higher return on the capital in the roads, which is collected by means of higher charges, or by making service less efficient or less safe. Low profits, with smaller business, caused a reduction of the average number of trackmen, per 100 miles, from 124 in 1893 to 102 in 1894.1

1 Railroad Laws Must Conform to Certain Principles, of which one of the best brief statements is given by Professor Emory R. Johnson in the Political Science Quarterly of March, 1900-a magazine giving, in contributed articles and in book reviews, the cream of the world's current economic thought. The following is a skeleton outline of his main points, stated mostly in different language, and with added explanations :

1. Government regulation should promote growth of railroad facilities where needed, but should prevent the grosser speculation, and waste of capital in useless parallel lines. By the Massachusetts law of 1894, to which the Texas law is similar, the state commission must first approve, after expert investigation, every issue of stock or bonds by steam or electric roads. Investors are thus protected from stock watering. In New York, and in four New England states, a new steam or electric line cannot be built until the commission has decided that "public convenience requires it."

2. It should encourage the companies to act together in harmony. Competition in excellence of service is beneficial, but in rate-making it is vicious. The Inter-State Law, and more especially the anti-trust act of 1890, do not allow the cooperation (pooling) necessary to abolish the discrimination they forbid. Cooperation between roads does not lead to extortion. Rivalry of the Atlantic and Gulf ports, together with the water-ways, is what makes rates low. Managers have little rate making power. A company must give its shippers proper rates, or their outside business will pass to shippers on other lines. The government commission should be a judge between shipper and carrier, not an advocate of either.

3. The lowest freights (such as those on coal, lumber, and on long distance grain) must cover cost of hauling and some profit. These will not be shipped if much more is charged. The rate must be less than the value added by the hauling. Goods of high value, such as shoes and dry goods, should bear higher freight, more so than at present, Professor Johnson says, to cover the road's general expenses, interest, etc. Here there is more ability to pay, which should be regarded as in taxation. Such goods being light, even a high freight adds little to their retail price. heavy materials there may be no ability to bear a share of general expenses. Total income must exceed total outgo to the extent of a fair return on capital.

With the

We Get the Advantages and Avoid the Evils. By the present American system of private ownership of rail

4. Regulation should secure for all shippers, within a given area, equality of advantage on similar service. In some other area, as the Far West, lower through rates may be necessary, or industry would stop; but there local rates must be highest to yield a net profit, because local business is smaller than where population is denser. Of course unjust favoring of persons or places is not to be tolerated.

5. The ultimate aim is to benefit society by lowering rates as fast as fair profit and healthy improvement of road will permit. This purpose is attained by a moderate policy, just to the companies no less than to the people, for the real interest of both parties is identical. A change for a special social purpose may sometimes be good, as in lowering rates to enable working people to live outside of a crowded city.

Low Fares Everywhere Have Greatly Benefited Society, by enabling men to go quickly where their labor is wanted most. Austria's heavy reduction of fares in 1890 was a successful means of inducing peasants to travel who remained in the lethargy of the Middle Ages. Perhaps it is their thirdclass rate of two cents a mile that causes Britons to travel more per capita than Americans. In Hungary the number of passengers was increased from 9,000,000 in 1887 to 35,000,000 in 1897, and the average distance doubled, by lowering of rates through the system of a uniform charge for each of a number of zones or belts of territory outward from the starting city. The plan of some writers, gradually to enlarge such zones until a whole country was in one, with railroad tickets sold as stamps without regard to distance, would necessitate high rates for short rides, to earn expenses, and by excessive cheapness of long distance fares would cause waste of time in traveling. This plan seems to make of uniformity a fetich.

Rates by Carload and in Small Quantities.-E. W. Bemis, in The Forum of December, 1899, says the social advantage of equality is so great that quasi-public railroads must eventually charge freights as the government sells stamps; and that in the South the practice of taking smaller quantities at carload rates is already carried further than most railroad men have been willing to admit as practicable. Dabney (p. 136) argues that several lots filling a car should have the carload rate. E. P. Bacon, in N. A. Review of January, 1902, says the difference in cost to the road for handling is very small. Some western roads have lately been abolishing a practice of permitting different shippers to unite to make up a carload. In Russia, to get the lowest rate, 100 pounds are sufficient; in New South Wales, six tons, which may consist of different articles or commodities. The public good, it would seem, requires that the difference in favor of carload shipments be at the minimum, but large enough to cover extra cost

