1/5 ne Cornell Mniversity Library BOUGHT WITH THE INCOME FROM THE SAGE ENDOWMENT FUND THE GIFT OF Henry W. Sage 18901 SOS ee ncn cncimem 1357 OLIN LIBRARY — CIRCULATION GAYLORO DATE DUE HE1051 .H15 Problems in railway regulation PROBLEMS IN RAILWAY REGULATION THOR: 9 THE MACMILLAN COMPANY NEW YORK + BOSTON + CHICAGO SAN FRANCISCO MACMILLAN & CO., Limitep LONDON + BOMBAY + CALCUTTA MELBOURNE THE MACMILLAN CO. OF CANADA, Lr. TORONTO PROBLEMS IN RAILWAY REGULATION BY HENRY S. HAINES MEMBER AMERICAN SOCIETY CIVIL ENGINEERS; MEMBER AMERICAN SOCIETY MECHANICAL ENGINEERS; FORMERLY VICE-PRESIDENT AND GENERAL MANAGER “PLANT SYSTEM” OF RAILROAD AND STEAMSHIP LINES; ALSO COMMISSIONER SOUTHERN STATES FREIGHT ASSOCIATION; EX-PRESIDENT AMERICAN RAIL- WAY ASSOCIATION; AUTHOR OF “AMERICAN RAILWAY MANAGEMENT,” “ RESTRICTIVE RAILWAY LEGISLA- TION,” AND “ RAILWAY CORPORATIONS AS PUBLIC SERVANTS ” New Work THE MACMILLAN COMPANY IQII Ad rights reserved GH t\ vy CopyrRIGHT, 1911, By THE MACMILLAN COMPANY. Set up and electrotyped. Published October, rorr- Nortoood Press J. 8. Cushing Co. — Berwick & Smith Co. Norwood, Mass., U.8.A. nae PREFACE THE purpose of this work is to follow the course of railway regulation in this country to the present time, to consider the several ways in which our rail- way system has affected the general welfare, and to offer some suggestions as to its future regulation; if that system is to be viewed as an organic factor in the further exploitation of our natural resources and in the evolution of our characteristic social order. Its scope includes such a description of past con- ditions as seems necessary to trace to their origin the ills complained of, and to exhibit the effects of the attempts to cure them by government regulation. These intermediate conditions have been treated with greater particularity in previous works on “ Restric- tive Railway Legislation”’ and on “ Railway Corpora- tions as Public Servants,” of which this work is in that sense a continuation. CHAPTER CONTENTS THE AMERICAN RAILWAY SYSTEM The Period of Formation. THE AMERICAN RAILWAY SYSTEM The Period of Extension. THE PERIOD OF RECONSTRUCTION THE PERIOD OF REGULATION RECENT RAILWAY REGULATION OF INCORPORATION IN FINANCE IN CONSTRUCTION IN OPERATION IN TRAFFIC IN DISCRIMINATION IN RATE MAKING OF CAPITAL AND LABOR THE TENDENCY OF GOVERNMENT REGULATION I. INTRODUCTION II. III. IV. V. VI. VII. PROBLEMS VIII. PROBLEMS IX. PROBLEMS X. PROBLEMS XI. PROBLEMS XII. PROBLEMS XIII. PROBLEMS XIV. PROBLEMS XV. APPENDICES INDEX PAGE 18 43 71 98 124 174 208 260 304 349 382 413 459 49! 523 567 PROBLEMS IN RAILWAY REGULATION CHAPTER I INTRODUCTION A DEMocRACY settles but one political issue at a time. In the first flush of popular excitement, it is futile to endeavor to give a rational direction to the discussion. Statements founded upon a_ thorough investigation of the subject matter or upon expert knowledge are ignored. If they are from independent, impartial observers, they usually contain some propo- sitions that are unwelcome to the interests attacked or, if they favor the parties defendant, they are con- temned as being either bought or biased. In fact, when one reads the newspaper accounts of such a discussion, it would almost seem that all which had been written on the subject, the result of experience and reflection, had been written in vain. The arguments that captivate public opinion have their origin perhaps in individual or sectional griev- ances, partly real but largely sentimental, or they arise in a period of general financial depression which is popularly attributed to the immediate and there- B I 2 PROBLEMS IN RAILWAY REGULATION fore more apparent links in a chain of causes and effects, whose governing factor is remotely concealed. By means of such arguments, politicians attain notoriety and succeed in placing upon the statute books the remedial legislation that they advocate. The effect of such legislation may not be imme- diately perceived. It may have become involved with correlated or contemporaneous phenomena; so that only in the course of time will it be practicable to disentangle the complicated reactions and ascribe to each factor its relative agency. But meanwhile the voice of the people has been heard, and recalcitrant interests must conform to its mandate. For it is by such means that legislation crudely indi- cates the will of a democracy. It may not at first conform to actual conditions; often it does not. But by degrees, and principally through its modifi- cation by resort to the courts for its interpretation ‘under the light of experience, it becomes adapted to the state of society in which it is to be applied. Earnest and honest efforts to find remedies for ad- mitted evils, though they may fail of the purpose in view, do assist in bringing about a better state of things. As Milton said, “the opinion of good men is knowledge in the making.” The gain politically is in the general recognition of a fundamental principle underlying some novel complexity in economic con- ditions, which has gradually involved the social order INTRODUCTION 3 without attracting observation, until attention is directed to its objectionable effects upon the welfare of the community. Many of the propositions thus presented for public discussion are urged from personal motives or are intended to further individual or local interests. Under our form of government, action on such propo- sitions is usually confined to the legislatures of the several states in the Union. In considering those of a national character, and looking back only to the termination of the Civil War, we have had first to settle those which concerned the political status of the conquered states. Few even of these issues have proved to be of more than temporary importance. Of those which still remain as a heritage from that period, the most important problems of a national character have arisen from the unsettled relations of the white and black races in the Southern States. In fact, these may be considered as the only ones that are purely political, in so far as they affect the fundamental principles of constitutional govern- ment. Others which have been treated as politi- cal issues are at bottom social problems, such as the prohibition of the sale of intoxicants, and, in- deed, the relations of the races may gradually lose the character of political issues and be placed in the same category. Such issues have at different times aroused bitter 4 PROBLEMS IN RAILWAY REGULATION animosity and convulsed the temperament of our people to an extent that would permit of no rational discussion of them. They have been utilized for scenic displays of ambitious oratory or for securing political preferment by sensational appeals to sectional or class prejudices. Yet by continual attrition, in the course of public discussion, these also have be- come divested of the political husk in which they were enveloped and the substantial issue has at length appeared as an economic problem. This may be asserted of the problems that were presented in the reéstablishment of the public f- nances and the resumption of specie payment, as in the issue of the “‘Greenback currency,” certainly of the demonetization of silver. The sug- gestion that silver should be placed on a parity with gold as the basis for a paper currency was in its origin a political expedient devised to secure the support of and more senators from the silver-producing states in the pas- sage of a customs tariff bill. Yet opposition to this purely partisan scheme was afterward eloquently de- nounced as a crime which could only be adequately symbolized by comparison with the tragic culmination of the revelation of God to Man. So true it is that faith without knowledge in matters of fact confuses the sense of right and wrong. When we consider the subsequent displacement of silver as a circulating medium of equal dignity with INTRODUCTION 5 gold and its general relegation to the position of a merchantable commodity, we recognize the factitious character of the political agitation which obscured the economic aspects of this problem; an agitation which was even utilized in dissolving the ties of po- litical parties to further personal ambition. As this topic seized upon public opinion, an opportunity was afforded for those rhetorical appeals which are as dear to the political orator as to his hearers; since they call for but a superficial acquaintance with the subject on his part and make as little demand upon their reasoning powers. While partisan feeling with reference to