by John Moody
New Haven, Yale University Press
Toronto, Glasgow, Brook & Co.
London, Humphrey Milford
Oxford Unversity Press
I. A CENTURY OF RAILROAD BUILDING
II. THE COMMODORE AND THE NEW YORK CENTRAL
III. THE GREAT PENNSYLVANIA SYSTEM
IV. THE ERIE RAILROAD
V. CROSSING THE APPALACHIAN RANGE
VI. LINKING THE OCEANS
VII. PENETRATING THE PACIFIC NORTHWEST
VIII. BUILDING ALONG THE SANTA FE TRAIL
IX. THE GROWTH OF THE HILL LINES
X. THE RAILROAD SYSTEM OF THE SOUTH
XI. THE LIFE WORK OF EDWARD H. HARRIMAN
XII. THE AMERICAN RAILROAD PROBLEM; BIBLIOGRAPHY
THE AMERICAN RAILROAD PROBLEM
During the last fifty years the railroad has perhaps been most familiar to the American people as a "problem." As a problem it has figured constantly in politics and has held an important position in many political campaigns. The details that comprise this problem have been indicated to some extent in the preceding pages—the speculative character of much railroad building, the rascality of some railroad promoters, the corrupting influence which the railroad has too frequently exerted in legislatures and even in the courts. The attempts to subject this new "monster" to government regulation and control have furnished many of the liveliest legislative and judicial battles in American history. Farmers, merchants, manufacturers, and the traveling public have all had their troubles with the transportation lines, and the difficulties to which these struggles have given rise have produced that problem which is even now apparently far from solution.
Railroads had been operating for many years in this country before it dawned upon the farmers that this great improvement, which many had hailed as his greatest friend, might be his greatest enemy. It had been operating for several decades in the manufacturing sections before the enterprising industrialist discovered that the railroad might not only build up his business but also destroy it. From these discoveries arose all those discordant cries of "extortion," "rebate," "competition," "long haul and short haul," "regulation," and "government ownership," which have given railroad literature a vocabulary all its own and have written new chapters in the science of economics. The storm center of all this agitation concerned primarily one thing—the amount which the railroad might fairly charge for transporting passengers and freight. The battle of the people with the railroads for fifty years has been the "battle of the rate." This has taken mainly two forms, the agrarian agitation of the West against transportation charges, and the fight of the manufacturing centers, mainly in the East, against discriminations. Perhaps its most characteristic episodes have been the fight of the "Grangers" and their successors against the trunk lines and that of the general public against the Standard Oil Company.
Even in the fifties and the sixties, the American public had its railroad problem, but it was quite different in character from the one with which we have since grown so familiar. The problem in this earlier period was merely that of getting more railroads. The farmer pioneers in those days were not demanding lower rates, better service, and no discrimination and antipooling clauses; they asked for the building of more lines upon practically any terms. This insistence on railroad construction in the sixties explains to a great extent the difficulties subsequently encountered. In a large number of cases railroad building became a purely speculative enterprise; the capitalists who engaged in this business had no interest in transportation but were seeking merely to make their fortunes out of constructing the lines. Not infrequently the farmers themselves furnished a considerable amount of money, expecting to obtain not only personal dividends on the investment but larger general dividends in the shape of cheap transportation rates and the development of the country. Even when the builders were more honest, their mistaken enthusiasm had consequences which were similarly disastrous. The simple fact is that a considerable part of the Mississippi Valley, five or ten years after the Civil War, found itself in the possession of railroads far in excess of the public need. In the long run this state of affairs was probably not a great economic evil, for it stimulated development on a tremendous scale; but its temporary effect was disastrous not only to the railroads themselves but to the struggling population. The farmer had mortgaged his farm to buy stock in the road; and his town or county or State had subsidized the line by borrowing money which it frequently could not repay. When this property became bankrupt, not only wiping out these investments but leaving the agricultural population at the mercy of what it regarded as exorbitant rates and all kinds of unfair discriminations with high interest charges on its mortgages and high local taxes, the blind fury that resulted among the farmers was not unnatural.
