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vicinity of New York. The railroad passes my door. Those twenty car-loads of freight on a certain road passed my farm. On the same train I loaded five cars of freight from my farm. All went to the same destination, being hitched to the same train; and the cost of transporting the freight 28 miles from my farm to New York was greater than the cost from Chicago to New York, but the rate from my farm to New York was reasonable. The whole twenty-five car-loads of freight were put on board ship for London. If it had not been for the low rate given from Chicago I could not have exported the five carloads raised upon my farm. I again say that the rate from my farm to New York was a reasonable rate.

Mr. CAMDEN. The Senator must have raised something on his farm that was raised by no other person in this country, or he would not have recognized that principle.

Mr. MCPHERSON. How could I help but recognize that principle? The State of New Jersey under its laws says that no railroad company shall charge an unreasonable rate of freight. The charter granted by the State fixes the rate beyond which they shall not charge per mile, and in addition to that competition steps in and reduces that limit fixed in the charter to more than 50 per cent. below that, and in addition to that as I say I paid a reasonable rate upon the five car-loads of merchandise which were to be exported from my farm. I found no fault with that rate; it was reasonable; but twenty car-loads came from Chicago

Mr. CAMDEN. Others of the same kind?

Mr. McPHERSON. The same kind of freight and the same quantity in each car.

Mr. CAMDEN. Do you recognize the principle that it was fair to charge inore for twenty-eight miles than for a thousand ?

Mr. MCPHERSON. I recognize this: I say that the proposition presented by the Senator from West Virginia, that it is not right to charge more for a short haul than for a long one, as an abstract principle is correct; but when you undertake to apply any such principle to conditions that are dissimilar, that can not be made alike, and when you undertake to incorporate that in an iron-bound rule of procedure which must govern a commission, that very moment you so disturb the relations of labor and capital and enterprise and transportation that it is impossible for any community of citizens to get on at all. That I say, and I say, moreover, when you undertake to establish the principle in your bill, as you have, you confer on railroads by enactment the power to oppress the people of this country to a greater extent than they are now doing.

I repeat, and I want any Senator on this floor to contradict the proposition if he can, that no measure was ever devised which will help railroads so much as this will if the railroads see fit to help themselves. How? By simply electing whether they will rob the Western country of the power to export their goods, or whether they will consent to go into bankruptcy. There are the two propositions. If they continue the low rate from Chicago, and if they permit goods to be exported, bankruptcy pure and simple is inevitable, because it fixes all local rates. If they decide, on the other hand, to protect themselves they will raise the rate from Chicago, and what becomes of the export trade? There is the whole proposition in a nutshell. That is the conı mon sense of the whole question, and there is no other view to take of it. It admits of no other.

I have no objection, as far as I am concerned, to dealing with this question; but I do object most positively to making a statute and placing it upon the statute-books of the United States in the interest of low transportation, a principle which must needs have a contrary effect.

I am in favor of water transportation, and the time will never come in this country when we can control railroads except by the water routes of the country. Take a map of this country and consider for a moment the geography of the whole question. Chicago is the key today to the entire Western world by reason of railroad concentration reaching to all parts of the West. It stands at the head of the water transportation of the country, at the head of the great lakes, connected with the seashore. How? First, by the Erie Canal of very limited proportions, unable to do anything like the amount of business that must necessarily be thrown upon it if the railroads do not enter into the Chicago competition. What else is there? The Welland Canal, the Canadian route of transportation, capable of floating immense quantities to the seaboard, with almost unlimited capacity for transportation. What must be the result? Inevitably a large proportion of the products that we send to-day to the seashore will go to Montreal, and from thence by steamer to Liverpool. What does not go there will go to New York. It will tend to build up the great ports of New York and Montreal at the expense of Philadelphia and Baltimore and every other seaport city.

Let us follow the illustration further. The New York Central Railroad is not within the jurisdiction of this law. It begins and ends in the State of New York. All its competitors from Buffalo to New York are interstate roads, and by reason of this exemption it can bankrupt. all its rivals.

Mr. CAMDEN. Is it not already governed by the law of New York ?

Mr. McPHERSON. There is no such law as this on the statutebooks of the State of New York and never will be, let me tell my friend, because the people of New York will find it not to their advantage if Congress passes this bill.

Mr. CAMDEN. Is not that the rule which the New York railroad commission applies to the New York Central ?

