I. The following passages are taken from reports, newspapers, journals, and books published since 1873. They are given approximately in the order of their publication. The list makes no pretense of being complete, but it is taken to be representative of the opinions current during this period. The Nation speaks for the class of eastern owners of railway securities. The following quotations in 1873-75 show the feeling against the granger acts: It is the general disbelief of the honesty of railroad management which causes the tone of anger generally pervading all discussions of the subject.' This means (giving figures of dividends, etc.) simply that the work of transportation in the United States is, on the average, already done at a loss to the owners of the lines, etc. The railroads of the country, taken together, are an unprofitable enterprise, and do not pay the owners the ordinary rate of interest on the cost of constructing them.3 [Referring to the influence of the laws on the legislatures of Wisconsin, Illinois, Iowa, and Minnesota, it says]: thus giving to the members a power which will, according to all experience, make them purchasable as cattle; and that railroad managers will deal in them hereafter, almost as freely as in stocks, no intelligent man needs to be told. The attack on property in which the movement has resulted, is therefore really its least serious feature. Property in such large masses as the railroads has never yet in this country failed to take care of itself in the long run. The Potter law is simply a mild way of doing what a mob law does when it burns a station or tears up rails or throws locomotives off the track.5 The brigand mode of dealing with it, etc. A persistence in these low rates (Potter law) meant absolute ruin to the companies." President Alexander Mitchell of the Chicago, Milwaukee & St. Paul Railroad on the passage of the Potter law, wrote to the governor of Wisconsin as follows: It is confiscation. That it has effectually destroyed all future railroad enterprise, no one who is acquainted with its effects in money centers will for a moment doubt." The law in question proposes to reduce our freight rates about the same (25 per cent.), thus deducting from our present tariff about 25 per cent. of our gross earnings.10 . . . . [It takes from them] over threefourths of the net income received under our present tariff," etc. .... The Nation, Vol. XVI, p. 329, May 15, 1873. 2 Ibid., XVII, p. 36, July 17, 1873. 5 Ibid., XIX, p. 122, August 20, 1874. 6 Ibid., XIX, p. 122, August 20, 1874. 7 Ibid., XX, p. 189, March 18, 1875. Wisconsin, 1874. Appendix p. 1. " Ibid., p. 4. President Albert Keep, of the Chicago & Northwestern, at the same time wrote a similar letter, stating that the rates under the new law would average 30 per cent. less than the former rates of the railroad.' Mr. Charles Francis Adams, a successful railroad commissioner and one of the great railroad authorities of Massachusetts, wrote of the "granger movement" in April, 1875: It is quite apparent, however, that the time has now come when the granger can be looked upon as a phenomenon of the past and treated in a spirit of critical justice. The simple truth is that the granger excitement was not causeless, and that, in spite of the blunders which marked its career, it has done a great deal of very good work.3 . . . . Finally [he says in closing] East and West, the good which has resulted and will yet result from the granger movement will be found greatly to predominate over the evil; what is more, the good will survive, while the evil will pass away.4 Notwithstanding this very favorable attitude towards the granger movement, Mr. Adams in this same article thus speaks of the laws themselves. The Potter law, so called, of Wisconsin, which seemed designed to operate as a practical confiscation of many millions of foreign capital invested in the public improvements of that state.5 As usual, however, the wild utterances took the form of yet wilder laws. If ever a problem called for wise legislation, founded upon careful and patient study, this one certainly did. The granger legislatures, however, went at it like so many bulls at red rags. . . . . Yet practically the control of the railroads was to be taken out of the hands of the owners, and was to be placed in those of the state. The earliest constitution, whether of Illinois or Wisconsin, is young beside the great commandment, "Thou shalt not steal!" The action of the granger legislatures of those states has, however, more than once pressed hard upon it, and that, too, upon the averred ground that there was nothing to the contrary in the constitutions of the states. It is certainly not flattering to our national pride, nor conducive to a renewed faith in written constitutions, to reflect that much of the recent Illinois and Wisconsin railroad legislation would have been indignantly thrown out of Parliament, not as being contrary to any provision of a written code, but for the simple and obvious reason that it was opposed to common right, to common decency, and to common sense. Wisconsin, be it remembered, is the state whose legislature, by the enactment in 1874 of the most ignorant, arbitrary, and wholly unjustifiable law to be I 1 Ibid., pp. 5 and 6. North American Review, Vol. CXX, p. 395. 3 lbid., p. 395. 5 Ibid., p. 395. 8 6 North American Review, p. 406. 7 Ibid., p. 408. 4 Ibid., p. 424. 8 Ibid., p. 413. found in the history of railroad legislation, reduced the freight tariffs of its railroads twenty to fifty per cent.1 In the middle of seven pages of the "Killing test" of figures of actual costs and dividends appears the following: The "heads-I-win, tails-you-lose" basis of future construction, now with such indescribable gravity propounded from the Northwest, may excite a grim amusement in the money markets of the world, but that any railroads which involve a risk of loss will be built under it is more than improbable. The granger movement touches, then the real cause of the evil under which the West is suffering only so far as it tends to supplement the disasters of the recent financial crisis and put a complete stop to all further immediate railroad construction.3 It (the granger movement) has placed many preposterous laws on the statute books of the West, which will probably long remain there, undisturbed memorials of legislative incapacity, and about as formidable as those ancient blunderbusses which sometimes in old-fashioned houses ornament the kitchen wall. Undoubtedly it has seriously impaired the credit of those states more especially identified with it, and notably that of Illinois and Wisconsin. For this, of course, they will have to pay dearly; higher interest and more binding guarantees will unquestionably be exacted of them, and, what is more, they will have to give