Many of the railroad evils were inherent in the situation; they were explained by the fact that both managers and public were dealing with a new agency whose laws they did not completely understand. But the mere play of personal forces in themselves aggravated the antagonism. The fact that most of the railroad magnates lived in the East added that element of absentee landlordism which is essential to most agrarian problems. Many of the Western capitalists were real leaders; yet it is only necessary to remember that the most active man in Western railroads in the seventies was Jay Gould, to understand the suspicion in which the railroad promoter of that day was generally held. It is significant that of all the existing railroad abuses, the one which seemed to arouse particular hostility was the free pass. There were many greater practical evils than this, yet the fact that most editors and public officials and politicians and legislators and even many judges rode "deadhead" was a constant reminder of the influence which this "alien" power exercised over the government and the public opinion of the communities of which it was theoretically the servant. Many of these roads had a greater income than the States they served; their payrolls were much larger; their head officials received higher salaries than governors and presidents. The extent to which these roads controlled legislatures and, as it seemed at times, even the courts themselves, alarmed the people. The stock-jobbing that had formed so large a part of their history added nothing to their popularity. Yet, when all these charges against the railroads are admitted, the fundamental difficulty was one which, at that stage of public enlightenment, was beyond the power of individuals to control. Nearly all the deep-seated evils arose from the fact that the railroads were attempting to do something which, in the nature of the case, they were entirely unfitted to do—that is, compete against one another. When the great trunk lines were constructed, the idea that competition was the life of trade held sway in America, and the popular impression prevailed that this rule would apply to railroads as well as to other forms of business. To the few farseeing prophets who predicted the difficulties which subsequently materialized, the answer was always made that competition would protect the public from extortion and other abuses. But competition between railroads is well-nigh impossible. Only in case different companies operated their cars upon the same roadbed—something which, in the earliest days, they actually did on certain lines—could they compete, and any such system as a general practice is clearly impracticable. One railroad which paralleled another in all its details might compete with it, but there are almost no routes that can furnish business enough for two such lines, and the carrying out of such an idea involves a waste of capital on an enormous scale. Probably the country received its most striking illustration of this when the West Shore Railroad in New York State was built almost completely duplicating the New York Central, with the result that both roads were nearly bankrupted.
While no one railroad can completely duplicate another line, two or more may compete at particular points. By 1870 this contingency had produced what was regarded as the greatest abuse of the time—the familiar problem of "long and short haul." Two or more railroads, starting at an identical point, would each pursue a separate course for several hundred miles and then suddenly come together again at another large city. The result was that they competed at terminals, but that each existed as an independent monopoly at intermediate points. The scramble for business would thus cause the roads to cut rates furiously at terminals; but since there was no competition at the intervening places the rates at these points were kept up, and sometimes, it was charged, were raised in order to compensate for losses at the terminals. Thus resulted that anomaly which strikes so strangely the investigator of the railroad problem—that rates apparently have no relation to the distance covered, and that the charge for hauling a load for seventy-five miles may be actually higher than that for hauling the same load one hundred or one hundred and fifty miles. The expert, looking back upon nearly a hundred years of railroad history, may now satisfactorily explain this curious circumstance; but it is not surprising that the farmer of the early seventies, overburdened with debt and burning his own corn for fuel because he could not pay the freight exacted for hauling it to market, saw in the system, only an attempt to plunder. Yet even the shippers at terminal points had their grievances, for the competition at these points became so savage and so ruinous that the roads soon entered into agreements fixing rates or formed "pools." In accordance with this latter arrangement, all business was put into a common pot, as the natural property of the roads constituting the pool; it was then allotted to different lines according to a percentage agreement, and the profits were divided accordingly. As the purpose of rate agreements and pools was to stop competition and to keep up prices, it is hardly surprising that they were not popular in the Communities which they affected. The circumstance that, after solemnly entering into pools, the allied roads would frequently violate their agreements and cut rates surreptitiously merely added to the general confusion.
