l ibrinrt í
pli/^âu or railway econqmics
* rj a 5 h i N G1 O k L> • C,
THE OUTLOOK
FOR RAILROAD TRANSPORTATION
IN THE UNITED STATES.
FEBRUARY 23, 1909.
By JOSEPH NIMMO, Jr., LL. D„
Statistician and Economist.
It is clearly apparent to every person familiar with the
utterances of the Interstate Commerce Commission during
the last ten years that in its recent Twenty-second Annual
Report the Commission has expressed itself as being opposed
to all independent railroad management and control, and
that it is thoroughly committed to the policy of the absolute
administrative supervision and control of the railroads in the
hands of the Commission. In a word, it is fully committed
to the policy of hostility to the doctrine enunciated by the
Supreme Court of the United States in the case of Interstate
Commerce Commission v. Chicago and Great Western Rail¬
way Company, in which Mr. Justice Brewer expressed for
the court the following unanimous opinion:
"It must be remembered that railroads are the
private property of their owners; that while, from
the public character of the work ix which tney are
2
ENGAGED, THE PUBLIC HAS THE POWER TO PRESCRIBE RULES
POR SECURING FAITHFUL AND EFFICIENT SERVICE AND
EQUALITY BETWEEN SHIPPERS AND COMMUNITIES, YET, IN
NO PROPER SENSE, IS THE PUBLIC A GENERAL MANAGER."
209 U. S., 105, 118.
In the face of the opinion of Mr. Justice Brewer, backed
by the unanimous decree of the Supreme Court of the United
States, the Interstate Commerce Commission seems to think
that it is appointed to fulfill the functions of "general man¬
ager," president of the road and board of directors in so far
as relates to the supervision and control of the physical and
financial interests of the railroads of this country.
A MANIFEST MISREPRESENTATION.
At the very beginning of its last annual report .the Com¬
mission speaks of "the temporary financial depression from
which the country is now emerging." This is an evident
misrepresentation of the awful financial and commercial
disaster which this country has suffered during the years
1907, 1908, and a part of the year 1909, in consequence of
the attempt to substitute administrative discretion for judicial
authority, and it is calculated to mislead the Congress and
the people of the United States.
From the time when the act of June 29, 1906, commonly
known as the Hepburn act, took effect there was a marked
depreciation in the value of railroad securities. The alarm
thus created in the mincls of financiers and leading railroad
officers wras quite general. In the course of six months the
depreciation in the value of railroad and other corporate
securities in the United States amounted to nearly five thou-
3
sand million dollars, an amount in excess of the total cos!
of the Civil War. Financial matters steadily grew worse,
until the monetary crisis of October 16, 1907, occurred.
Even to the last the Interstate Commerce Commission and
the advocates of its policies maintained that the growth of
the American railroad system still continued. In its annual
report dated December 23, 1907, the Commission declared
that the car shortage "still exists," and that the great need of
the country arises from insufficient car and track capacity.
Soon thereafter the truth in regard to railroad affairs sud¬
denly burst upon the country. The deficiency of cars sud¬
denly changed to a surplus of 206,156 idle cars on December
24, 1907, and to 323,261 idle cars on January 8, 1908. More
than 100,000 cars were thrown out of employment during
the two weeks from December 24, 1907, to January 8, 1908.
By the middle of April, 1908, the number of idle cars was in
excess of 400,000. The value of idle cars and locomotives
at that time is estimated at $475,000,000. In the month of
April, 1908, it was estimated by competent judges of labor
conditions that 2,000,000 laboring men had been thrown out
of employment. No public mention has been made of these
facts by the Interstate Commerce Commission.
At the present time and during the last three months there
have been over 300,000 idle freight cars in the United States.
These cost $300,000,000, besides other facilities, namely,
engines, tracks, etc., which cost as much more.
Before the commercial and financial depression of 1907,
1908, and 1909, the railroads, in order to provide cars, en¬
gines, and other facilities for the management of our then
rapidly increasing commerce and manufactories, incurred an
expense of over half a billion dollars—$500,000,000. This
4
lias since proved to be a useless expenditure. This is tlie
recent testimony of Mr.. Arthur Hale, chairman of the Com¬
mittee on Car Efficiency of the American Railway Associa¬
tion—a national organization—before the railroad commit¬
tees of the Nebraska Legislature 011 February 3, 1909.
