new tariffs for all the carriers of the United States. There would then remain just the same motive and the same opportunity for cutting these rates as the present system affords. Nevertheless, the Commission has for years created the impression that this power to make rates will prevent the evil of secret rate-cutting; and most of the support which it has secured for its pretensions has been based upon this completely false assumption.

As an additional illustration of the attitude of the Commission, it is proper to state in this connection that the evil of secret rate-cutting, as far as it may prevail, is largely the fault of the Commission. The prevention of this evil was undoubtedly the paramount purpose of the Interstate Commerce Act. The Commission was created for the purpose of enforcing the act. It was given the widest possible powers of investigation, including power to compel production of all books, papers, etc. ; and it was empowered to require the district attorneys of the United States to prosecute all offenders against the act. The Commission, however, has insisted that it is not its special business to enforce the provisions as to the maintenance of tariff rates, although that is perhaps its most important duty. It has devoted comparatively little time to investigating offences of this character, either directly or indirectly, or to attempting to procure prosecutions for them. Whenever there has been any court decision adverse to the contention of the Government in such prosecutions, the Commission seems to have willingly acquiesced in such decision, and to have made no attempt to have the question tested further in other courts. With respect, however, to such assumed functions as the Commission has delighted to exercise, it has shown no such acquiescence. Whenever it has encountered any decision adverse to its contention as to the rate-making power or as to its changing the construction of the long and short haul section, it has not only prosecuted appeals in the cases decided, but has proceeded with other cases in other inferior courts, and has shown a striking tenacity of purpose which has been wholly wanting in its efforts to enforce the provisions of the act against secret rate-cutting.

In one case a district court decided that the offence of unjust discrimination could not be made out unless it should be proved that a party was discriminated against as well as that a party was favored. The Commission straightway announced that it was impossible for it to prove that a party was discriminated against - although the court said it could be done by the exercise of ordinary intelligence and alert- and hence that no way was left of enforcing the maintenance of

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tariff rates; in spite of the fact that the court clearly decided that the mere departure from the tariff rate, regardless of what was paid by anybody else, was, while not unjust discrimination, a distinct offence under the act. The Commission, however, seems to have made no effort whatever to prosecute anybody for this latter offence, although it has known for years that such offences have been committed. Moreover, this latter offence has been punishable by fine only. By pursuing it the Commission would have been relieved of the embarrassment of the imprisonment feature of the act, which, it has been frequently said, made it impossible to secure evidence or convictions.

Further, the Commission's lamentations that the courts have destroyed its power have been so broad as to cover the whole act, and have necessarily created the impression that, in all respects, including the maintenance of tariff rates, the law is a dead letter; although there has not been a single decision impairing the Commission's power to deal with secret rate-cutting, and the Supreme Court has upheld, to the fullest extent, the Commission's ample powers of investigation. The necessary result of the Commission's policy has been to encourage violation of the law as to maintenance of tariff rates; and it now uses those violations as an argument why it should be given the rate-making power, which would have no possible tendency to correct them! These facts do not excuse the carriers or shippers who have violated the law; but they suggest the propriety of the Commission's performing its present important duties instead of reaching out after new, dangerous, and wholly unnecessary powers.

In each of its last three annual reports, the Commission has used the tendency toward railroad consolidations as an argument why it should be given the power to make rates. It has based this argument upon the statement, which is absolutely unwarranted, that any railroad. company can now "charge for its service whatever it pleases, and as much as it pleases, without any real power in this Commission or any other tribunal or court to limit the amount of such charge for the future." It has further contended that these consolidations would altogether remove the competition which determines rates. Yet its last annual report shows in a striking way the prevalence and controlling effect of water competition and competition of different markets, which it will be impossible to destroy by any sort of railroad combination, and which will always determine rates. The Commission's argument is necessarily based on the unsupported theory that as railroads consolidate they will try to raise their rates. This theory is clearly inconsistent with the in

evitable tendencies of the times. An interesting illustration of the real effect of consolidation is contained in a letter dated October 17, 1895, from Hon. Martin A. Knapp, Chairman of the Interstate Commerce Commission, addressed to Senator William E. Chandler, and published in Senate Document No. 39, of the 54th Congress, 1st Session. In this letter Mr. Knapp said:

In the New England States the process of absorption in one way or another has gone on until there is now practically no competition in the railroad service of that section. So far as I am aware, this consolidation has not resulted in any increase in charges, but, on the contrary, has been attended by considerable reduction in rates, by improved facilities, and by the better accommodation of the public. Fewer complaints come to us from that region than from any other part of the country. My observation and inquiries lead me to believe that there is less dissatisfaction with railroad charges and practices in New England than is found elsewhere in the United States, and that the people of that territory would not welcome a return to competitive conditions.

It will be borne in mind that these favorable conditions have been realized without the possession or use by the Commission of any ratemaking power. There is adequate power under the present act to correct extortion and unjust discrimination, but there seems to have been no necessity for resorting to it.

