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ation as between the competitive and the non-competitive points. The Senator from Illinois gave no opinion upon the question as to what the decision should decide.
Mr. ALDRICH. I understood him to make the statement I attributed to him.
Mr. CULLOM. While I am upon the floor I wish to say another thing. The Senator from Massachusetts objects to the construction of this subject being left in any degree to a commission.
Mr. HOAR. No; but that part of it.
Mr. CULLOM. Í refer to the question whether the foreign commerce of the country should be interfered with or pot. All I desire to say is that the best we can do is to pass the best bill we can, and it is for the commission and the railroads and the courts to construe it afterward. We are compelled to leave it to the common carriers and then to the commission, if one is created, and at last to the courts to determine what the proper construction of the law that we shall pass may be.
Mr. ALDRICH. As the Senator from Illinois says that he did not make that statement, I now ask him what his opinion is upon that question, if he has any, and I should like also to get the opinion of his colleagnies on the committee.
Mr. CULLOM. I will simply say in answer to the Senator from Rhode Island that he seems to be exceedingly anxious to, in some way, make the bill which is before the Senate offensive to the people of this country; but I repeat that any court or any commission which had the coustruction of this section to pass upon would be required to take into account the language used, the place, the circumstances, and ail together as to what those words should mean in determining whether a com-, petitive point should have any advantage over a non-competitive point.
Mr. CAMDEN. If the Senator from Rhode Island will allow me I will answer his question.
Mr. ALDRICI. I desired an er cathedra answer from the committee who made this report.
Mr. HARRIS. If the Senator wants my opinion he shall have exactly what I understand it to mean.
Mr. ALDRICH. I do. Mr. HARRIS. I favored the short-haul provision from the beginning, and did so for this reason: As a general rule the shipper from a competitive point has a measure of protection, at least, by the competition that exists there.
Mr. ALDRICII. How if the shippers there can not get any lower rates?
Mr. HARRIS. But theshipper from a point non competitive, where he most accept the terms of the carrier or allow his produce to perish upon his hands, is the shipper whom I wanted a short-haul law to protect. Mr. CAMDEN. That is the very object of the provision.
Mr. HARRIS. That is the very object with me, at least, in haviog insisted from the moment I entered the interstate commerce committee, and I continue up to this moment and shall continue to insist upon short-haul provision, so as to give the shipper from the non-competitive point some protection against unreasonable and unjust exactions; and for another reason: Take Chicago, for instance, as a competitive point. When rate wars may rage and drive through freights down to an unreasonable point, if the competing carriers there know that, however
low they may put their rates from Chicago to New York, they can not charge an aggregate sum greater for any shorter haul between Chicago and New York, it will do more to restrain and to prevent rate wars than all your pooling contracts have ever done or will ever do.
Mr. ALDRICH. Does the Senator from Tennessee expect that those results will ever accrue from the passage of this bill?
Mr. HARRIS. The protection of the shipper from non-competitive points?
Mr. ALDRICH. Yes.
Mr. HARRIS. I not only' expect, but I am confident that it will accrue from this bill.
Mr. ALDRICH. I have received an answer, so far as the Senator from Tennessee is concerned, but I do not understand that the Senator from Illinois makes any answer to the question.
The PRESIDENT pro tempore. The Senator from California ( Mr. STANFORD) has the floor.
Nr. STANFORD. Mr. President, I shall speak to this bill as I understand it. In what I shall have to say upon the measure I shall endeavor to be entirely candid and correct. The importance of the subject is so great that it can only be permanently settled upon right principles. Anything else means renewed and continued disturbance. The bill under consideration provides for a regulation of one species of property not common to others. To see how far this is justifiable, it is well for us to consider the creation of railroads, and to understand how they are created.
Railroad companies are organized under the general laws of the different States. They have no exclusive privileges. They are associations aided by these general laws-laws of which every citizen, or any number of citizens, may avail themselves equally with those forming the railroad company. In the mere fact of association they may exist entirely without the aid of the State. The association is as natural as it is for one man to call in his neighbors to help him raise his barn, or to roll a saw-log, or to do any business not inconsistent with the rights of others. The State gives, hy virtue of the incorporation laws, nothing to the incorporation. Whatever of capital or labor that is contributed to them is entirely private.
The ownership of the labor and capital provided is private; as much so as the banker's ownership of his money, the farmer's ownership of his farm, the teamster's ownership of his team, and so on.