the “Free silver” question was at its height, the growing im- portance of certain problems connected with our rail- way system also attracted public attention and, when the demonetization of silver had become an accomplished fact, railway regulation replaced it as a prominent political issue. In the course of dis- cussion, public interest was diverted from the original presentation of the matter as a regulation of railway rates and was directed to the restriction of the privi- lege of consolidating competing railway lines. The next step was toward the prevention of a common control of competing railway corporations. At length, the regulation of incorporated capital in general he- came a political question and was seized upon by the same class of partisan agitators who had made use of 6 PROBLEMS IN RAILWAY REGULATION the ‘‘Free silver” issue to disorganize the two prom- inent political parties. To prevent disorganization, both parties avowed adhesion to such regulation as one of the prin- ciples of their respective platforms in the last presidential campaign. The party that expressed the most conservative views on the subject prevailed by such a substantial majority as to place the respon- sibility for further legislation concerning it upon the representatives of that party in the federal govern- ment; and those who are disposed to judge of the future by the past may perceive an analogy in the subsequent outcome of this agitation with that which made a political issue of the “Free silver” question. As a result of the last presidential election, public opinion concerning the regulation of railway cor- porations may gradually cool down to a temperature that will admit of its discussion apart from consider- ations of partisan advantage. When that time arrives, the problems affecting the railway situ- ation which were made to do service in this contest should be disentangled from political complications; in order that it may be ascertained in what respects they really are political and in what respects they may be commercial or economic in their origin and develop- ment. Use may then be made of experience already acquired ; that is, if we recognize the value of learning INTRODUCTION 7 from such experience instead of going over the same ground and paying for it a second time. In no other country has the development of its rail- way system given rise to political issues of the char- acter which it has engendered in the United States. Therefore there is but little for us to gain from the experience of the countries in Continental Europe. In those countries the highways and canals had been under the control of the superior governments for centuries. Railways were only introduced after their paramount importance as means of communication had already been demonstrated in Great Britain, and their regulation became at once a matter of bureau- cratic administration. The main political’ issue was that of state ownership, which is, as yet, not a burning question with us. It is only in Great Britain, where the ownership of the national system has always been in private corporations, that we may learn much of present advantage in the matter of regulative legis- lation. The ‘Free silver” issue was but one phase of a controversy that dates back to the discovery of gold and silver, while the discoveries which have given rise to railway problems originated with the generation that has just passed away. From time immemorial, transportation by land had been accomplished with animal power. Down to the second quarter of the nineteenth century there had been no change in 8 PROBLEMS IN RAILWAY REGULATION this respect. The means of transportation were still the ass, the horse, and the camel, as in the days of the Hebrew patriarchs. The muscular power and the physical endurance of these animals still limited the capacity and the rapidity of all communication by land. So far as these elements of transport service affected the expansion of commerce, the welfare of the human race had attained its utmost limits. When the railway began to be used for the trans- portation of goods and passengers, the vehicles were still drawn by horses. It was therefore looked upon as a highway, like a turnpike road, though dif- ferent somewhat in construction. Efforts were made to utilize it in the same way by collecting tolls from all comers who would adapt the wheels of their vehicles to the rails. But the substitution of the locomotive for the draught horse compelled the as- sembling of the vehicles in trains and brought the control of their movements directly under the railway management. With this concentration of the main- tenance of the roadway and the control of the train service under one management, the mission of the railway began as an entirely new method of land transportation. A change was at once brought about in the manner of compensation for the service performed, from tolls on vehicles to specific charges for transporting their contents; and the foundation was laid for the differ- INTRODUCTION 9 ences of opinion with respect to railway rates which still afford themes for orators and problems for political economists. The appearance of the railway as a competitor to the turnpike was accompanied by the obligation to obtain from Parliament the powers necessary to the performance of a public service and with the first recognition of the peculiar character of the service which the railway was thereafter to per- ‘form, there came also the correlative appreciation of its availability as a political issue. The right-of-way or ‘“‘way-leave” for tramways that mine owners had obtained through private prop- erty by negotiation with the landowners might be obtained for a public highway, without their consent, by the exercise of the right of eminent domain inherent in the sovereign state. On the accompanying question of land damages, the political agitation was concen- trated. Every attempt to obtain a railway charter was vigorously resisted by the territorial magnates. All obvious means were resorted to for creating a public opinion adverse to the new method of transportation. The antagonism was utilized of the interests associated with the turnpike trusts, the stage-coach and wagon ‘lines, the canal companies, and the barge lines. Many influential persons whose pecuniary interests were not unfavorably affected were drawn into the opposition by that antipathy to innovation which comes from mental inertia. The locomotive was denounced as 1o PROBLEMS IN RAILWAY REGULATION an engine for spreading vile fumes throughout the atmosphere and for scattering incendiary fires over the country. The accidental death of a cabinet min- ister at the opening of the Liverpool and Manchester Railway deterred many persons from traveling by rail, and others, from class prejudice, insisted upon having their own carriages transported in open wagons. By such appeals to selfish motives and to class prej- udices, and by arousing antipathy in those who had no direct interest in the matter a formidable opposition was arrayed in Parliament against railway promotion. This opposition, however, had no real foundation in a desire for the public welfare. It was organized for the purpose of “holding-up” the incorporation of railway companies in the interest of the landed propri- etors, to enable them to demand exorbitant damages as the price for their assent. The stage of develop- ment into which the railway system of England was then entering afforded favorable opportunities for the prosecution of such schemes. The profitable returns from some of the earlier rail- way undertakings furnished promoters with arguments on which to base forecasts of the possibilities latent in their own projects that attracted general attention to the new mode of transportation. The adaptation of the principles of joint-stock ownership as a financial basis for these projects facilitated the investment in them of the profits of small tradesmen and of savings INTRODUCTION II from moderate fixed incomes. A speculative epidemic ensued comparable to that which had been engendered by the operations of the South Sea Company, sixty years before. ; The ordinary legislative duties of Parliament were so much obstructed by the numerous applications for corporate powers that special committees were created to dispose of them. The hearings held by these committees were without precedent in parlia- mentary experience. Promoters contended with each other for permission to occupy the same route with their rival lines and, into this contention, the represent- atives