The early seventies were not a time of great prosperity in the newly opened West, and the farmers, looking about for the source of their discomforts, not unnaturally fixed upon the railroads. Their period of discontent coincided with what will always be known in American history as "the Granger movement." In its origin this organization apparently had no relation to the dissatisfaction which its leaders afterward so successfully capitalized. Its founder, Oliver Hudson Kelley, at the time when he started the fraternity was not even a farmer but a clerk in the Agricultural Bureau at Washington. Afterward, when the Grangers had become an agrarian force to be feared, if not respected, it was a popular jest to refer to the originators of this great farmers' organization as "one fruit grower and six government clerks." Kelley's first conception seems to have been to organize the farmers of the nation into a kind of Masonic order. The Patrons of Husbandry, which was the official title of his society, was a secret organization, with signs, grips, passwords, oaths, degrees, and all the other impressive paraphernalia of its prototype. Its officers were called Master, Lecturer, and Treasurer and Secretary; its subordinate degrees for men were Laborer, Cultivator, Harvester, and Husbandman; for women—and women took an important part in the movement—were Maid, Shepherdess, Gleaner, and Matron, while there were higher orders for those especially ambitious and influential, such as Pomona (Hope), Demeter (Faith), and Flora (Charity). Certainly these titles suggest peace and quiet rather than discontent and political agitation; and, indeed, the organization, as evolved in Kelley's brain, aimed at nothing more startling than the social, intellectual, and economic improvement of the agricultural classes. Its constitution especially excluded politics and religion as not being appropriate fields of activity. It did propose certain forms of business cooperation, such as the common purchase of supplies, the marketing of products, perhaps the manufacture of agricultural implements; but its main idea was to contribute to the social well-being of the farmers and their families by frequent meetings and entertainments, and to improve farming methods by collecting agricultural statistics and by spreading the earliest applications of science to agriculture. The idea that the "Grange," as the organization was generally known, would ultimately devote the larger part of its energies to fighting the railroads apparently never entered the minds of its founders.
Had it not been for the increasing agricultural discontent against railroads and corporations in general, the Patrons of Husbandry would probably have died a painless death. But in the early seventies this hostility broke out in the form of minority political parties, the principal plank in whose platform was the regulation of the railroads. Farmers' tickets, anti-monopoly parties, and anti-railroad candidates began to appear in county and even state elections, sometimes achieving such success as to frighten the leaders of the established organizations. The chief aim of the discontented was "protection from the intolerable wrongs now inflicted onus by the railroads." "Railroad steals," "railroad pirates," "Wall Street stock-jobbers," and like phrases supplied the favorite slogans of the spirited rural campaigns. These parties, though much ridiculed by the metropolitan press, started a political agitation which spread with increasing force in the next forty years and in recent times eventually gained the ascendency in both the old political parties.
The panic of 1873 and the unusually hard times that followed added fuel to the flame. It was about this time that the Patrons of Husbandry gave evidences of a new vitality, chiefly manifested in a rapidly increasing membership. On May 19,1873, there were 3360 Granges in the United States, while nineteen months later, on January 1, 1875, there were 21,697, with a total membership of over seven hundred thousand. In the Eastern States the movement had made little progress; in the South it had become somewhat more popular; in such States as Missouri, Iowa, Kansas, Nebraska, Montana, Idaho, and Oregon, it had developed into almost a dominating influence. It is not difficult to explain this sudden and astonishing growth: the farmers in the great grain States seized upon this organization as the most available agency for remedying their wrongs and rescuing them from poverty. In their minds the National Grange now became the one means through which they could obtain that which they most desired—cheaper transportation. Not only did its membership show great increase, but money from dues now filled the treasury to overflowing. At the same time the organs of the capitalist press began to attack the Grange violently, while the politicians in the sections where it was strongest sedulously cultivated it. But the leaders of the movement never made the fatal mistake of converting their organization into a political party. It held no political conventions, named no candidates for office, and even officially warned its members against discussing political questions at their meetings. Yet, according to a statement in the "New York Tribune", "within a few weeks the Grange menaced the political equilibrium of the most steadfast States. It had upset the calculations of veteran campaigners, and put the professional office-seekers to more embarrassment than even the Back Pay." The Grangers fixed their eyes, not upon men or upon parties, but upon measures. They developed the habit of questioning candidates for office concerning their attitude on pending legislation and of publishing their replies. Another favorite device was to hold Granger conventions in state capitals while the legislature was sitting and thus to bring personal pressure in the interest of their favorite bills. This method of suasion is an extremely potent political force and explains the fact that, in certain States where the Granges were most powerful, they had practically everything their own way in railroad legislation.
