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greater charge for a shorter haul would injure the great agricultural West and all interested in eastbound traffic.15
The same argument was used at the other end of the line, representatives from New England, New York, and Florida opposing it on similar grounds.
Against a rigid clause it was argued that water carriers and intrastate and Canadian lines would profit; for the railways subject to the act would then be unable to compete profitably. The familiar point that by the addition of a cheap through traffic lower rates may be levied on the local traffic was often made.
Mr. Rice (Mass.) held that competition would be destroyed: “Here is a road between two cities two hundred miles long. Here is another road going another route between the same termini three hundred miles long. Now this second road can only carry freight between the terminal points as cheaply as the other does;" therefore under a long-and-short-haul clause, it must either cease to compete or charge losing rates on local traffic.16
The Senate committee, whose report was so influential, did not doubt the injustice of charging more for a shorter than for a longer haul under most circumstances; but thought it inexpedient to enforce a rigid prohibition of such charges, fearing that competition would be stifled in many cases and the country be deprived of low through rates to tide-water.17 A large majority of the witnesses examined had urged the incorporation in the bill of some provision as to long and short hauls, and the committee was convinced of the necessity for legislation on the subject. “Such legislation must of necessity be largely experimental, and its effects cannot be accurately determined in advance.
There was great confusion in the minds of congressmen as to the exact significance of the long-and-short-haul clause. “Where one member says, 'I will vote for that phraseology, because it
See also p. 119, Mr. Davis.
15 Ibid., 1884-85, p. 686 circa.
means so and so;' and another says, “I will vote for it means exactly the reverse,' I say in that case there is not that consensus of legislative intention which makes the proper enactment of law,"19_these words of Mr. Dibble's (S. C.) were very significant and apropos. Some persistently labored under the delusion that the clause had a pro rata effect and would mean equal mileage rates. The most serious haziness occurred with regard to the phrase, “substantially similar conditions." Did competition in any form constitute a condition? did export trade? There was a determined effort to get an expression of opinion on this point from the Senate conferrees,20 but these gentlemen stated that the interpretation of the measure was a matter for the courts to decide and that each member in voting was to consider what he thought the courts' interpretation would be. Mr. Hoar (Mass.) read a letter from Mr. Crisp, a House conferree, to the effect that export trade, and competition did constitute circumstances and conditions which might be justification for an exception to the clause. There is, however, no evidence that this was the general idea.
There was also difference of opinion as to whether or not the term “line” would include more than the railway controlled hy a single company, a point which was to be settled by judicial interpretation some years later.
A Commission. The majority of the Senate always favored a commission, and it is believed that, in 1887, this might be said of the House. In 1884, however, the majority of the House stood with Judge Reagan in opposing such a body; and when it was moved to amend the House bill by adding a provision for a commission the motion was lost by a vote of 96 to 126, 101 not voting.21 Mr. Reagan expressed his views in these words: "In opposition to placing this great interest in the hands of a commission,
the substitute (Reagan) bill declares what shall be done and what shall not be done
and after giving all the necessary remedies on the criminal and civil docket, I propose to give equitable powers, so as to compel par
19 Cong. Rec., 1886–87, p. 839. 20 Ibid., p. 571 ff. 21 Ibid., 1884-85, p. 552.
ties to testify and produce books and papers, in order that the ends of justice may be fairly attained
This statement implies what was the great objection of a large number of anti-commission men. They looked upon a commission as a substitute for action, as a mere sop thrown to the public instead of a remedy for the evil; and they demanded strict legislation against pooling, rebates, etc., to be enforced by the courts, “which are within convenient reach of the people, and with whose methods of procedure they are familiar." It was maintained that a commission was un-American and undemocratic.23 Yet a large number of the states had railway commissions at the time, which fact Judge Reagan appears to have overlooked, although he saw their provisions concerning pooling and long-and-short hauls.
It was urged that so small a number of men could not possibly supervise so great a railway system.
And that they could maintain their integrity in the face of such corrupting pressure as would be brought to bear upon them was gravely doubted.