of the landholders entered with vigorous pro- tests. The money of all the contestants was lavished upon the advocates who practiced before the com- mittees. The competing promoters were at the mercy of the landed proprietors who controlled parlia- mentary constituencies and who made the terms with them for their support; so that it may be said that compensation for land damages was but another ex- pression for indirect bribery. This item, with that of parliamentary expenses, aggregated an amount so vast that it seriously increased the capitalization of the railway corporations, and to this day an appreciable proportion of the charges on railway traffic in Great Britain is devoted to defraying the interest on the useless expenditure entailed by vicious legislation. Like every other figment of the imagination that 12 PROBLEMS IN RAILWAY REGULATION obsesses popular opinion, the mania for investment in railway undertakings had to run the usual course, heedless of the consequences which follow upon a refusal to recognize statistical facts and a disregard of economic laws. The general eagerness to get rich quickly increased in intensity until the inevitable moment could no longer be delayed and the specu- lation in railway shares collapsed, to the conster- nation of the thousands who had ventured and lost the savings of a lifetime or the inheritance which had been their means of support. After the financial panic of 1849, there was time for sober reflection, and the public began to see that there were issues involved in the railway situation that affected the welfare of the people at large, as dis- tinguished from railway promoters and shareholders and from landowners, and the matter became the subject of serious investigation. The-shrinkage in the market prices of railway shares had been so great as to assume the importance of a national calamity. But the collapse of the speculative railway mania differed in its character from the bursting of the South Sea Bubble, which was purely fictitious and without realizable assets. The railway promoters, on the contrary, were not altogether cheats, but often only too optimistic. The premises of their prospectuses might have been correctly stated, while their con- clusions were erroneous or exaggerated, and they INTRODUCTION 13 deceived themselves with their own arguments. The money invested in their enterprises was for the most part represented by railway property that had a pro- ductive capacity of a substantial character, to which the prices of railway shares conformed after confidence had been regained in the permanent value of railway communication as a public service. For these reasons, when general attention was at- tracted to the railway corporations by the spectacular expansion and collapse of speculation in their shares, they were not treated as being inimical to the welfare of the people at large or as imperiling their political rights. Fortunes had been made, it was true, by questionable and even fraudulent practices; but in- stances of this kind were considered as matters for the courts to deal with either by civil or criminal procedure. There was no disposition to utilize such cases as themes for inciting partisan animosity or for creating class antipathy. Legislation was directed rather to such amendment of the laws concerning corporations as would provide suitable remedies for the evils which had sprung up with the construction of the national railway system by means of individual investments in private cor- porations. The regulation of their powers was treated apart from the regulation of railway transportation as a public service. It was recognized that the wel- fare of the nation was inseparable from the prosperity I4. PROBLEMS IN RAILWAY REGULATION of the corporations whose securities had become an important element of the national wealth, and it was not thought discreditable for a member of Parliament to advocate a careful consideration of the effect upon their prosperity of legislation intended to regulate them in the public interest. The governing classes had become involved in rail- way investments to such an extent that their inter- ests were fully considered in the parliamentary de- bates. Discussion was accordingly directed, in a great measure, to the reorganization of the railway system by the amalgamation of rival lines; but the internal commerce of the country had so profited by their rivalry that the mercantile interests were strongly opposed to such projects. The question of amalga- mation versus competition thus became a definite political issue between the two class interests that dominated legislation. It is characteristic of British legislation not to provide remedies beforehand for all possible ills, but to meet exigencies as they arise by adapting ex- isting instrumentalities to immediate requirements. This mode of legislation may appear cumbersome ; the administrative machinery may work slowly; but such a method conforms so nearly to the national habits of thought that but little energy is dissipated in fruitless experiments. Neither the method nor its results may meet with the approbation of the INTRODUCTION 15 theorist, wedded to a priori deductions and logical formulas, but they seem to be successful in bringing the institution or service to be regulated into con- formity with the regulating authority without serious hindrance to their operations and without disturbance of the financial equilibrium of the corporations sub- jected to such regulation. On the other hand, a system of regulation on a pre- digested plan, the product of a single mind, however gifted, may fulfill the conception of its creator in its symmetry, yet, in fact, become a strait-jacket for those who are compelled to conform to its fixity of plan and its rigid adherence to the canons of political economy. There is also a distinction to be drawn between regulative legislation that is the result of due consideration of the welfare of all whose interests are affected by it, and that which is stricken out red- hot with the eloquence of doctrinaires who are guided by their inner consciousness as to the character and ex- tent of the evil and of the suitable remedy. Still worse is that kind of regulation which has been molded by partisans moved by sectional or class prejudices or by envy of those who have perhaps unduly profited by opportunities afforded in connection with the matter to be regulated. It is the temper in which British railway legislation has been framed, rather than the form given to it, that may afford a lesson to us in the further course 16. PROBLEMS IN RAILWAY REGULATION of regulation by Congress and by the state legislatures. Still the regulation of railway service in Great Britain has measurably remedied the evils which became apparent with the development of the national railway system. For these reasons, I have dwelt at some length upon the character of British railway legisla- tion and upon the environment in which it has been accomplished. In many respects, however, the meas- ures which were adopted in Great Britain would have been inapplicable to the railway system of the United States, which has attained its present proportions under far different conditions. Therefore, in discussing problems connected with the regulation of the American railway system, it will be well to understand the character and extent of that system, the conditions which affect the public service that it renders, and the circumstances by which its operations are surrounded; or more briefly, to com- prehend the environment in which its evolution has been developed. The evolution of the American railway system may be regarded in four stages of development : the tenta- tive or embryonic stage, the period of experiment with a mode of transportation whose potential influence as a public service had not yet become apparent; the stage of its extension, when confidence had been ac- quired in its permanent value as a factor in our com- mercial, political, and social life, the period in which INTRODUCTION 17 the principal framework of the system was substan- tially established; the succeeding stage, in which it was found necessary virtually to reconstruct the sys- tem in order that it should keep pace with the in- crease in the population, the products and the resulting commerce of the country; and finally, the period in which the legislative regulation of that system has become a predominating factor in its further evo- lution. These several stages of development have not been synchronous throughout the United