The measures which they thus forced upon the statute books and which represented the first comprehensive attempt to regulate railroads have always been known as the "Granger Laws." These differed in severity in different States, but in the main their outlines were the same. Practically all the Granger legislatures prohibited free passes to members of the legislatures and to public officials. A law fixing the rate of passenger fares—the maximum ranging all the way from two and one-half to five cents a mile—was a regular feature of the Granger programme. Attempts were made to end the "long and short haul" abuse by passing acts which prohibited any road from charging more for the short distance than for the long one. More drastic still were the laws passed by Iowa in 1874 and the famous Potter bill passed by Wisconsin in the same year. Both these measures, besides fixing passenger fares, wrote in the law itself detailed schedules of freight rates. The Iowa act included a provision establishing a fund of $10,000 which was to be used by private individuals to pay the expenses of suits for damages under the act, and this same act made all railroad officials and employees who were convicted of violations subject to fine and imprisonment. The Potter act was even more severe. It not only fixed maximum freight rates, but it established classifications of its own. The railroads asserted that the framers of this law had simply taken the lowest rates in force everywhere and reduced them twenty-five per cent. But Iowa and Wisconsin and practically all the States that passed the Granger laws also established railroad commissions. For the most part these commissions followed the model of that established by Massachusetts in 1869, a body which had little mandatory authority to fix rates or determine service, but which depended upon persuasion, arbitration, and, above all, publicity, to accomplish the desired ends. The Massachusetts commission, largely owing to the high character and ability of its membership—Charles Francis Adams serving as chairman for many years—had worked admirably. In the most part these new Western commissions were limited in their activities to regulating accounting, obtaining detailed reports, collecting statistics, and enforcing the new railroad laws.
These measures, following one another in rapid succession, produced a national, even an international sensation. The railroad managements stood aghast at what they regarded as demagogic invasions of their rights, and the more conservative elements of the American public looked upon them as a violent attack upon property. Up to this time there had been little general understanding of the nature of railroad property. In the minds of most people a railroad was a business, precisely like any other business, and the modern notion that it was "affected with a public interest" and that the public was therefore necessarily a partner in the railroad business had made practically no headway. "Can't I do what I want with my own?" Commodore Vanderbilt had exclaimed, asserting his exclusive right to control the operations of the New York Central system; and that question fairly well represented the popular attitude. That the railroad exercised certain rights of sovereignty, such as that of eminent domain, that it actually used in its operations property belonging to the State, and that these facts in themselves gave the State the right to supervise its management, and even, if necessity arose, to control it—all this may have been recognized as an abstruse legal proposition, but it occupied no practical place in the business consciousness of that time. Naturally the first step of the railroads was therefore to contest the constitutionality of the laws, and while these suits were pending they resorted to various expedients to evade these laws or to mitigate their severity. A touch of liveliness and humor was added to the situation by the thousands of legal fare cases that filled the courts, for farmers used to indulge in one of their favorite agricultural sports—getting on trains and tendering the legal two and a half cents a mile fare, a situation that usually led to ejectment for nonpayment and then to a suit for damages. The railroads easily met the laws forbidding lighter charges for long than for short hauls by increasing the rates for the longer distances, and the laws fixing maximum rates within the State by increasing the rates outside the State. When the courts decided the cases against the railroads, as in most cases they did, these corporations set about to secure the repeal of the laws. They started campaigns of education, frequently through magazine or newspaper articles pointing out the injustice of the Granger laws and insisting that they were working great public damage. It is a fact that a decrease in railroad construction followed the Granger demonstration, and the friends of the railroads insisted that timid capital hesitated to embark in an enterprise that was constantly subject to legislative attack. These campaigns succeeded much better than the more violent opposition to which the railroads had first resorted. The Western States in the majority of cases repealed their most drastic legislation. Nearly all the laws fixing maximum rates disappeared from the books, and even Iowa and Wisconsin substituted for these measures supervisory and advisory commissions after the Massachusetts model.
