of the criminal cases growing out of this investigation, but indictments containing 8,193 counts have been returned by the various grand juries. It is claimed that the various devices by which these discriminations were obtained are permissible under the law, but this contention seems untenable. The purpose of the law is to provide equality of opportunity and treatment to all shippers. The law deals with the result, not the device by which the result is accomplished. The more clever the device the more flagrant is the violation of the law, for wilful intent to evade is shown. If this be not the true interpretation of the law, it becomes worse than useless, because it offers false security and opens the door to fraud.

A most striking and important result immediately followed the investigation of the Bureau; the railroads canceled substantially all the secret rates, illegal or improper discriminations, and in many cases the discriminations in open rates. Thus a widespread system of railway discrimination was wiped out of existence because of the discovery by the agents of the Bureau and before any prosecutions were brought thereon. The shippers of oil advise the Bureau that for the first time in many years they are now rapidly obtaining equality of treatment from the transportation companies.

Work on the other phases of the oil industry and the investigations of the tobacco, steel, sugar, and coal industries are well advanced; special reports thereon will be made in due course. An inquiry into canal and water transportation has been started.

The work of the Bureau during the past year presents very strikingly the power of efficient publicity for the correction of corporate abuses wholly apart from the penal or remedial processes of the Courts. No more convincing illustration of this power has been given than the experience of the Bureau in connection with the above-mentioned system of railway discriminations in favor of the Standard Oil Company and the change of the system by its mere exposure. In most cases, as soon as the officers of a railroad were aware that the agent of the Bureau had discovered a discrimination, the improper rate was canceled or the discrimination removed. This action on the part of the railroad officers was all the more striking inasmuch as it could hardly have been taken with a view to escape from criminal liability, because that criminal liability, if existing at all, had already been incurred and could not be mitigated or evaded by cancellation of the discriminatory

rate or regulation; and further, the fact of that voluntary action was a convincing admission of the unfairness of the rate or regulation. In short, the experience of the Bureau indicates that enforced publicity of facts is a most efficient means of putting an end to such discriminations. A great advance toward publicity has been made by the new law increasing the powers of the Interstate Commerce Commission. All books and records of railroad companies are now open to the examination of agents of the Commission. The Government will no longer be hampered by being limited to search for single items, but every entry, every record will be scrutinized.

The meat-inspection and pure-food laws are the most recent examples of the extension of the principle of publicity. The meat-inspection law goes further by affirmatively establishing the principle of imposing a condition precedent upon the right to engage in interstate commerce. Meat products cannot be transported in interstate and foreign commerce until they have been subjected to Federal inspection and such inspection evidenced by labels. This is in effect the requirement of a license to engage in interstate commerce.

The investigations conducted by the Bureau, the effect of the interstate-commerce laws, the results of prosecutions under the anti-trust law, the reasons which compelled the enactment of the meat-inspection and pure-food laws, all lead me to earnestly urge again the desirability of and necessity for the establishment of Federal inspection and supervision of the greater industrial corporations engaged in interstate and foreign commerce, substantially as outlined in the license plan suggested in my annual reports for 1904 and 1905.

Such a plan is but the extension of a well-tried and efficient means for the proper regulation of business. It will not interfere with the power and authority of the States over the corporations created under State laws. It will be the exercise of direct affirmative power by the Federal Government over the actions of corporations when engaged in interstate and foreign commerce, which cannot be dealt with by State authority. It will give a simple and effective method of dealing with such corporations in a jurisdiction coextensive with their field of operation.

Such inspection is not an invasion of private rights. A corporation should not be treated as an individual; it has great powers and enjoys public rights which an individual cannot exercise; it is given some of the attributes of sovereignty, i. e., perpetual life, and in some instances the right of eminent domain; the unrestricted exercise of its powers may permit it to grow strong enough to unduly influence and in measure control the political life of the State which created it. Such a result would be intolerable. Hence, for reasons of public safety and selfpreservation a government must retain and exercise proper regulation of and control over corporations. Such regulation and control can not

be wisely exercised unless the government has full and accurate knowledge of the ownership, management, and properties of corporations. This knowledge can only be obtained by opening all the books and records of corporations to public inspection, but protecting, of course, the corporation from unreasonable examination or the injurious exposure of its legitimate business.