States. In fact, they have overlapped each other in the same region. But, in a general way, the embryonic stage may be said to have terminated with the occurrence of the Civil War, the stage of reconstruction to have followed upon the consequences of the financial crisis of 1873, and the stage of legislative regulation to have been definitely reached in the passage of the Interstate Commerce Law in 1887. CHAPTER II THE AMERICAN RAILWAY SYSTEM The Period of Formation At the beginning of the nineteenth century, the settled portion of the United States was confined to the region bordering on the Atlantic Ocean, from the Bay of Fundy to the northern boundary of Florida. Along this stretch of fifteen hundred miles of coast, commercial interests had gathered at suitable sit- uations; at Salem, Boston, and Newport, east of the Connecticut River; then came in succession, New York, Philadelphia, Baltimore, Alexandria, Richmond, and Charleston. Ranges of mountains, almost con- tinuous, rose in the background at distances varying from a hundred to two hundred miles; so that there was no extensive system of river communication with the interior. Each of these cities therefore served only the region which was accessible by estuaries and tidal streams, and that region was restricted by the difficulties of navigation. For none of these water- courses was navigable fifty miles above tidewater. The greater part of this region was dependent upon communication by land for all the purposes of com- 18 THE AMERICAN RAILWAY SYSTEM 19 merce and of society. Yet the roads were little more than bridle paths and trails. The floating capital of the country was insufficient for its current require- ments and, because of the topographical limitations above described, there was no concentration of com- merce upon definite routes in magnitude sufficient to secure an application of the public credit of any of the states to their improvement. The re- gion toward the mountain ranges was therefore still mainly a virgin forest, and much of it in the South Atlantic States remained in the possession of the Indians. The several ranges of mountains that form the Alleghany system constituted a series of bulwarks that had been at once a protection and a restriction to the Thirteen Colonies. Beyond these ramparts there extended westward illimitably the fairest lands that ere the sun shone on; a vast territory that was coasted on the north by the great fresh-water seas. It was also permeated by a grand system of navigable streams which gave access to the Gulf of Mexico. Here was a field for territorial extension such as the world nowhere else afforded. It was sparsely in- habited by tribes of barbarians, not only without a central organization, but also in a state of chronic warfare amongst themselves; so that it was a prize which could have easily been grasped by the colonists, except for the prior claims of the European powers 20 PROBLEMS IN RAILWAY REGULATION that for a century had been striving for supremacy over it. If the sovereignty of the United States had been limited to the region belonging to the Thirteen Col- onies, the history of the world, as well as of our railway system, would have been written after a different plan. But, by a chain of circumstances growing out of the Napoleonic wars, the policies of the European powers with reference to their North American possessions were greatly modified to the advantage of their humbler rival across the Atlantic, and at the end of the War of 1812-1815 and by the conclusion of the Treaty of Ghent, the territory from the Alleghenies to the Rocky Mountains was opened up to the people of the United States, freed from further foreign inter- ference. They had, however, but nominally entered into possession of this imperial domain. Their po- litical restrictions had been removed, but the entrance to the land of promise was still barred by a mightier obstruction than the will of prince or potentate; by the interposition of the series of mountain ranges that extend from the Saint Lawrence River almost to the Gulf of Mexico. Even before the constitution of our federal govern- ment, General Washington had organized a company for the improvement of the navigation of the Upper Potomac in connection with a highway across the Alleghanies to the navigable waters of the Ohio. In THE AMERICAN RAILWAY SYSTEM 21 1806, the federal authorities took the first efficient step in this project by an appropriation for the con- struction of the National Road from Cumberland, Maryland, to Steubenville, Ohio, which became the highway over the mountains from the city of Balti- more, as well as from the federal capital. Only at one point along its extended contour was this mountain barrier interrupted, — where the Mo- hawk River made its way to the Hudson. Through this gap, convenient access was had to the rich plains that bordered the Great Lakes, and by this route the pioneers from the New England States penetrated the Northwestern Territory. The advantages which the city of New York derived from its geographical position were greatly reénforced by the introduction of steamboats on the Hudson River in 1807. Here was afforded the opportunity that had been lacking for the concentration of commerce upon a definite route in volume sufficient to secure an application of the public credit for its improvement. Through the energy and foresight of DeWitt Clinton, the credit of the state of New York was utilized in 1817 in the construction of the Erie Canal. Upon the com- pletion of this work in 1825, there followed a develop- ment of traffic on the Great Lakes, that converged on Buffalo, which, with the introduction of steam navigation in 1816, built up secondary commercial centers on their coasts. 22 PROBLEMS IN RAILWAY REGULATION The region tributary to the Great Lakes was, how- ever, limited, by lack of navigable streams, to the area within which wagon transportation to their shores was practicable. The prairies on their borders stretched away southward into the Mississippi valley, whose mighty waters afforded the most extensive natural means of communication in the known world. On its ever-flowing current, fleets of rafts and flatboats drifted unceasingly with the products of farms and forests to Cincinnati, Saint Louis, and New Orleans. The voyage upstream was slow and toilsome and the tendency of trade was altogether away from the Atlantic cities; that of the Great Lakes was becoming concentrated in New York, while the commercial activity of the rivals of that city was virtually re- stricted to the regions accessible to them by coastwise navigation and by wagon transportation. The introduction of steam navigation on the Ohio River in 1811 had meanwhile altered the conditions of intercommunication in the Mississippi valley, by making the upstream voyages commercially profit- able. The growth of trade from the upper Ohio valley with Baltimore and Philadelphia was growing in im- portance when its farther development was threatened by the flank movement through the Great Lakes and the Erie Canal to New York. This movement was accelerated by the general interest that had been aroused in favor of canals, owing to the success that THE AMERICAN RAILWAY SYSTEM 23 had attended the completion of the Erie Canal. The topography of the region between the Great Lakes and the Mississippi River facilitated the construction of artificial waterways connecting the two systems of navigation; and it is estimated that by 1835 there was a canal mileage in operation in this country of 2617 miles, of which the greater proportion was de- voted to the traffic with the trans-Alleghany region. The restrictive effect of canal construction upon the business of Baltimore became so apparent that its citizens were aroused to the necessity for better means of communication with this region. The superiority as to cheapness of service lay unquestionably with canal transportation. The geographical position of Baltimore was unfavorable to communication by artificial waterways and it became imperative to consider some improved mode of transportation by land. No halfway measure could cope with the conditions that confronted its commercial prosperity. In this dilemma, attention was drawn to the new method of the iron way which was then being adopted in England and, in 1827, the Baltimore and Ohio Rail- road Company was chartered to build a railway from Baltimore to the Ohio River three years before the opening of the Liverpool and Manchester Railway. There had been experiments in railroad construction in the United