It is private labor that builds the railroad from the first shovelsul of dirt that is thrown until the last spike is driven and the road is ready for business; and then, when it is ready to operate, it is all the product of individual or private property.
But some will say the right of way was given. In regard to that I think there is much misapprehension. Those who desire to build a railroad, of course, must in some manner obtain the right of way on which to build it. They appeal to the State on the ground that the proposed investment is of a highly beneficial character to the public, and they ask the State to exercise its right of eminent' domain in order that the road may be built. The State only can exercise the right of eminent domain for the benefit of the public, and then upon just compensation to be made to the owner for whatever is taken. The State could not take private property for the benefit of A, B, C, D, E, F, and others.
Now, up to this time everything in the railroad has come from private sources, and the labor belongs to the individuals as much as the labor of the man who tills a farm.
Control is the essence of ownership. The value of the property is its income-producing quality. This bill strikes at the control, and directly affects the income-producing capacity of the properties. Now, if the investment is legitimate, if its nature is so highly beneficial that the State can do, to aid its construction, what it could not do for the establishment of a factory or any other legitimate business, wherein is the reason for theinterference with the values and the control of this property? No monopoly is given to it; it interferes with no rights previously existing, and is never used except when it offers advantages to the shipper or traveler superior to those existing before. If it is a monopoly it is only a beneficent one, cheapening and facilitating travel and commerce.
Now, if the State has given nothing to this railroad company but what it gives to every other citizen: if it has put no money in; if the company has no monopoly; if its services are necessarily of a beneficial character, why should the State interfere with its ownership and with its income-producing qualities? And if the State, or if Congress, impairs the value of this property, why should not compensation be made to the owners, and, before putting into operation a law that will affect values, ought not compensation to be made as is done when the Government exercises its right of eminent domain and condemns the property of A that the road may be built which the company pays for? By a reduction of income producing qualities the value of the very right of way, which the railroad company has paid for, is affected.
The geography and topography of the country make competition a certainty. This bill denies to the railroad the right to charge less for the greater distance than for the shorter. I do not suppose that any railroad company ever carried freight or passengers for the longer distance for less than for the shorter unless competition, or some other circumstance beyond the control of the company, compelled. The only alternative would be to yield the business. It is a principle in good railroading to reject no business that offers if it can possibly be done, so long as it will pay the additional expense consequent upon its own movement. A very large portion of the traffic of the country is done below the average cost. The fixed expenses and the semi-fixed expenses of a railroad company are very large. They, as well as the operating expenses, are included to make the average cost of movement.
The average of operating expenses per ton is a very different figure from that of the average cost per ton, the latter including operating expenses, fixed expenses, and semi-fixed expenses. Thus, take the business from the Atlantic to the Pacific, or from the Pacific to the Atlantic, and we find competition by the Isthmus of Panama and competition by Cape Horn; we find overland routes of different length, of different grades and curves, varying in volume of business and in expenses of operating. We have very different average expense for movement. The longer road must compete with the shorter. The road with the heaviest gradients must compete with the road of easier. The road having a small volume of business, must compete with the road having a large volume of business. The cost of fuel is a very important item, varying on the different railroads. Yet the road having the least volume of business, the road having the longest line, having the heaviest grades and curves, having the highest cost of fuel, will be in competition with and will have to carry as cheaply as one having the shortest line, the easiest gradients, the cheapest fuel, and the largest volume of business.
All these are factors that determine the rates at which the railroad may possibly do business, however meager the profits. All the overland lines of railroad find their rates very largely controlled or influenced by the routes by way of the Isthmus of Panama and of Cape Horn; meeting that competition, and being willing to accept a small profit where a larger can not be had, they carry along the line between the two extreme points the same character of freight at less rates than it is carried from east to west, or from west to east, to intermediate places. Thus, because of competition, freight going from New York to San Francisco may pass over the various lines of road making up a through line for, perhaps, half their regular rates, say from New York to Buffalo, from Buffalo to Chicago, from Chicago to Omaha, from Omaha to Salt Lake, and so on to destination on the Pacific coast. No profit is so small as to be despised. Business is done at that rate rather than not do it at all.