Mr. McPHERSON. I do not know about that. The railroad commission of the State of New York unquestionably has a great influence, but, as I read the law, no absolute power on these matters; but as to the long and short haul business, you will not find a law on the statute-book of New York to-day, neither will you ever find it if by so doing it will cripple the commerce of the State and city of New York.

Mr. CAMDEN. The New York Legislature appointed a railroad commission and that railroad commission has established the rule that no greater sum shall be charged for a shorter than for a longer haul, and the New York Central Railroad is now operating under that rule.

Mr. MCPHERSON. Very true. They may give their implied sanction to the work of the commission; perhaps it is for their interest to do it; but when their interest becomes different, what then?

Mr. GEORGE Has it bankrupted that corporation?

Mr. MCPHERSON. I do not say that it has. That does not necessarily follow.

Mr. GEORGE. I understood the Senator to say it would bankrupt the companies.

Mr. MCPHERSON. I simply said if the railroad companies from Chicago did not abandon the low rates which to-day do not pay the cost

of transportation, it would bankrupt railroad companies that engaged in it after being made subject to the provisions of this bill.

Mr. GEORGE. Did it bankrupt the railroad from Buffalo?

Mr. MCPHERSON. The reason they have not been bankrupted is because there is no provision of law which requires them to make the low rates for all their business.

Mr. GEORGE. The statute which is binding on all of them is the rule laid down by the railroad commission of the State of New York, which they are bound to obey.

Mr. MCPHERSON. I do not know that I understand exactly the purpose the Senator has in view in proposing the question.

Mr. GEORGE My purpose is to show that the necessary effect of the obligatory law on these railroad companies to charge no more for a shorter distance than for a longer one is not to destroy them, as I understood the argument of the Senator from New Jersey to be.

Mr. MCPHERSON. Now I catch the Senator's idea. Simply because the railroad companies have a pool by which they agree to maintain rates from Buffalo. The New York Central Railroad is to-day charging reasonably high rates from Buffalo in order to maintain local rates if the long and short haul principle of this bill is operating in that State.

Mr. GEORGE. Then I understand that the result of the law which compels them to charge no more for a shorter haul than for a longer one is obviated by the fact that they have gone into a pool. There is nothing in this bill which prohibits a pool.

Mr. MCPHERSON. Why do you not provide in the bill for prohibiting pools? You propose to establish a short haul and long haul system, and you do not propose in the bill to prohibit pooling.

Let me now ask the Senator a question. If, for instance, the rate of freight for a car-load of wheat from Chicago to New York was fixed at $20, and the rate is often as low as this, and that did not represent the cost of moving it, and it does not to New York, and under existing conditions the railroad company could charge from the next station east of Chicago $50, would you not alter the situation if they were compelled to ship from Chicago at $20 a car, with no power to charge more from local stations? Would it not lessen the earning power of the road?

Mr. GEORGE. I will answer that question by asking the Senator another. Will he tell me by what standard of morals or justice he can justify the imposition on the man he has just named 10 miles this side of Chicago, a charge of $50 on his freight, when only $10 is imposed upon the man who lives in Chicago? I should like to ask him also by what ruleof morals or justice he can justify the practice of any railroad company in making up its loss, as the Senator said the other day it did, on the through freights from Chicago by overcharging upon customers who live along the line and have no other means of getting their freight to market than by the road. In other words, I would like to know by what rule of right and justice you can justify upon individuals, upon communities that have no competition, the loss sustained by railroads in a war of rates that they make upon each other in carrying freights for less than the actual cost from other points ?

It seems to me that the interests of somebody else but the railroads ought to be consulted in the matter. If the railroads of their own will (because there is no law to regulate them now) at certain points where they come in competition, in order to destroy each other, put rates so low as to cause an actual loss to the companies, then I ask how it is right or just that all these railroad companies who have thus entered into war shall make up their losses by extraordinary charges upon those who live along the line of the roads and who have no competition?

Mr. MCPHERSON. I do not undertake to justify anything of the kind. As a distinct proposition, standing alone, certainly the Senator is right when he says that a service is entitled to certain consideration and compensation. If that service is increased either in length of' route, or by whatever process it is increased, most assuredly it would seem to honest and com nion minds that the compensation onght to be increased. That is a proposition which is an axiom. It is a self-evident truth.

Mr. GEORGE. Put that proposition as an axiom in the law, and then it can not be violated.