States as early as 1826, almost con- temporaneously with the enterprises in England in 24 PROBLEMS IN RAILWAY REGULATION which public interest had been aroused. As originally in that country, they were attempts to facilitate the movement of minerals by horse power to points available for water transportation. The merchants of Baltimore, however, projected a railroad to Wheeling, 378 miles distant, at a time when there was no other in existence over fifty miles in length. It was at first intended to operate the line with horses; for as yet the locomotive was only in an experimental stage. The Delaware and Hudson Canal Company had built a tramway for its coal traffic and had ordered a locomotive from England before Stephenson had built the Rocket in 1829 for the Liverpool and Manchester Railway Company ; and before the work on the Balti- more and Ohio Railroad had progressed to any con- siderable extent, the merits of steam power for rail- way traction had been so clearly established as to compel the abandonment of horse power. The trade of Philadelphia was now threatened by the completion of the Erie Canal on one side and by the construction on the other of the Chesapeake and Ohio Canal and the Baltimore and Ohio Railroad. The responsibility for providing better facilities for communication with the Ohio valley was assumed by the state government and delegated to a Board of Canal Commissioners. The topographical difficulties were of a character that could not be readily sur- mounted by canals alone and, in 1831, a scheme was THE AMERICAN RAILWAY SYSTEM 25 projected for utilizing the Susquehanna and Juniata rivers as a way across the Alleghanies to Pittsburg, in connection with a series of canals and inclined planes. In 1834, this system was connected with Philadelphia by the Philadelphia and Columbia Rail- road, operated by horse power; but it was not until 1844 that horses were altogether displaced by the locomotive on this road. The Baltimore and Ohio Railroad was the first railroad ever projected to overcome great natural obstacles in the establishment of improved communi- cation between such extensive regions as the Atlan- tic states and the Mississippi valley. Although its construction was commenced in 1828, several other railway undertakings of a less ambitious character were carried to completion before the difficulties of financing such an extensive enterprise had been fairly overcome. These other enterprises had been for the most part accessory to existing water routes, either by canal, river, or coastwise ; and were intended to facilitate transportation by land between such routes. One of the earliest of these was the Mohawk and Hudson Railroad, between Albany and Schenec- tady, completed in 1831. This was the first in a series of railroads that, under seven separate cor- porations, were constructed successively between the principal cities along the Erie Canal and which by 1843 had connected Albany by rail with Buffalo. 26 PROBLEMS IN RAILWAY REGULATION Boston had been closely associated with the growth of Western New York and of Ohio by the migration to those regions from New England and, upon the opening of the Erie Canal, its merchants had a vision of a canal in extension of that water route to their city by a tunnel through the Berkshire Hills. This vision was afterward realized in a different way by the construction of a railroad that was opened to Worcester in 1835 and completed to Albany in 1841, before the Hudson River Railroad Company had even been chartered. While one set of commercial interests was intent upon improving the means of communication with the Great Lakes and another with the Mississippi valley, still another set devoted its attention to sup- plementing the navigation between the seaboard cities by the construction of railroads over the inter- vening land routes. The Boston and Providence Rail- road was built in 1835 as a connection of the steam- boat lines on Long Island Sound ; in 1838, the Camden and Amboy Railroad connected the waters of New York Bay with Philadelphia; and there was thereby established a land route by steam between New York and Washington. Only in that year was a rail con- nection completed between London and Liverpool. As Boston, New York, Philadelphia, and Baltimore began to experience the benefits accruing to them from their situation as railroad termini, their several THE AMERICAN RAILWAY SYSTEM 27 fields of commercial activity were enlarged by the construction of railroads radiating into the adjacent country. Cities farther down the seacoast likewise projected railroads to points beyond access by river navigation. The Charleston and Hamburg Railroad Company was chartered in 1828 to construct a rail- road from Charleston to Hamburg, on the Savannah River opposite Augusta, with a branch to Columbia on the waters of the Santee. This was the first railroad to be constructed avowedly for operation by steam. In 1831 the first locomotive built in the United States was placed on this road; and when the line to Ham- burg, 137 miles from Charleston, was completed, it was the longest continuous railroad in the world. The establishment of a five feet gauge of track on that road fixed the gauge for all future construction in most of the Southern States for many years afterward. As the transportation of coal had been the incentive to the original adaptation of the steam engine as a motor on land, so it brought about the earliest use of a railroad in the anthracite region of Pennsylvania, until local systems of railroads were gradually ex- tended from the mines to tidewater on the Delaware and Hudson rivers. The exploitation of bituminous coal deposits in Central Pennsylvania and in Mary- land in like manner induced the construction of many branches of the Pennsylvania and the Baltimore and Ohio railroads. 28 PROBLEMS IN RAILWAY REGULATION Hitherto the lines from the seaboard westward had halted at points of contact with lake or river navigation. The towns on the south shore of Lake Erie now became the centers for local lines intended to draw trade from the interior. This movement began with the construction of a road from Sandusky in 1837, and a similar effort on the part of Cincinnati inaugurated the building of the Little Miami Railroad to Springfield in 1841. As the cities along the Lake Erie shore increased in population, their interurban traffic was fostered by roads between them which became links in a chain from Buffalo westward that in 1852 brought Chicago into direct rail communica- tion with the East. The consolidation of the separate companies between Albany and Buffalo was con- summated in 1853 under the charter of the New York Central Railroad Company, and in 1854 this line to Chicago was in operation as a continuous route from the city of New York. The Baltimore and Ohio Railroad was not opened to Wheeling until 1853, a quarter of a century after its inauguration; and not until 1857 was there a practicable rail route from Baltimore to Cincinnati and Saint Louis. This was brought about by the completion of the Ohio and Mississippi Railroad, as a broad-gauge connection for the Erie Railroad; and this broad-gauge system was the first that continu- ously connected the waters of the Atlantic Ocean THE AMERICAN RAILWAY SYSTEM 29 with the Mississippi River. Although there had been a disconnected railroad route between Philadelphia and Pittsburg since 1852, the first through train was not put in operation over the Pennsylvania Railroad until 1858. Meanwhile the lack of river feeders that had in- duced the construction of railroads to the south of Lake Erie had likewise led to the extension of lines from the newly established port of Chicago, which was favorably situated for the connection of the Great Lakes with the navigable waters of the Missis- sippi. In 1848, work was commenced on a road of 158 miles to Galena. In 1854, a road to Rock Island brought Chicago into communication with the Upper “Mississippi, and in 1856 connection was made with ' Cairo by the Illinois Central Railroad. The traffic that was concentrated upon Chicago by the extension of its railroad system throughout the Mississippi valley aroused a rivalry among the lines from New York, Philadelphia, and Baltimore which had been originally projected only to reach the western navi- gable systems; and thus were established the “ Trunk Lines” as the principal avenues of commerce between the seaboard and the Great West. As railroads were built into that region, there was concurrently incited a flow of migration that drew into its