While the Granger movement thus failed effectively to curb the railroads, it succeeded in arousing great popular interest in the railroad problem and in placing before the public several of the most important details of that problem. Not the least of its achievements were the decisions which it obtained from the Supreme Court of the United States. The Granger cases are among the most epoch-making in American history, and they fixed for all time the principles of American policy in dealing with the railroad question. They are particularly worthy of study by those who have regarded the Supreme Court as the bulwark of social injustice and as a body which can always be relied upon to protect the rights of property against the interests of the masses. In its railroad decisions this change hardly holds; for these Granger cases sustain practically all the legal contentions made by the Granger legislatures.* The cases fixed for all time the point that a State, acting under the police power, may regulate the charges of a railroad even to the extent of fixing maximum rates. They even went so far as to hold that the right to fix rates is not subject to any restraint by the court on the ground of unreasonableness, a principle which the Supreme Court has reversed in more recent times. The courts also held that a State, at least until Congress acted, could regulate interstate commerce, but this decision also has since then been reversed. These subsequent reversals of decisions which were exceedingly popular at the time, however, not only constituted sound law but promoted the public interest, for they established that body of law which has made possible the present more comprehensive system of Federal regulation of railroads.
* The cases of particular interest were: Munn vs. Illinois, 94 U.S. 114; Peik vs. Chicago and Northwestern Railway Company, 94 U.S. 164; and Chicago, Burlington and Quincy Railway Company vs. Cutts, 94 U.S. 155.
Meanwhile the demand for regulation was gaining strength in the Eastern States, but for somewhat different reasons. The farmers of New England, New York, and the Eastern region in general had not particularly sympathized with the Granger legislation; they already had great difficulty in competing with the large Western farms, and a reduction in rates to the seaboard would have made their position even less endurable. This attitude was unquestionably selfish but entirely comprehensible. The agitation for railroad reform in the East came chiefly from the manufacturing and commercial classes. Here the main burden of the complaint was the railroad rebate. This was a method of giving lower rates to large shippers than to small—charging the favored shipper the published rate and then, at stated periods, surreptitiously returning part of the payment. This was perhaps the most vicious abuse of which the railroads have ever been guilty. That the common law forbade the practice and that it likewise violated the implied contract upon which the railroad obtained its franchise was hardly open to dispute; yet up to 1887 no specific law in this country prohibited the practice. For many years the rebate hung over the American business world, a thing whose existence was half admitted, half denied, a kind of ghostly economic terror that seemed persistently to drive the small corporation to bankruptcy and the large corporation to dominating influence. The Standard Oil Company was the "monster" that was believed especially to thrive upon this kind of sustenance, though this was by no means the only industry that maintained such secret relations with the railroads; the Carnegie Steel Corporation, for example, accepted rebates almost as persistently. It was not until 1879, when the Hepburn Committee in New York State had its hearings, that all the facts concerning the rebate were exposed officially to public view. The contracts of the Standard Oil Company with the railroads were placed upon the records and these showed that all the worst suspicions regarding this practice were justified. This disclosure made the railroad rebate one of the most familiar facts in American industrial life; and in consequence a demand arose for Federal legislation that would definitely make the practice a crime and also for some kind of Federal supervision to do effectively the work which the state commissions had failed to do.
By this time it was clear enough that the only hope of adequate regulation lay with the Federal Government. Congressman Reagan, of Texas, had for years been pushing a bill to regulate interstate commerce and to prohibit unjust discriminations by common carriers; other measures periodically made their appearance in the Senate; but the Houses had been unable to agree and nothing had been done.
Two facts presently gave great impetus to the movement; in 1886 the United States Supreme Court, reversing its previous decision, decided that no State could fix rates for railroad lines outside its own borders, in other words, that interstate rates were exclusively within the jurisdiction of the Federal authority*; and a Senate committee, under the chairmanship of Shelby B. Cullom, conducted an investigation of railroad conditions which made clear the need of immediate reform. As a consequence, Congress passed the Interstate Commerce Act, which received President Cleveland's signature on February 4, 1887. This measure specifically made illegal rebates, pools, higher charges for short than for long hauls (when the hauls in question were upon the same road); it required railroads to file their tariffs, and it established a commission of five members, who had powers of investigation, including the right to make the companies produce their books. This commission received power to establish systems of accounting and the like, but it had no prerogative to fix rates. Inadequate as this measure seemed to the radical element, it was generally hailed as marking the beginning of an era in the Federal control not only of railroads but of other corporations, and this impression was increased by the high character of the men whom President Cleveland appointed to the first board.