Mr. McPHERSON. Now, the Senator proposes to apply that to what? He proposes to apply it to a system of railroads. The railroads were built in the first place for the purpose of developing the country. You will find when a railroad is located it takes a position somewhat remote from existing lines in order that the country may be developed and local trade may be developed. The railroad very naturally expects to get a fair compensation for the local business over its line. But you find a great point of distribution like Chicago, where there is competition on the lake, where, as the Senator from Ohio said, you carry grain for 6 cents a bushel between Chicago and New York, then the railroad will abandon the field of competition and leave it to the lakes, provided you make a rule for railroads which you can control, and no rule for lake or water transportation which you can not control. The lake transit has no local stations.

Let us go further. The lakes furnish transportation six months in the year, and if the railroads abandon the field what will the lakes charge? Will it be more or less than they now charge? The natural effect of that is to double the cost of transportation by the lakes. When the lakes are frozen up, the railroads step in and they make their own rate from Chicago, and your bill makes it from every other station. Now, taken together, adding if you please the increased lake transportation and the increased rail transportation in winter, and how much more have you paid for the privilege of putting in your bill this absurd idea?

Mr. GEORGE. Now, will the Senator allow me to ask bim a question?

Mr. MCPHERSON. Certainly. Mr. GEORGE. I understand him now, in answer to the proposition which I made, to say that the effect of competition by railroad is to lessen the water carriage by lake and let the water carriers charge what they please, but when the lake is frozen up, then having no lake competition, the railroads can charge what they please to New York and make more money than they do now. I understand that to be the position.

Mr. MCPHERSON. In reply to the Senator's question, I stated that the railroads would abandon the business to the lakes. Naturally the lakes having the business without competition with railroads would then increase the price. The lakes can run but six months in the year. Then step in the railroads and they take the business for the other six months at higher rates, and the Senator makes it necessary that the railroad should charge a higher rate because by his bill he has made every other rate conditioned upon the rate from Chicago.

Mr. GEORGE. I understood the Senator to say that they frequently carry freight from Chicago to New York at a loss. What is the reason of that proposition ?

Mr. MCPHERSON. A railroad company, as I said before, depending on local business for all their profit, find a great distributing station in the West. Lines of railroad radiate from that to all points of the West. The connection is valuable to them. They are forever expecting that some time in the history of railroads the business from that point may be made profitable. They are waiting in expectation of getting something out of it. Unless a railroad line has a connection with some great distributing point, it would be nothing in the world but a local road and a road of no importance.

I want to add here that I think the railroad lines, say from New York to Chicago, can afford to carry freight for less compensation per mile upon long lines than upon short ones. Therefore as to what motives control them I can not say. I am not a railroad man; never have been engaged in railroad business. I only know the common sense of this hill as applied to them purely from a business standpoint. I think I understand that.

Mr. HARRIS. May I inquire of the Senator irom New Jersey if I understood him correctly to say that from the competing point railroad companies carried freight at less than the cost oi transportation?

Mr. MCPHERSON. I think it safe to say 50 per cent. of all the freight shipped from Chicago to New York is to-day transported for less than it cost to haul it over the road.

Mr. HARRIS. Then, do I understand the Senator from New Jersey that it is just and proper that railroads should be pernoitted to carry through freights at a loss and recoup for that loss on the local traffic of the people who live on the road and do not live at a competing point? That seems to involve the whole question.

Mr. MCPHERSON. Not at all; that does not necessarily follow. If the railroad at a point which is not competitive exacts only a fair compensation for doing the business, who can object? (ertainly a railroad likeany other business enterprise is entitled to pay its fixed charges, the interest upon its bonds, and to give a fair margin of profit to its stockholders. * Nobody will deny that to a railroad if properly managed and ifits stock properly represents the amount of money the stockholders have in the line. If it represents three or four times that amount it is a different question. But suppose the railroad did not run to Chicago at all; suppose it stopped 20 miles this side of Chicago where there was no competition; I want to ask the Senator if it would be an unreasonable rate to charge from that station enough to compensate the railroad for the work done the public?

Mr. HARRIS. Conceding all the Senator says as to the justice of allowing a railroad corporation to earn money enough to pay its fixed charges and a reasonable profit upon its stock, according to what he has just admitted the railroad company takes upon itself additional burdens by taking through freights at an actual loss, rendering itself therefore less able to pay these charges than it would otherwise be. And if I understand his argument he justifies the railroad companies in doing that in respect to through freights, and justifies their making up that loss and securing the profits that they are to earn on their capital by charging the local traffic that has no competition an extra charge.

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