current not only inhabitants of the Eastern States, but also by thousands the population of the 30 PROBLEMS IN RAILWAY REGULATION overpeopled states of Northern Europe. This was a new departure in civilization. Never before had an uninhabited country been so speedily occupied by colonists, and this transformation of a wilderness into a region of organized communities would have been impossible but for the facilities afforded by railroad communication. In the Southern Atlantic States, the development of railroad transportation proceeded more slowly and with greater difficulty, because of the peculiar physical and social environment of the population. There was no illimitable public domain of prairie lands which needed only to be turned by the plow to give an immediate and bountiful harvest of grain. The inhabited country was still hemmed in between the mountains and the sea; a sandy plain covered with a continuous forest of lofty pines which, toward the mountains, was succeeded by rolling clay lands for- ested with a deciduous growth. The torrents flowing from the eastern slopes of the Blue Ridge through this region furrowed it with deep ravines and, as they gathered into broader watercourses, they were bordered by extensive and almost impenetrable swamps and morasses. The concurrence of climate, soil, and agricultural products determined the character of the social en- vironment. Slave labor, which had proved to be un- profitable under the physical conditions that prevailed THE AMERICAN RAILWAY SYSTEM 31 in the more northern states, could be here more ad- vantageously employed. This was more particularly the case near the seaboard, where the slave popu- lation preponderated. The nature of the products and the average thinness of the soil resulted in such a small return per acre that each family of owner and slaves required a large area of cultivable land for its maintenance. As a consequence, the rural popula- tion gathered for the most part in large plantations isolated in the surrounding forests. Each of these little communities was as self-sustaining as those which had clustered around the baronial castles of feudal Europe. Such an environment did not invite immi- gration, and the population increased but slowly as compared with that of the other states. In fact, the South Atlantic States, with the exception of Georgia, were to: some extent depopulated by the migration of planters with their slaves to the more fertile lands along the rivers which flow into the Gulf ‘ of Mexico. The country was therefore too thinly populated to provide a lucrative passenger business for a railroad, and a large proportion of that population was slaves, who were not permitted to travel at will; nor did the scanty products of the fields furnish any very considerable tonnage, except during the few months after the cotton crop had been picked and baled for shipment. There were a few interior points at which 32 PROBLEMS IN RAILWAY REGULATION this crop was principally marketed. Where these were not accessible by water, they were gradually brought into connection with the seacoast by rail- roads. This was the motive which led to the early con- struction of the Charleston and Hamburg Railroad, afterward the South Carolina Railroad, with branches to Augusta and Columbia. From Augusta, a further extension was made to Atlanta and then still farther to Montgomery, on the Alabama River. Savannah began to rival Charleston as a seaport and succeeded in building a line to Macon, at the head of the navi- gation of the Ocmulgee and the Altamaha rivers, from which point connection was made with Atlanta and later with Columbus at the head of navigation on the Chattahoochee and Apalachicola rivers. The seacoast region was the more thickly populated, but it was also well provided with water communica- tion. Chesapeake Bay gave access by the Potomac to * Alexandria and Washington, by the Rappahannock to Fredericksburg, and by the James River to Richmond. From Norfolk, a canal twenty-two miles in length had been excavated through the Dismal Swamp to Albemarle Sound as early as 1822, and thereby was opened up an internal navigation in connection with the Roanoke, Pamlico, and Neuse rivers which fur- nished the most fertile and best populated part of North Carolina with cheap and ample facilities for THE AMERICAN RAILWAY SYSTEM 33 marketing its crops. This coastwise communication was gradually supplemented by a parallel line of rail- roads, which began at Acquia Creek on the Potomac, and touched the head of navigation on the Rap- pahannock at Fredericksburg, of the James at Rich- mond, of the Appomattox at Petersburg and of the Roanoke at Weldon. ‘There it was connected again with the waters of Chesapeake Bay by a branch line from Portsmouth and Norfolk. The interior route of coastwise navigation was con- tinuous from Long Island Sound to Pamlico Sound. From Weldon southward the land communication was only by stages and wagons until just after 1840, when the construction was undertaken of a railroad from Weldon to Wilmington, on the Cape Fear River, a distance of 161 miles; which at the time was a con- siderable enterprise. Beyond Wilmington there was a stretch of barren pine land that offered little induce- ment for railroad construction. Indeed, the tendency of commerce in North Carolina, as in Virginia, was either toward Baltimore or, by sail vessels, to New York. Passengers and mails were, however, conveyed by coastwise steamers from Wilmington to Charleston, where navigation was again available along the coasts of South Carolina and Georgia to Florida. About 1853, the South Atlantic railroad system was extended from Wilmington to a connection with the South Carolina Railroad, near Columbia, but Charleston D 34 PROBLEMS IN RAILWAY REGULATION and Savannah were not united by rail until after the beginning of the Civil War. As the North Atlantic coast cities had striven for railroad connection with the Great West, so did their commercial rivals to the south of them make similar efforts for trade routes to the growing states of Ken- tucky and Tennessee. When the task had proved to be beyond the means of the private capitalists whose interests were directly involved, state pride was invoked to secure the aid of the public credit. This assistance, however, was exhausted in Virginia, North Carolina, and South Carolina before the moun- tain ranges had been pierced which barred the way to the Mississippi valley, and Georgia alone accom- plished the task, by the construction of a railroad from Atlanta to a connection with the Nashville and Chattanooga Railroad, on the Tennessee River. This line was entirely constructed and operated by the state of Georgia and, at the time of its completion, was the only railroad route from the seacoast to the trans-Allegheny region, south of the Baltimore and Ohio Railroad. The states bordering on the Gulf of Mexico were more fortunate as to water communication with the interior. The Apalachicola and Alabama rivers were navigable for a considerable distance and Apa- lachicola, Mobile, and New Orleans were the natural entrepots for the external commerce of Middle THE AMERICAN RAILWAY SYSTEM 35 Florida, Western Georgia, and the states of Alabama, Mississippi, and Louisiana. This region was also provided with interior routes of coastwise navigation and, as the most fertile cotton lands were directly on the watercourses, the necessity for commercial routes by land was not urgent. Even after railroad com- munication was continuous from the Potomac River to Montgomery, the passenger service southward to Mobile was maintained by steamers down the Alabama River and from Mobile to New Orleans through Mis- sissippi Sound to Lake Pontchartrain. This entire region was supplied with what it did not produce either by sea or by the Mississippi River to New Orleans, and thence into the interior by the routes just described. The commercial relations thereby established for many years controlled the direction of the railroads which were at length pro- jected from New Orleans and Mobile. They were intended primarily to reach the cotton-growing country that was less accessible by water, and eventually to effect a communication with the region to the north- ward, from which were obtained the supplies of grain, hay, flour, and hog products that were largely con- sumed on plantations which were almost solely de- voted to the production of cotton. Such was the development of the railroad system of the Southern States down to the year 1860. Meanwhile railroad construction had been