them. Habitual borrowers cannot afford to play tricks with their credit, and it will be very long indeed before either the defeat of Judge Lawrence or the provisions of the Potter law are forgotten in Wall street or on the Royal Exchange. J. W. Midgley prepared an elaborate article at the request of the presidents of the two Wisconsin railroads, and published it with an introduction signed by them. Could it be shown that, at the rates now imposed, the Wisconsin railways were enabled to earn fair returns, some justification for their continuance might be claimed. But the depressing fact is, that no railroad in the state (Wisconsin) is in position to earn a dividend; while two only from their earnings meet current expenses and interest on their indebtedness, etc. In compliance with popular demand, a crushing blow has been struck. Beneath it a mighty industry lies prostrate. Neither has the state benefited by the law. Wherever capitalists meet its baleful effects are known and appreciated. They deem its passage an act of dishonesty, etc. [Quotes consuls about foreign capital.] W. W. Grosvenor, under the heading "The Communist and the Railway," wrote in 1877: I 1 Ibid., p. 416. 2 Ibid., p. 420. 3 North American Review, Vol. CXX, p. 422. ▲ Ibid., p. 423. 5 The effect of Restrictive Legislation upon the Railways of Wisconsin and the material interests of the state (Chicago, January 5, 1876), p. 7. 6 Ibid., p. 8. 7 Ibid., p. 19. Acts were passed which entirely ignored the right of the stockholder to hope for any return whatever for his investment. The granger was a "toiler," while "bloated capitalists" made money without work. He turned Communist and began spoliation. Capital took fright,' etc. The crash of September, essentially a railroad panic, was the immediate effect of granger legislation, though due also to other causes, etc. L. H. Atwater in 1880 : In our opinion legislative interference of the kind invoked would be sure to make them so (immeasurably worse). Such has been the effect of it in the granger states, in Colorado, in Great Britain,3 etc. What is known as the Reagan bill in Congress, would be vastly more mischievous than the granger legislation of the Northwest. But the experience of the effects of this granger legislation and its like everywhere has led to its substantial abandonment as hurting not only the railroads but still more the people.5 Four years later Mr. G. L. Lansing included a page and a table, showing the bad effects of the granger laws." In 1885 appeared a book on Railroad Transportation by Arthur T. Hadley, now president of Yale University. This book at once became the most quoted and most trusted authority on the whole subject of transportation. Professor F. W. Taussig wrote the following criticism of it: Mr. Hadley's book deserves high praise. It is clear, scholarly, well written, well arranged, temperate and impartial, and yet vigorous and outspoken. It supplies a need which Mr. C. F. Adams's book filled with great, even though incomplete success, for matters as they stood ten years ago the need of a compact discussion of what the railroad problem is, and what it means, etc. The book may be strongly recommended, both to those who are especially interested in railroads and the railway problem, and to the general reader who wishes to inform himself on one of the most important of public questions. And elsewhere he tells us that when the legislature of Wisconsin. by the Potter law, fixed rates at unremunerative figures railroad construction stopped, facilities on existing roads could not be kept up, and the state was compelled to repeal the law. The laws of trade could not be violated with impunity. There (in chapter on competition and combination) and throughout the book, are the marks of thorough study and clear-headed thinking.10 1 International Review, Vol. IV, p. 587. 2 Ibid., p. 587. 3 Princeton Review, Vol. VII, "The Regulation of Railroads," p. 411. In Railroad Transportation appears the paragraph on the granger acts which heads this paper. given at the close of this paper. ley repeated practically all of these statements: In their anxiety to secure low rates, they had overlooked the necessity for railroad development. This oversight reacted forcibly against them; and the same reaction is likely to be felt wherever reckless railroad legislation is attempted.' If your legislation prevents the investor from receiving his dividends, he will not invest his capital in your state. It is not now a question of ethics as to what you or he ought to do; it is a matter of fact, proved by actual experience, as to what he will do." [Again in October of that year:] In fact, the system of direct legislation of monopoly charges, which gave rise to the granger cases themselves, proved so bad in its first consequences that it was being gradually abandoned at the very moment when the right to apply it was put beyond all question by the decision quoted. It is extremely difficult for a state authority to attempt to fix rates to advantage. If they are placed too high they are inoperative. If they are placed too low, they check railroad development in such a way as to do unbounded harm. This was the trouble with the granger legislation, and constituted the reason why the men who had passed it, in so many cases found themselves forced to repeal it.3 In 1887 a full page of Harper's contains the same statements. A year later an article in Scribner again repeats them and adds ; Where the movement was strongest in 1873, it had practically spent its force in 1876. There have been many similar attempts in all parts of the country since that time; just now they are peculiarly active; but nothing which approaches in recklessness some of the legislation of 1873 and 1874. The lesson was at least partly learned.5 [In 1889.] As the result of these influences, the value of railroad property has fallen enormously. It is doubtful whether the combined effects of the crisis of 1873 and the granger legislation of the same period produced any greater effect in depressing prices." It is not unlikely that the total depreciation of railroad stock during the operation of the Interstate Commerce Act may have amounted to something like $500,000,000.4 [In 1890.] There can be no doubt that railroad competition does act in the manner described, bringing rates too low to pay interest and repairs. This was proved in Wisconsin in 1874, when all rates were reduced by law to the level of competitive ones, and the railroads were actually unable to pay interest. [In 1891.] The tendency toward enforced Popular Science Monthly, Vol. XXIX, p. 6. Ibid. I 3 HADLEY, Quarterly Journal of Economics, Vol. I, p. 37. 4 HADLEY, Harper's, Vol. LXXV, p. 143. 5 HADLEY, Scribner's, Vol. IV, p. 484. "Quarterly Journal of Economics, Vol. IV, p. 178. 7 Ibid., Vol. V, p. 159. |