* Wabash, St. Louis and Pacific Railway Company vs. Illinois, 118 U.S. 557.
The Interstate Commerce Commission lasted essentially in this form for nearly twenty years. On the whole it was a failure. Such was the judgment passed by Justice Harlan of the United States Supreme Court when he remarked in one of his decisions that the commission was "a useless body for all practical purposes"; and such, indeed, was the judgment of the commission itself, for in its report of 1898 it declared that the attempt at Federal regulation had failed. The chief reasons for this failure, the commission said, were the continued existence of secret rates and the fact that published tariffs were not observed.* The managers of the great American railroad systems would not yet admit that the fixing of railroad rates was the concern of any one but themselves, and they still regarded railroad management as essentially a private business. If they could obtain large shipments by granting special rates, even though they had to do it by such underhanded ways as granting rebates, they believed that they were entirely justified in doing so. Thus rebates flourished almost as much as ever, passes were still liberally bestowed, and pools were still formed, though they sometimes took the shape of "gentlemen's agreements."
* But it should be added that the effectiveness of the commission as an administrative and regulating body was diminished by decisions of the courts, notably the decision of the Supreme Court in the maximum rate case. See 160 U.S. 479.
In 1906, when President Roosevelt became intensely active in the railroad problem, conditions were fairly demoralized. Attempts to enforce the anti-pooling clause had led railroads to purchase competing lines, and when the United States Supreme Court pronounced this illegal, the situation became chaotic. The evils of overcapitalization also became an issue of the times. The Interstate Commerce Commission had become almost moribund, and there was a general sentiment that the trouble arose from the fact that the commission had no power to fix rates and that the solution of the railroad problem would come only when such power was vested in it.* The Interstate Commerce Act which became a law on June 29, 1906, was the outcome of one of the greatest battles of President Roosevelt's political life. The act increased the membership of the commission from five to seven members, placed under its jurisdiction not only railroads but pipe lines, express companies, and sleeping-car companies, added to the other familiar restrictions a "commodities clause," which prohibited any railroad from transporting a product which it had produced or mined, "except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier"—this clause was intended to end the railroad monopoly of the coal mines—and made the failure to observe published tariffs a crime punishable with imprisonment. The amended law did not give the commission the right to fix rates in the first instance but did empower it, on complaint, to investigate charges and on the basis of this investigation to determine just maximum rates, regulations, and practices, though carriers were given the right of appeal to the courts.
* The Elkins Act of 1903 had, it is true, increased the effectiveness of the commission in dealing with discriminations, but it had not solved the problem of securing reasonable rates.
Thus, in essence, the public had obtained the reform which it had been demanding for years. The reorganized commission did not hesitate to exercise its new powers. It soon began actually fixing rates, and from being a half-alive despised institution it rapidly developed into one of the most powerful agencies of administration. In the succeeding ten years its powers were still further enlarged by acts of Congress and the privilege of fixing charges practically passed out of the hands of the railroads into the control of the Interstate Commerce Commission. The railroads, that is, practically lost the power to regulate their own income. Meanwhile, the progressive movement in American politics had led to the creation of commissions in most of the States, with similar authority over rate making within the States, besides exercising numerous other powers over service and capitalization. Many railroads fell upon evil days and receiverships again became common. Naturally the railroad managers attributed these calamities to the fact that they were so constantly being regulated; but they probably pushed this claim too far, for the causes of their troubles were more complex.
In 1916, in the heat of a political campaign, the Federal Government took a step which introduced a new principle into railroad management and made the roads practically helpless. The four brotherhoods of railroad operatives were making demands for a so-called eight-hour day, and threatened a general strike that would paralyze all business and industry and throw the whole life of the nation into chaos. Properly to appreciate the consequences of this event, it is necessary to keep in mind the fact that the plea for an "eight-hour day" was spurious. An eight-hour day cannot be rigidly enforced on railroads; the workmen well knew this, and indeed they did not really demand such working hours. What they asked for was a full day's pay for eight hours and "time and a half " pay for all in excess of that amount; that is, they demanded an increase in wages. President Wilson, having failed in his attempt to settle the difficulty by arbitration, compelled a Democratic Congress over which his sway was absolute to pass a law-sponsored by Chairman Adamson of the House Committee on Interstate Commerce—which granted practically what the unions demanded. In passing this law, Congress asserted an entirely new power which no one had ever suspected that it possessed—that of fixing the wages which should be paid by common carriers and possibly by other corporations engaged in interstate commerce. The railroads immediately took the case to the United States Supreme Court, which promptly sustained the law. This decision, unquestionably the most radical in the history of that body, declared virtually that Congress could pass any law regulating railroads which the public interest demanded.