It is sometimes assumed that the business of operating railroads is a governmental function, and hence that the Government should make their rates. Although there are general expressions by the courts that the railroads perform a function of the state; yet, as a matter of fact, the business of operating a railroad is not a function of Government, as that word is understood, in this country or even in England, from whose law we draw the principles of our Constitution. While it has been undoubtedly a governmental function both in England and in America to provide public highways, it has never been the policy of the Government to perform transportation service. It would no doubt require an amendment to the Constitution of the United States before this Government could acquire and operate the railroads of the country. The mere fact that the railroad company may exercise the power of eminent domain does not make its operations governmental. It is undoubtedly to the public interest that railroads should be constructed; and it is for this reason that the Government has conferred the power of eminent domain upon railroads as necessary to their construction, not because it has been. or is now a function of Government in this country to operate railroads. There can be no doubt, however, that the Government does possess the right to regulate the charges of all common carriers, whether railroads or others, in order to prevent their being unreasonable or unjustly

discriminating. But it is not the duty or the moral right of the Government to reduce the rates of common carriers simply because in a prosperous year they may produce more than the rate-making tribunal may regard as a fair return on the value of the property. There is no reason why the owners of railroads should not be permitted to share, along with other enterprises, in large profits that may be enjoyed in prosperous years, although large profits on railroads are rare at any time. The mere fact that a railroad may make a large profit on the value of its property does not indicate that its rates are unreasonably high. In view of the fact that a company has to take the risk of years of depression and stand the losses then incurred, it should certainly get a corresponding benefit in years of prosperity. Yet the movement for giving the Commission the rate-making power seems to proceed on the theory that it is a positive wrong for railroads to accumulate any surplus in years of prosperity. There is no counterbalancing suggestion, however, that they shall be guaranteed any return in years of depression.

The Commission and its supporters have indulged in much fine theorizing to show that generally the consumer, but in the case of agricultural products the producer, actually pays the freight rates, and that these classes will get the full benefit of all reductions in rates. There was recently a substantial reduction of coal rates in Kentucky; and the Kentucky Railroad Commission reports that the coal operators raised their prices and that the consumers got no benefit from the reduction in freight rates. Several years ago the Interstate Commerce Commission ordered a considerable reduction in the rates on milk to New York City. The railroads complied with the Commission's order. Two years and a half later the president of one of the railroads reported the result, which was that the farmer received if anything less for his milk, there having in no case been an advance; that meanwhile there had been no decrease to the consumer; and that the railroad had lost $30,000 per year in its earnings.

The fact is that it cannot be mathematically ascertained who bears the ultimate cost of transportation; but there is always the probability that reductions will be for the benefit of parties who can easily combine to secure these advantages, and not for that of any large number either of producers or consumers who cannot so readily combine for that purpose. Moreover, on numerous articles the rates are so small a part of the price that the only appreciable result of a reduction is that which appears in the carriers' loss of revenue. While these considerations are not urged as reasons why the carriers should be permitted to charge rates which

are excessive, they are pertinent as indicating the conservatism which ought to be employed in reducing rates where the injury to the carrier is inevitable, while the corresponding benefit to any other class cannot be ascertained.

In predicating legislative regulation upon the character of the railroad as a common carrier, it must be borne in mind that the railroad performs a function of immense public value in devoting its energies to the discovery and development of the resources and the promotion of commerce and industry along its line. To look at the railroad simply as an institution for performing the legal duty of hauling articles from one point to another for all who may request its services is to lose sight entirely of this most beneficial factor. To put the making of rates into the hands of some theoretical tribunal will undoubtedly hamper and discourage this highly useful service, which has contributed so much to this country's recent commercial and industrial success.

A reading of the judicial opinions discussing those orders of the Commission which in the past have been the subject of litigation will show almost without exception that the Commission is such a theoretical tribunal. The Commission has frequently proved its readiness to sacrifice traffic of the most important character both to the railroads and to the public in order to carry out theoretical ideas of rate-making. Moreover, its conduct in the past shows unerringly that it will not hesitate to make orders completely changing rate conditions in vast sections of the country, when it is impossible for it to understand the innumerable conditions which should control the establishment and relation of these rates, and when it cannot begin to make due allowance for the influence which the rates it makes will have upon numerous other rates not at all involved in the complaint before it. Judge Cooley announced long ago that it would be a superhuman task to act as the rate-maker for all the rates in the United States and to adjust tariffs so as to meet the exigencies of business, while at the same time endeavoring to protect the relative rights and equities of rival carriers and rival localities. Rates are now made by the railroads through experienced representatives constantly in touch with local conditions, and every unlawful rate is subject to adequate correction. Give the rate-making power to the Commission, and it will make rates generally without such experience, under conditions making it impossible for it to have an intimate knowledge of the situation; it will subordinate the development of traffic to unnecessary mathematical principles; and as a rule the rates it makes will be beyond the possibility of correction anywhere.