much 36 PROBLEMS IN RAILWAY REGULATION more active north of the Ohio and east of the Mis- sissippi River. Each city which had acquired com- mercial prominence on the great lakes or rivers was striving to secure communication with the country at its back; a country which was rapidly filling up with an energetic population whose replete granaries invited a readier access to their market places than could be afforded by wagon roads. As the railroad lines were extended from rival trade centers into this land, whose products in abundance and bulk promised a profitable traffic, they approached each other and were gradually connected in such a way as to form through routes between Pittsburg, Cincinnati, Cleve- land, Detroit, Chicago, and Saint Louis. At the crossings of these routes, interior towns acquired com- mercial prosperity, as Columbus and Indianapolis. The roads which had been constructed from Chicago to different points on the Mississippi were continued beyond that river into Iowa and Minnesota. At the beginning of the Civil War, the region between the Mississippi and the Missouri rivers was beginning to be a field for active railroad construction. In the previous ten years, the population of Iowa had in- creased from 192,000 to 674,000, and the grain from the prairies furnished a traffic that induced the railroad companies operating west of Chicago to extend their lines farther beyond the Mississippi River into the country that was inviting immigrants by thousands THE AMERICAN RAILWAY SYSTEM 37 with the prospect of cheap farms. This tendency, to railroad extension was further stimulated by extensive grants of these fertile lands from the public domain. Before a railroad terminus had been established on the border of that region, promoters were pro- jecting lines beyond the Missouri River and tentative surveys had been made in the interest of some of the lines out of Chicago. Even schemes for a transcon- tinental railroad had long been germinating in the minds of visionary projectors. For ten years from 1840, Asa Whitney had been pursuing the subject before Congressional committees, though he accom- plished nothing of a practical character. The dis- covery of gold in California, in 1848, gave an impetus to public opinion which made the proposition for a railroad to the Pacific coast a political issue through- out the country; and, in 1853, Congress authorized the exploration of several routes across the Rocky Mountains. In 1850, a company had been chartered by the State of Missouri under the name of the Pacific Railroad Company, which subsequently became the Missouri Pacific Railroad Company; and in the following year work upon its line was commenced at Saint Louis. While this first stage was being prosecuted in the construction westward of a transcontinental railroad, steps were taken to inaugurate the same work from the Pacific coast by the organization of 38 PROBLEMS IN RAILWAY REGULATION the Sacramento Valley Railroad Company. By 1856, this company had built twenty-two miles of road, and in 1859, at a public meeting in San Fran- cisco, Theodore D. Judah was authorized to secure assistance from the federal government for the ex- tension of this road across the Sierra Nevada as a transcontinental line. In 1861, Judah induced certain merchants of Sacramento City — Huntington, Hop- kins, Stanford, and the Crockers—to organize the Central Pacific Railroad Company, with a cash capital of $125,000. As agent of this company, Judah went to Washington and joined in the efforts that were being made by the promoters of rival projects to secure assistance from Congress for the construction of a transcontinental railroad. The continuance of the Union was then imperiled through the secession of the Southern States, and the germs of a similar ferment were being propagated on the Pacific coast. Separated from their fellow-citizens of the Atlantic seaboard and of the Mississippi valley for nearly two thousand miles by desert plains and lofty mountains, its people were forming family ties and social relations apart from them. Their business interests were so little disturbed by the depreciation of the national paper currency that they disregarded it and maintained their commercial transactions on a gold basis. Their more practicable communications with the Eastern States were by the circuitous sea THE AMERICAN RAILWAY SYSTEM 39 route, and, after 1855, by the interoceanic railroad across the Isthmus of Panama; and they were develop- ing their vast natural resources in comparative inde- pendence. Their political institutions could not fail to be affected by their peculiar environment, and they ° were gradually acquiring habits of thought and action which tended to leave them with but few interests in common with the states beyond the region then known as The Great American Desert. The possible effect of the isolation of the Pacific coast upon the welfare of the United States was caus- ing grave concern to thoughtful men when the credit of the country was being sorely taxed and the lives of its citizens were being freely offered for the preser- vation of its integrity. It was at this critical period that the appeals were made to Congress for assistance in the construction of a transcontinental railroad. After much discussion as to the creation of a railroad corporation by the federal government, and amid eager competition for recognition by the advocates of rival projects, an act was passed in 1862 for grants of land and of the public credit in aid of the construction of a railroad from the Missouri River to the Pacific Ocean. The Central Pacific Railroad Company of California availed itself of the provisions of this act, and the Union Pacific Railroad Company was organ- ized to undertake construction westward from Omaha. It is difficult for the present generation to realize 4o PROBLEMS IN RAILWAY REGULATION the impressions which this proposition made upon the minds of those to whom it was then presented. We have become accustomed to the application of modern engineering processes and appliances to the execution of gigantic enterprises, made feasible by the ready aggregation of capital in enormous amounts; so that tous the construction of a single-track railroad eighteen hundred miles in length is merely to be viewed as a business proposition. But in the early years of the Civil War, the project of a transcontinental railroad was considered as a visionary scheme. Although work was begun by the Union Pacific Railroad Company in 1863, it had been difficult to secure the means for its prosecution, Government bonds could only be sold at a considerable discount, and one of the arguments that had been advanced in favor of the enormous grants from the public domain was that the lands were unsalable. There was ample authority for the opinion that the scheme was im- practicable. The territory through which the road was to pass was virtually unexplored save by Indians and hunters. It was looked upon as a region of arid deserts and barren mountains, except the oasis upon which the Mormons had settled. The track was to be laid over vast stretches of country destitute of water and timber. Tunnels of indefinite length were to be pierced through snow-covered peaks, far away from bases of supply, and where the line must follow a THE AMERICAN RAILWAY SYSTEM 41 devious route over heavy grades, menaced in winter by avalanches and in summer by hordes of wandering Indians. Under such discouraging conditions, the enterprise was not attractive to capitalists as an investment. Therefore it bore so hardly upon the private fortunes of its incorporators that, in 1864, they resorted to Con- gress for further aid. There they met with opposition, not only from those who were unwilling to disregard long-established precedents in support of a chimerical project, but also from others who had schemes for which they likewise sought assistance from the public treasury or from the public domain. As the contest became intense, those who were bearing the financial burden were not over scrupulous as to the means which they used to gain their ends. Their conduct was subjected to official investigation, in which serious charges were substantiated and from which the reputation of men of distinction in politics and in finance severely suffered. Despite opposition and opprobrium, further assistance was secured from Congress, partly by questionable combinations with advocates of rival schemes and partly by the votes of honest men, who considered the construction of a transcontinental railroad an essential factor in the permanence of the Union and could see no other practicable way for its accomplishment. Whatever differences of opinion there may be as 42 PROBLEMS IN RAILWAY REGULATION to the morality of the methods by which the support of the federal government was obtained for this pur- pose, there can be none as to the vigor and intelligence displayed in the prosecution of the enterprise. The financial difficulties that were overcome, the perils that were encountered, the marvels of engineering skill that were displayed, the rapidity with which the work was accomplished, were all recognized at the time as unexampled in the previous history of railroad construction. For these reasons and be- cause of the subsequent effect upon the development of the United States, economically and politically, this account of the genesis of the first transcontinen- tal railroad seems profitable for an adequate compre- hension of the evolution of the American Railroad System. And, as the present is but a part of all that has gone before, the regulation of that system cannot be intelligently discussed without a recognition of the importance of its formative period as a factor in the development of our country’s resources and of its social and political order.! 