These facts, which the Interstate Commerce Commission
seeks to minify and to call in question, indicate very clearly
that the country still faces a very potent political question
which must be thoughtfully considered during the 61st Con¬
gress. which will convene soon after the inaugural ceremonies
of March 4, 1909, are ended.
.V11 appreciation of these facts in Congress is indicated in
the recent adverse report of Senator El'kins to accompany
Senate Bill 423, and in the recent adverse report of Senator
Nelson to accompany Senate Bill 6440.
BUREAUCRATIC GOVERNMENT PROPOSED.
It is clearly evident from the statement of the Interstate
Commerce Commission in regard to the Bureau of Statistics
and Accounts, at pages 82 and 84 of its last annual report,
that the Commission is fully committed to the idea of a Eu¬
ropean bureaucracy so freely advocated bv its statistician and
accountant, Professor Henry C. Adams, in an address before
the Association of Government Accountants 011 November 11,
1907, and endorsed by the Commission in its annual report
of December 23, 1907. Such bureaucratic exercise of power
by the Commission was utterly condemned by Senator Nelson
in his recent report from the Committee on the Judiciary, in
which he said :
"Shall we confer a power upon the mere head of a bureau
that the Parliament of England were unwilling to accord to
5
the King, and which they regarded as a menace to their liber¬
ties? To do so would be a most serious departure from the
fundamental principles of our Government, and would do
violence to what we conceive to be due process of law."
This report by Senator Nelson was approved by the Senate
and the matter to which it referred—namely, the Civic Feder¬
ation Bill of March 20, 1908—and was indefinitely post¬
poned, or, in other words, buried out of sight.
Notwithstanding the fact that the Commission is charged
by the Act to Regulate Commerce with important duties to
the public and to the railroads, its tendency from the begin¬
ning has been to transcend those important functions and to
assume judicial and legislative functions with which, in the
opinion of the judicial power of the United States, it has no
concern, either in law or in the Constitution. The last an¬
nual report of the Commission still breathes the sentiment of
administrative supervision and control of both the physical
and financial interests of the railroads. This transcends the
functions of the Commission. Indulgence in its exercise was
the chief cause of the financial crisis of October, 1907, and of
the commercial and financial difficulties with which the coun¬
try has since struggled.
AN INTIMATION THAT THE CONSTITUTION OF
THE UNITED STATES MAY BE CHANGED.
On page 20 of its last annual report the Commission speaks
of the possibility of effective railway regulation "under the
¡»resent Constitution of the United States." In this it refers
to the assumed need of a radical amendment of the clauses of
the Constitution which refer to the power of Congress to regu-
6
late the interstate and foreign commerce of the United States.
I venture to say that those constitutional powers will survive
long after the Interstate Commerce Commission has ended its
career.
THE INTERSTATE COMMERCE COMMISSION DE¬
NIES THE AUTHORITY OF THE COURTS TO
REVIEW THE ORDERS OF THE COMMISSION.
At page 20 of its last annual report the Commission makes
this astounding statement: "Perhaps the most serious prac¬
tical question concerns the right of the courts to review the
orders of the Commission." But- a much more serious ques¬
tion arises from the assumption of the Commission that it
has or should have the power to deny the right of the courts
to review the orders of the Commission. This latter assump¬
tion has been the main cause of the financial troubles of the
ycare 1907 and 1908. When the political issue arises
as to the judicial authority of the Commission or of the
"judicial power of the United States," the latter will survive
long after the former has ceased to exist by statutory enact¬
ment. The Commission, as observed by the Supreme Court
of the United States, is charged with an important function,
which it is discharging beneficially and with acknowledged
ability. The trouble with the Commission, apparent to the
Federal judiciary and to a large part of the people, is that
the Commission during the last ten or twelve years has mani¬
fested a disposition to exceed the legitimate exercise of its
powers, and to trench upon the constitutional powers of the
legislative and judicial branches of our governmental system.
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CONCLUSION.
From the foregoing considerations I have arrived at the
conclusion that the future public discussion of the question
of railroad transportation in this country will relate mainly
to its political aspects, and in a much less degree to its vitally
important commercial and economic aspects.
Joseph Nimmo, Jr.
Washington, D. C., February 23, 1909.
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