Take a more marked illustration. The Southern Pacific road strikes the Atlantic waters at a much less distance than any of its more northern competitors. It has a line of easy gradients comparatively, and it competes not only with its northern rivals, but more particularly with the Cape Horn and Isthmus of Panama routes, because of its shortor line and easy graciients. In this competition it often takes freight between the two oceans as low as $10, while it takes freight halt way for, say, $30 a ton, a most reasonable rate for the limited local business of that country. . Now, if it makes only a dollar net on the freight from San Francisco to New Orleans at $10, it is glad to make that dollar where it can get no more; but a ton of freight going to El Paso, something over half the distance, will pay $30 a ton. Now, if the freight at $10 to New Orleans pays $1 profit, the freight going a less distance, to El Paso, would pay as much profit as 21 tons going through to New Orleans; and the rates charged to El Paso are but fair, as is shown by the gross earnings and the gross expenses of the road, leaving but a very narrow net profit.
The shorter distance is not charged any more because of the less rate for the longer distance. Indeed the longer distance helps the railroad company to maintain itself, while without that help perhaps they could not do the shorter business at all. Is this Congress prepared to say that small earnings shall be despised, that they shall not be secured when greater can not be had? Are they prepared to deny to individual shippers and communities the benefit of their more favorable location, whether made so because of the geography and topography of the country or by artificial means? It is the misfortune of some places not to be so well located and not the fault of the more favorable places that nature or art has given them superior advantages. It seems to me that Congress might with equal propriety deny the shipper the right to avail himself of these natural or artificial advantages as to deny to the railroad the right to avail itself of opportunities to meet competition.
There is a class of freight that can stand only a certain charge. A greater charge becomes prohibitory. A very large part of the unmanufactered raw material of this country belongs to this class, paying a trifle over the additional cost consequent upon its movement, developing a business that may pay better, and giving its small portion of net profit above the cost of movement towards the large items of fixed and semi-fixed expenses. Whether a road is doing a profitable business or not is not determined by the percentage of operating expenses. Thus a road carrying ialuable goods and doing a small business may find its percentage of operating expenses upon the amount earned very small, whereas, if there could be thrown upon it in addition a large business of cheap transportation, its earnings would be larger, but the per cent. of operating expenses would be increased; and to the extent that there was a net earning on this cheap class of freight just so far the company would be benefited. The long haul at cheap competing rates is really beneficial to the short haul at non-competing rates. It may be that neither alone would maintain the road. If I understand this bill correctly, under it the long lines of railroad passing through different States will have to give up one or the other. It will be practically a regulation of freight within the boundaries of a State and making a barrier of the boundary of a State to the free transmission of commerce.
Since the first road was built in the United States up to this time the railroads have substantially fixed their own rates for service, until to-day the rate is such as was not alreamed of as possible twenty years ago, nor was it believed possible even ten years ago. The whole country is developed. No product has suffered for want of movement. The general railroad management of the country is careful to consider what the cheap unmanufactured products of the country can afford to pay, and make their rates with a view that production shall not be hindered. The rates charged for manufactured goods, almost without an exception, do not affect the producer or the consumer. If the rates of freight upon manufactured articles were reduced one-half the probability is that there is nothing that moves by railroad over the longest line in the country whose price to the consumer would be affected or would be taken into consideration by the manufacturer; but the fractional part of a cent becomes a serious consequence in the long haul to most of the raw products of the country. The higher the maximums the lower the possible minimums.
Thus, in my own State, the maximum rates were 15 cents per ton per mile. With an average cost of 2 cents a mile for movement, which was about the average at one time, 1 ton of freight moved at 15 cents a ton per mile, would enable the railroad to move 14 tons at the minimum rate of 1 cent a ton per mile. There was at that time about 1 per cent. of the business done at the maximum rate, while the other 99 per cent. was done at rates governed by circumstances and influences which the railroad company could not control.
This bill seems to me not only to deny competition by railroads, which exist almost throughout the length and breadth of the country, but to exhibit a tendency to foster water ways to the positive discouragement of the railroad interests. If it aimed but to insure the water lines of communication against the competition of rails. I do not know how a bill could be framed to secure that object better than this one. If railroading is a legitimate business, and if it is only the aggregate of the private property contributed by the stockholders; if it is maintained and operated by the labor of individuals, what justification there can be for depriving the owners of control, and the property of its full earning capacity within the laws as they existed at the time of the original investments, I am unable to see. It seems to me, clearly, it is a violation of the rights of property, and the rights of the laborer to receive a compensation for services performed.
It is also a discouragement of this class of investments. The railroads up to this time have received the peculiar indorsement of being of such a highly beneficial character that the State could exercise the right of eminent domain to the end that the road might be built. If this bill shall become a law its consequences will be most disastrous, in my judgment, to the varied business interests of the country. When you think that most of the products of the country pass one or