Railroad Gazette/Volume 38/Number 5/"Let Justice Be Done"
“Let Justice Be Done”
It is more than a decade since a great and wise railroad president, now deceased, appealed to the public, in a paper bearing the above title, to deal fairly and justly with the railroad industry. He urged that if there is no alternative save oppressive legislation on the one hand and government ownership upon the other, simple justice to the investors in railroad property demands that these properties be taken over by the government at a fair valuation. Long ago the advocates of drastic anti-railroad laws, adopting an argument similar to that by which reluctant children are urged to swallow nauseous medicines, which may or may not have been wisely prescribed, began to use the bugaboo of government ownership to frighten conservative citizens into acceptance of their legislative nostrums. Thus Prof. Henry C. Adams, statistician to the Interstate Commerce Commission, writing in 1896, said:
There are two possible lines of development, both of which call for an extension of governmental authority. The one is to increase the powers conferred upon commissions, so that they may become in fact, as they now are in theory, a positive influence in the conduct of railroad affairs; the other is to adopt the policy of government ownership and government management.
It is gratifying to note that although the President regards “increased supervision” as the “only alternative to an increase of the present evils on the one hand or a still more radical policy on the other,” his experienced Secretary of the Navy, fresh from daily and practical contact with the business of transportation and the patrons of a great railroad system, sees at least two other possibilities, both of which lie in the direction of greater rather than less freedom on the part of the individuals and corporations engaged in this great industry. But if it is to be a choice between the evils of government control without ownership and government ownership and control, which should railroad investors choose? It is not particularly pleasant to discuss this or any other American problem from the point of view of class interest, but when a threat is hurled at one industry such discussion may be justified. And the railroad class is a large one. Primarily, it consists of one and one-half millions of workers whose names are borne upon railroad pay-rolls and of other millions who build cars, make rails, mine locomotive fuel, raise grain to feed railroad labor and follow the thousand and one vocations which contribute to the sustenance of this great industry. Then there are the millions of depositors in savings banks that own railroad securities, the policy holders of insurance companies whose capital and reserve funds are similarly invested, the students and other beneficiaries of universities and other institutions whose endowments and trust funds rest upon railroad stocks and bonds. To this great and worthy class the enactment of the Quarles-Cooper bill, or the Hearst bill, or the Townsend bill, or the Hepburn Dill, or the Davey bill, or any other rate-making measure means that the industry upon which its members depend shall be confined in legislative swaddling-clothes. When any of these measures has become a law, elasticity of railroad rates will have become a thing of the past. Facility in adopting rates to the changing demands of an intensely dynamic industrial organization will be no more, although such facility is precisely the means by which American industry and American railroads have grown great together. The rates and the revenues of every railroad system will be hopelessly at the mercy of a Federal board, whose members are selected as partisans and may be chosen for political reasons. It will no longer be safe to make empirical concessions in the hope of augmenting traffic at particular points or of particular kinds, for every reduction will be a club by which the ultimate authority, that is, the Interstate Commerce Commission or whatever board may take its place, could and probably would compel other and undesirable reductions. The effect upon the railroads would be no worse than that upon all other industries, but we are now considering the subject solely from a railroad point of view. Government rate-making, whether under government ownership or under control not based upon ownership would stretch all American industry, including the railroad industry, upon a procrustean bed and could cause nothing but numbness, stagnation and deformity.
Does not this make the sensible choice of the railroad class perfectly clear? Under government rate-making and private ownership they would bear the first consequences of the blow. With this alternative, railroad labor and railroad capital would suffer first and most acutely. Government ownership would enable the present railroad class either entirely to “stand from under” or at the worst but to bear their proportionate share of the aggregate evil inflicted upon the community. The worst evil of government ownership would in fact be precisely that now sought to be imposed, viz., government rate-making. If the railroads were owned by the government, railroad employees could hope to maintain, for a time at least, their present high relative standard of earnings, by means of united political action. Ultimate reduction would probably be necessary in consequence of reduced efficiency in management, but this would probably be long postponed. The savings banks, insurance companies, colleges, missionary societies, etc., as well as the private owners of railroad securities would fare still better.
But when government ownership is brought about, if it ever is, it will not be, for it cannot be, by the confiscation of property. If railroad property is taken for pub-- lic use, those from whom it is taken must be given fair compensation therefor. There is but one way to meet this constitutional requirement and that is to issue to them government bonds to the full value of their holdings in railroad securities. When they have been so compensated they need worry no longer concerning the future of the American railroad system. If the rates made by the government officers charged with that duty and the methods of operation adopted by government functionaries do not leave a sufficient balance, after paying wages and other costs of operation, to meet the interest on the bonds issued to pay for the railroads, Congress will have to impose a general tax sufficient to meet the deficit. And why not? If the railroads are to be run by the government, that is by the politicians, it is clear that the people who order the change, must pay the cost. It cannot fall directly upon a class which is powerless to prevent a change which its leaders have consistently advised against. “Let justice be done.” By all means, Mr. President, if government ownership is the only alternative to legislative spoliation, let us have government ownership—provided the government is willing to pay the cost! At any rate, when that proposition is brought forward, the people will know just what they have to meet and will be ready to meet it.