The suggested Federal license law will restore individual responsibility and prevent the corporation from being the hiding place of the irresponsible, dishonest, or corrupt manager. As long as the individual can hide behind a corporation, can conceal his acts upon the records of a corporation, can escape personal responsibility by means of the corporation, so long will the corporation be used as an agency for imposition, fraud, and corruption. The moment the books and records of a corporation are open to proper public inspection the danger of such wrongs will be reduced to a minimum. The corporation is not then soulless, for the individuals who control it are known, and personal responsibility for its actions can be instantly fixed upon them.

Such a law will afford a means for gaining accurate information, so that the people of our country may form an intelligent opinion of industrial conditions, and not be driven to extreme and unwise action by the clamor of those who assail all great corporate interests because some have done ill.

Above all, a license system will provide the most effective method for dealing with the corporation whose managers violate law, by providing that the penalty for such violation shall be the revocation of the license, and the consequent denial of the opportunity to engage in interstate commerce. Such a penalty should not, of course, be imposed without affording the corporation opportunity to appeal to the courts and obtain necessary protection against unjustifiable or improper executive action.

Respectfully,

JAMES RUDOLPH GARFIELD, Commissioner of Corporations.

The SECRETARY OF COMMERCE AND LABOR.

PRESERVATION AND DEVELOPMENT OF NATURAL

RESOURCES

[The natural resources of the United States appeared unlimited even in the last generation, but at the present time the nation and its leaders are coming to realize that the wasteful methods of exploitation which have thus far been employed can no longer be tolerated lest the county should lose its rich inheritance. In order to preserve and develop the natural resources, new administrative services have been established in the federal and state governments, and laws

have been passed designed to protect the national wealth against wasteful methods of exploitation. The questions involved in this matter are illustrated by the following selections.]

FROM THE SECOND ANNUAL MESSAGE OF PRESIDENT CLEVELAND, DECEMBER, 1886

THE recommendations of the Secretary of the Interior and the Commissioner of the General Land Office looking to the better protection of public lands and of the public surveys, the preservation of national forests, the adjudication of grants to States and incorporations and of private land claims, and the increased efficiency of the public-land service, are commended to the attention of Congress. To secure the widest distribution of public lands in limited quantities among settlers for residence and cultivation, and thus make the greatest number of individual homes, was the primary object of the public-land legislation in the early days of the republic. This system was a simple one. It commenced with an admirable scheme of public surveys, by which the humblest citizen could identify the tract upon which he wished to establish his home. The price of lands was placed within the reach of all the enterprising, industrious, and honest pioneer citizens of the country. It was soon, however, found that the object of the laws was perverted, under the system of cash sales, from a distribution of land among the people to an accumulation of land capital by wealthy and speculative persons. To check this tendency a preference right of purchase was given to settlers on the land, a plan which culminated in the general Preemption Act of 1841.

The foundation of this system was actual residence and cultivation. Twenty years later the homestead law was devised more surely to place actual homes in the possession of actual cultivators of the soil. The land was given without price, the sole conditions being residence, improvement, and cultivation. Other laws have followed, each designed to encourage the acquirement and use of land in limited individual quantities. But in later years these laws, through vicious administrative methods and under changed conditions of communication and transportation, have been so evaded and violated that their beneficent purpose is threatened with entire defeat. The methods of such evasions and violations are set forth in detail in the reports of the Secretary of the Interior and Commissioner of the General Land Office. The rapid appropriation of our public lands without bona fide settlement or cultivation, and not only without intention of residence, but for the purpose of their aggregation in large holdings, in many cases in the hands of foreigners, invites the serious and immediate attention of Congress.

The energies of the land department have been devoted, during the present administration, to remedy defects and correct abuses in the