roads, with governmental power (unlimited except by nature) to tax, fix charges, and otherwise regulate, we not only have none of the serious disadvantages of government ownership, but all its benefits seem within reach if a determined effort is made to possess them. It is doubtless true that often the officials appointed to regulate railroads, and other natural monopolies, have themselves been regulated by the corporations. But they succeed where they are the right men, under the right laws, and attempt to do only what clearly can and ought to be done. If with the few laws and the few officials necessary to control the roads, the government, state and national, has not obtained results wholly satisfactory, would it be more likely to do so by a change to ownership, with a few more hundreds of thousands of men to hire, and billions of dollars to spend?

Could the State Control Better as the Owner?-Could we expect soon a time in this country when wealthy shippers of freight, and sellers of railroad supplies, would not be able to further their own private interests by influencing the government or its officials? And would it be possible to confine new lines of road to localities affording paying business, without regard to local party pressure, or to prevent discriminating freight classification in favor of districts having political power? There might not be better opportunity to control effectually under government ownership than at present. There is now no lack of power to do so, while the risk of fixed capital, the hiring of men, and the spending of money, all rest upon the private owners.

of handling the smaller, and thus to prevent also needless multiplication of dealers, at a waste of society's capital and business energy. Albert Fink testified that cost per car to the road was as low with one carload as with ten.

Is There a Conflict of Interests ?-There seems to be no conflict between the interests of the public and those of railroad owners when permanent results are considered. The people, in a far-sighted view, want to pay railroads well, and to get the best service that can be devised. For improvements adopted they will allow substantial reward in high profits, for some time, before taking all the benefit to themselves in lower rates. Railroad owners, on the other hand, know that injury inflicted by them on patrons, whatever the immediate gains, will sooner or later come back with added force on the company itself, reducing patronage and forfeiting public favor. More than a reasonable profit they cannot long take without bringing on their road eventually a compensatory loss. Since speculative building has passed, and railroad stocks have been brought down to a solid value based on reasonable earnings, it seems not too much to hope that the problem will largely disappear, in frank recognition, both by managers and by legislators, of inevitable principles working for the good of all concerned.

State Ownership Works Well in Europe.-In a European monarchy, where military discipline prevails, with the best men permanently settled in the public service, the government can carry on a business economically and well, though not progressively as a rule.' But with our changing civil service, and our easy system of influencing those in authority, "political reasons compel us to reduce government ownership of fixed capital to a mini

mum." The Italian government, about 1880, decided not to engage in the railroad business, and released its

With such a corps of officials, government control of private owners would also be far more successful. Having the best men in office is a great advantage under any system.

lines, "largely on the ground that politics would corrupt the railroad management, and that the railroad management would corrupt politics."1

Little Desire for State Ownership.-Except among people of socialistic ideas, who include a considerable number of wage workers, there has not been much serious thought in America of government ownership of railroads. The subject is considered here because it is an important part of the trust problem. The same is true of England and Canada. The movement in Canada for government ownership of all railroads, agitated a year ago by the Toronto World, is not likely to reach substantial results. Manitoba bought a short railroad in 1901, and leased it with conditions as to low freight

rates.

We Can Get Railroads Without It.-It would no doubt be wise for our government to build and operate a needed line here and there if like the Russians we could not get it in any other way, or if like the Germans we

1 Hadley, 403. Professor E. R. A. Seligman wrote in P. S. Quarterly, 1892, p. 165, that this Italian commission was packed, and that what its conclusion would be was known at first.

2 State Enterprises Eighty Years Ago.—This was the sufficient reason for the many internal improvements undertaken by the state governments between 1815 and 1850. Means of transportation were then necessary for developing a vast interior, inland from rivers, and as capitalists were not ready to do the work it was taken up by the states. Congress built the National Pike, from Washington to Columbus and Vandalia, starting in 1806. Many of the state enterprises were unsuccessful, coming before they were needed, and piling up heavy debts. The state debt of Virginia, whose readjustment was the dividing line between parties in the election of 1881, was contracted in part during the canal making period. New York state's Erie Canal, opened in 1825, was a great success, supplying the needed link in a chain of water transportation from the West to the seaboard. It has been largely used in late years by boat operators paying tolls (up to 1882-free since then); and it has a beneficial effect toward reducing the freight rates of railroads.