If an extremely abstract view is taken, there is danger of losing sight of the real problem, which is that of harmonizing these two interests in thought and in public policy. Yet the extreme advocates of the private control of railroads for a long time resented indignantly any public, interference with rail road rates and with railroad management as an infringement of individual liberty. This position often was inconsistently taken by those in whose interests free competition had been violently set aside at the very outset of railroad construction, and for whom governmental interference had made possible great fortunes. It has become generally recognized that the railroads ought not to be allowed to change from a public to a private character, just as it suits their convenience. True, they are private enterprises as regards the character of the investment, but they are public enterprises as to their priv ileges, functions, and obligations.
If there were none of these special reasons for the public control of railways, there is an all-sufficient general reason in the fact that a railroad is always, in some respects and to some degree, a monopoly. Therefore, the railroad problem may be viewed as but one aspect of the general problem of monopoly.
§ 3. State railroad commissions. When it became appar ent that public and private interests in the railroads were so divergent, it still was not easy to determine how the pub lic was to be safeguarded. At first some general conditions, such as maximum rates, were inserted in the laws and char ters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced. Some early efforts at state ownership were disastrous. The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for, while delay was death to the shipper's business, cases hung for months or years in the courts; it was ineffectual, for, even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers.
In the older eastern states, attempts to remedy these and other evils by creating some kind of a state railroad com mission date back to the fifties of the last century. Massa chusetts developed on the eve of the seventies (1869) a com mission of the advisory or "weak type," which investigated and made public the conditions, leaving to public opinion the correction of the evils. A number of the western states, notably Illinois and Iowa, developed in the seventies com missions of the "strong type," with power to fix rates and to enforce their rulings. The commission principle, strongly opposed at first by the railroads, was upheld by the courts and became established public policy. By 1915 every state
and the District of Columbia had a state commission.
As a remedy for railroad evils, however, the state commis sions, strong as well as weak, were disappointing. It is true that from the first they did much to make the accounts of the railroads intelligittle, something to make the local rates reasonable and subject to rule, and much to educate public sentiment. But it was difficult to get commissioners at once strong, able, and honest; the public did not know its own mind well enough to support the commissions properly; and the courts decided that state commissions could regulate only the traffic originating and ending within the state. After 1888 the state commissions more and more directed their activities toward the regulation of local utilities. In Wis consin and in New York in 1907, in New Jersey in 1911, and in many other states since, the "railroad" commissions were replaced by "public utilities" or "public service" commis sions, having control not only over the railroads but over street-railway, gas, electric-light, telephone, and some other corporations.
§ 4. Consolidation and need of national regulation. Be fore passing to the discussion of the next era of railway policy, reference should be made to the steady movement toward the consolidation of small railroad units into larger systems, for this was affecting greatly the character of the railroad problem. The early railroads, many of which were built in sections of a few miles in length, began to be united with many branches. The New York Central between Al bany and Buffalo was a consolidation, by Commodore Vander bilt, of sixteen short lines. The Pennsylvania system was formed, link by link, from scores of small roads.
Toward this result strong economic forces were working. Consolidation has many technical advantages: it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the ter minal facilities of the railroads, and insures continuous train service. It has the advantages of other large production and the possible economies of the trusts. Most important, how ever, from the point of view of the railroads, is the preven tion of competition and the making possible of higher rates and larger dividends. The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates. It is true that com petition between roads does not prevent discrimination and excessive charges between stations on one line only ; but com petition usually has acted powerfully at well-recognized "competing points." The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies. It is a grim jest to say that consolidation does not change the railroad situation as re gards the question of rates.