It was a class of men very different from those who objected to a commission as being a sham and un-American, which argued against its constitutionality. These, generally lawyers, said that Congress would be delegating legislative powers which was in itself unconstitutional—and would be combining legislative, executive, and judicial functions in one body, a palpable violation of the constitution.24
Mr. Cullom advanced the following arguments for a commission: (1) The mere fact of its existence would prevent abuses, -a fact attested by experience with state commissions. (2) Backed by public opinion many cases would be decided out of court. (3) The shipper would have a prima facie case made out and prosecuted by the government. Its value as an investigating body of experts was also realized,
22 Ibid., p. 31. Later Mr. Reagan moved to substitute his bill for the first seven sections of the committee bill, leaving the commission sections intact; but this was a concession of expediency and he remained opposed to a commission.
23 Ibid., 1885-86, p. 7280-4.
In reply to those who clamored for more direct action it was shown that in practice the people unaided failed to find a remedy in the courts. This had been made clear by English experience.25 Moreover, the direct-activity men seemed to forget that rebates, pooling, extortion, and discrimination were forbidden, as they desired; and, simply, the commission was the executive board for securing the enforcement of the law.
Nor did the act prevent, but specifically authorized pursuing the ordinary means for obtaining a remedy through direct application to the courts.
The fact seems to be that the above objections to a commission were brought forth at the earlier stages of the evolution of the act when commissions, purely advisory, were proposed for purposes of investigation, and continued to be repeated in the parrot-like way that characterizes both the obstinate and the uninformed. On a par with this objection was the hazy notion that the Reagan bill--among its other “iron-clad" characteristics, so-called-in some way regulated rates. Mr. Reagan once said, “One of the greatest troubles I have had even with the friends of legislation in this direction has been to get them to understand that this (the Reagan bill) is not a bill to regulate frieght rates.
I know the difficulties which would attend any measure attempting to prescribe rates of freight. I am persuaded that no law fixing rates of freight could be made to work with justice either to the railroads or to the public; and I have intended from the beginning to avoid that difficulty.”:28
Overcapitalization. One other topic which occupied much space in the discussion of railway regulation was overcapitalization and watered stock. Statistics from Poor's Manual were frequently cited to show gross overcapitalization, the average capitalization being over $62,000 per mile in 1883, while the average cost was stated to be about $30,000 a mile. Cost was generally considered to be the proper basis for determining reasonable rates, and even a railway valuation was proposed. Some were in error in thinking that improvements and extensions
23 Hadley was quoted to the contrary, but, then, as now, Mr. Hadley's pes. simism on this subject had little effect on the majority.
26 Cong. Rec., 1884-85, p. 533.
should not be capitalized and no doubt the element of risk was underestimated by such. As no legislation was passed on this subject further discussion seems unnecessary.
A few of the more patent economic errors often exhibited in the discussion may be mentioned, in addition to those concerning capitalization, to which reference has just been made.
It is true, as was implied by one speaker, that if a shoemaker sold each pair of shoes at a loss his loss would be proportionate to his sales; but evidently this reasoning overlooks the fact that, as expenses per shoe may be reduced as the scale of production increases, the loss per pair may vanish and become a gain. In the same way, as every beginner in transportation knows, as the number of ton miles increases expenses do not increase in proportion and what would be a losing rate may become profitable. This was not clearly understood by many a congressman who voted on the Interstate Commerce Act.
Then, too, there were relatively few who grasped the idea that the railway business has its economic peculiarities, though men like Mr. Platt (Conn.), Sewell (N. J.), and Brown (Ga.) explained the case.27 The majority believed in the good old "natural laws" of trade and the efficacy of competition. But the more progressive or thoughtful minority showed that railway transportation is not the same as other business; that once built a railway will not be readily abandoned but even when bankrupt will continue to compete as “a potent factor for good or for evil;'' and that this fact was emphasized and the situation made worse by receiverships. Furthermore a large part of the expenses of railways are fixed and do not vary with the amount of business done; hence there is not the connection between cost and rates of charge which exists in most other businesses.28 In justice to those who argued that ruinous competition was not necessary with railways it should be observed that the tendency might be admitted while holding that legislation might, by maintaining and equalizing rates, prevent or diminish the abuse.
27 See e. 9., Cong. Rec., 1886-87, p. 393; and ibid., 1884-85, p. 440 ff. 2 No expression of the idea of joint costs has been found by the writer.