And thus, after fifty years of almost incessant struggle with the public, was the mighty railroad monster humbled. It had lost power to regulate the two items which represent the existence of a business—its income and its outgo. The Interstate Commerce Commission was now fixing railroad rates, and Congress was fixing the amounts of railroad wages. It remained for the Great War to precipitate the only logical outcome of this situation— government control. The steadily increasing responsibilities of war soon told heavily upon all lines until, in the latter part of 1917, the whole railroad system of the United States had all but broken down. The unions were pressing demands for wage increases that would have added a billion dollars a year to their annual budgets. The fact that so large a part of the output of American locomotive works was being shipped to the Allies made it difficult for the American lines to maintain their own supply. Nearly all coastwise ships and tugs were utilized for war work, a large part of them had been sent to the other side, and this put an additional strain upon the railroads. The movement of troops, the heavy building operations in cantonments and shipbuilding plants, the manufacture and transportation of munitions, all put an unprecedented pressure upon them. Everywhere there was great shortage of cars, equipment, and materials. Possibly the railroads might have risen to the occasion except for the fact that the enormous increase in the cost of labor and supplies made demands upon their treasuries which they could not meet. They repeatedly asked the Interstate Commerce Commission for an increase in rates, but this request was repeatedly refused. The roads were therefore helpless, and their operations became so congested as to create a positive military danger. Under these circumstances there was profound relief when President Wilson took over the roads and placed them under government control, with William Gibbs McAdoo, Secretary of the Treasury, in active charge.
McAdoo immediately took the step which the Administration, while the railroads were under private control, had steadily refused to sanction, and now increased the rates. These increases were so great that they made the public fairly gasp, but, under the impulse of patriotism, there was a good-natured acquiescence. McAdoo also increased wages by hundreds of millions of dollars. His administration on the whole was an able one. He ignored for the moment the prevailing organization and managed the roads as though they constituted a single system. He instituted economies by concentrating ticket offices, establishing uniform freight classifications, making common the use of terminals and repair shops, abolishing circuitous routes, standardizing equipment, increasing the loads of cars and by introducing a multitude of other changes. All these reforms greatly increased the usefulness of the roads, which now became an important element in winning the war. Properly regarded, the American railroads became as important a link in the chain of communications reaching France as the British fleet itself. It is not too much to say that the fate of the world in the critical year 1918 hung upon this tremendous railroad system which the enterprise and genius of Americans had built up in three-quarters of a century. In February, 1918, Great Britain, France, and Italy made official representations to the American Government, declaring that unless food deliveries could be made as they had been promised by Hoover's food administration, Germany would win the war. McAdoo acted immediately upon this information. He gathered all available cars, taking them away from their ordinary routes, and rushed them from all parts of the country to the great grain producing States. All other kinds of shipments were discontinued; officials and employees from the highest to the lowest worked day and night; and presently the huge supplies of the indispensable food started towards the Atlantic coast. So successful was this operation that, on the 12th of March, the supplies so exceeded the shipping capacity of the Allies that 6318 carloads of food stood at the great North Atlantic ports awaiting transportation. This dramatic movement of American food supplies was an important item in winning the war and fairly illustrated the great part which the American railroads played in turning the tide of battle from defeat to victory.