1 Much of the information as to the early period of railroad con- struction in the United States has been obtained from “Great Ameri- can Canals,” by Archer Butler Hulbert, 1904, and from “When Rail- roads were New,” by Charles Frederick Carter, 1909. CHAPTER III THE AMERICAN RAILWAY SYSTEM The Period of Extension WitH the close of the Civil War, the United States entered upon a new era, one as distinctively different industrially, as it was socially and politically, from the stage of national development which had preceded that war. The coffers of capitalists were filled with an inflated currency that they were eager to convert into assets of a more substantial character. The slackened currents of migration were rolling in again in a flowing tide. With capital and labor in abun- dance, the people turned their backs upon the past, and, with renewed energy, hopefully faced the future. The increasing output of the fields, the forests, and the mines reacted upon the inventive genius and the industrial capacity of the urban population, so that manufacturers and commerce grew apace. In this reawakening of the nation, its railroad system was a notable factor. Its extension across the Mississippi valley determined the direction of mi- gration. As the iron way gradually penetrated those silent coasts, the shrill whistle of the locomotive 43 44 PROBLEMS IN RAILWAY REGULATION heralded the advent of throngs of home seekers. Soon the prairies gleamed with golden harvests. Isolated stations became villages; and villages, towns. Open fields were cut up into building lots. The real estate boomer was abroad in the land, and values advanced so rapidly that there was no desire to realize upon them. Railroads were no longer projected with the view of facilitating connection with navigable routes, but to compete with them. They paralleled the canals and the great river systems so effectually that com- merce forsook them. It is estimated that a canal mileage of five thousand miles, costing $150,000,000, has been rendered virtually worthless by railroad com- petition. The steamboat service that had built up Cincinnati, Saint Louis, and New Orleans could not successfully maintain a rivalry with the new mode of transportation, and those cities were compelled to invite railroad connections in order to retain their business relations. The traffic of the Great Lakes alone sustained the shock of innovation without in- jury, and indeed profited by it.!. The cities on their 1 There are in operation only 2190 miles of canal out of a total of 4500 miles originally constructed. The 2444 miles of canal now abandoned represent an original cost of over $80,000,000. In 1906, the railroads carried 1,610,099,829 tons, while the records show but 177,519,758 tons carried by water in the same year. Over 42 per cent of the water tonnage went over the Great Lakes, and nearly 37 per cent on the Atlantic and Gulf coasts and rivers. More than half THE AMERICAN RAILWAY SYSTEM 45 shores had been driven, by lack of river feeders, to encourage railroad construction in its early stage of development. They had gathered commerce from the borders of the lakes by steamboats, and now they drew it from the interior by rail. The ‘trunk lines” to the seaboard were competitors for their favors, and they prospered accordingly. Among these cities, Chicago occupied the preéminent position. Its rail communications now extended along the Mississippi valley from St. Paul and Minneapolis to New Orleans, and across the states of Iowa and Missouri to the Mis- souri River. Before the last rail had been laid on the Union Pacific line in 1869, there was an eager rivalry for public aid in the construction of competing lines across the con- tinent; and the transcontinental roads now in oper- ation were all in course of construction, with the ex- ception of the Great Northern Railway. By 1870 there were about 40,000 miles of railroad lines in the United States, which was perhaps double the mileage in of this tonnage consisted of coal, iron ore, and other crude minerals. At the present time, the canals in New York State transport less than 3 per cent of the freight carried by the railroads adjacent thereto. In 1890, shipments at Saint Louis by steamboats and barges amounted to 601,860 tons; in 1903, to 212,207 tons ; in 1906, to 89,185 tons. In 1894, the total movement on the Ohio River was 7,795,500 tons; in 1900, 14,054,320 tons; in 1906, 11,427,784 tons. Coal constitutes an enormous tonnage over this waterway. ‘Report on Railways and Waterways,’ by William E. Hoyt, International Railway Con- gress, July, 1910. 46 PROBLEMS IN RAILWAY REGULATION existence at the beginning of the Civil War; and it has been stated that between 1865 and 1873 there was at least 30,000 miles of track laid in this country. At the end of four years of civil war, the Southern States lay prostrate at the feet of a conqueror. Their social organization had been disrupted; their local governments were under martial law. The people were disfranchised, and the leaders to whom they would have looked for guidance had been slain in battle or were in prison or in exile. Their only currency was utterly discredited, and their public and private des- titution was complete. The railroads which had not been destroyed had so greatly deteriorated as to be unsafe, but the people had neither the heart nor the means to reconstruct them nor even to attempt the rehabilitation of their own fallen fortunes until their political fate had been decided. Therefore the South- ern States did not respond as readily to the reaction that prevailed elsewhere in the now reunited nation. During the transition period of their political re- construction, their resources were the prey of adven- turers who, through manipulation of the negro vote, had obtained control of their governments. Under the guise of benefactors to the emancipated slaves, they secured the protection of federal authority in their machinations. The financial reorganization of the railway system in this region was necessarily precedent to its physical recuperation. Many THE AMERICAN RAILWAY SYSTEM 47 of the railroad companies had received aid, di- rectly or indirectly, from the state governments by which they had been chartered and were seeking leg- islation in furtherance of their plans for financial relief. Their necessities afforded opportunities for unscrupulous officials to utilize the ostensible reha- bilitation of such corporations for burdening the states with obligations that they speedily converted to their personal benefit. With this exception, the United States was rejoicing in the returning sunshine of prosperity, when the sky became obscure and a financial cyclone swept over it, leaving a trail of ruined fortunes in its path. The extent and duration of this catastrophe may be inferred from the annual reports of commercial failures and resulting liabilities presented in the note below.1. The gathering of the storm in 1871 is there 1 COMMERCIAL FAILURES IN THE UNITED STATES DURING THE FINANCIAL CRISIS OF 1872-1878 (from the World Almanac) YEAR NUMBER LIABILITIES E866) ecu Se Ge OE a 1,505 $53,783,000 TORE ac ae Gy ae SS te ee 2,015 85,252,000 TO 72 inks, Bs al hos tae cae ie 4,069 121,056,000 TO73 ee ci Se Go OR Me 5,183 228,499,900 1874 re Ge ae, sees clan eae Uo