General literature on the history of American railroads is surprisingly scarce. While numerous volumes have been written in recent years on special phases of the railroad question, few histories of any real value are available. Probably the best outline history of American railroad development as a whole is still Arthur T. Hadley's "Railroad Transportation, its History and its Laws" (1885), but this necessarily covers only the earlier periods of railroad growth and its discussions are limited to the problems which confronted the carriers many years ago. An extremely valuable book (now out of print) giving a very complete picture of railroad building and expansion in the pre-Civil War period is "The Book of the Great Railway Celebration of 1857", by William Prescott Smith. This is primarily a description of the opening of the Ohio and Mississippi Railway, which connected the Mississippi Valley for the first time with the Eastern seaboard. A volume of real value, but somewhat technical, giving a complete and accurate view of the reorganization period of the great railroad systems, from 1885 to 1900, is "Railroad Reorganization", by Stewart Daggett (1910). This book contains outline sketches of the histories of nearly all of the large systems, as well as very accurate details of the financial reorganizations of all of the defaulted properties. The most comprehensive history of any American railroad system is "The Story of Erie", by H. S. Mott (1900), but even this is partially unreliable and much of it is compiled from unofficial sources. On the financial history of the Erie Railroad, the really valuable authority is Charles Francis Adams in his "Chapters of Erie" (1871). This book furnishes a full and accurate account of the regime of Daniel Drew, Jay Gould, James Fisk, Jr., and the famous "Erie ring," including "Boss" Tweed, and also throws side lights on the character and career of Commodore Vanderbilt. Among other important histories of particular railroad systems may be mentioned "The Union Pacific Railway", by John P. Davis (1894) and "History of the Northern Pacific Railroad", by Eugene V. Smalley (1883); but neither of these volumes covers the recent and more interesting periods in the development of these properties. To get a complete and satisfactory view of the later development of the Northern Pacific system, one must turn to modern biographical works, such as the "Life of Jay Cooke", by E. P. Oberholtzer (1910), the "Memoirs of Henry Villard" (1909), and the "Life of James J. Hill", by Joseph Gilpin Pyle (1916), which also recounts at length the rise and development of the Great Northern Railway system. But in these volumes, as in many biographies of great men, the authors often betray a bias and misrepresent facts vital to an understanding of the development of both of these railroad systems. A recent volume entitled the "Life Story of J. P. Morgan", by Carl Hovey, although extremely laudatory and therefore in many ways misleading, contains valuable information about the development of the Vanderbilt lines after 1880 and also about the financial vicissitudes and rehabilitation of the many Morgan properties, such as the Southern Railway, the modern Erie system, the Northern Pacific, the Reading, and the Baltimore and Ohio.
Some of the railroad companies many years ago themselves published histories of their lines, but most of these attempts were of little value, as they were always too laudatory and one-sided and evidently were usually written for political purposes. The best of this class of railroad histories was a book issued by the Pennsylvania Railroad many years ago, giving a record (largely statistical) of the growth and development of its lines. But this book has been long out of print and covers the period prior to 1885 only.
For original material on American railroad history, one must depend almost entirely on financial and railroad periodicals and official and state documents. By far the most valuable sources for all aspects of railroad building and financing during the long period from 1830 to 1870 are the "American Railroad Journal" (1832-1871) and "Hunt's Merchant Magazine" (1831-1870). Both of these periodicals are replete with details of railroad building and growth. And for the period from 1870 to the present time the best authority is the "Commercial and Financial Chronicle", with its various supplements. The story of modern railroading is so intertwined with finance and banking that to get any broad and complete view of the subject one must consider it largely from the viewpoint of Wall Street. For facts regarding operation and management of modern railroads, the "Railroad Age-Gazette" also is extremely useful. By far the most valuable sources for railroad statistics, railroad legislation, and all related facts, are the annual reports and bulletins of the Interstate Commerce Commission, which have been regularly issued since 1888. Many state commissions also have issued volumes of value.
The best account of the origin of the Granger laws is contained in S. J. Buck's "The Granger Movement" (1913). The beginnings of Federal regulation are traced in L. H. Haney's "A Congressional History of Railways in the United States, 1850-1887" (1910). The history of recent railroad regulation by state and Federal legislation, and of court decisions affecting the railroads, is clearly and succinctly told in William Z. Ripley's "Railroads: Rates and Regulation" (1912), and in Johnson and Van Metre's "Principles of Railroad Transportation" (1916).
Courtesy The James J. Kelly Library of St. Gregory's University, Alev Akman.
Scanned by Dianne Bean.
Proofread by Stephanie Manke.
Also available as unformatted text for unrestricted download via ftp.