The people were so anxious for the construction of railways that they offered every possible inducement to capital. The result was a great deal of unprofitable construction and immense losses to the promoters.
These able men saw that there was no possibility of railway construction, operation, and efficiency, with a continuance of unrestricted competition. It has taken from 1874 until 1920 to educate the railway men, the shippers, and the government to a realization of the fact that transportation facilities required for the public necessities can only be had by the freest operations and the strictest government regulations; that the solution of the problem is a system so automatic that public arbitration shall decide the justice of the demands of labor, and rates be advanced to meet the decision, and that public authority also shall take into consideration the other factors of increased expenses and adequate facilities for the railroads, and that maintenance and the highest efficiency must be preserved and also necessary extensions. To satisfy and attract capital there must be the assurance of a reasonable return upon the investment.
The meeting called by Commodore Vanderbilt in 1874, at Saratoga, was an epoch-making event. We must remember the railway management of the country was in the absolute control of about four men, two of whom were also largest owners of the lines they managed.
Fierce competition and cutting of rates brought on utter demoralization among shippers, who could not calculate on the cost of transportation, and great favoritism to localities and individuals by irresponsible freight agents who controlled the rates. Under these influences railway earnings were fluctuating and uncertain.
Improvements were delayed and the people on the weaker lines threatened with bankruptcy.
Public opinion, however, believed this wild competition to be the only remedy for admitted railway evils. As an illustration of the change of public opinion and the better understanding of the railway problems, this occurred in the month of October, 1920.
A committee of shippers and producers representing the farmers, manufacturers, and business men along a great railway system came to see the manager of the railroad and said to him: "We have been all wrong in the past. Our effort has always been for lower rates, regardless of the necessities of the railways. We have tried to get them by seeking bids from competing lines for our shipments and by appealing to the Interstate Commerce Commission.
The expenses of the railroads have been increased by demands of labor, by constantly rising prices and cost of rails, cars, terminals, and facilities, but we have been against allowing the railroads to meet this increased cost of operation by adequate advances in rates. We now see that this course was starving the railroads, and we are suffering for want of cars and locomotives to move our traffic and terminals to care for it. We are also suffering because the old treatment of the railroads has frightened capital so that the roads cannot get money to maintain their lines and make necessary improvements to meet the demands of business.
We know now that rates make very little difference, because they can be absorbed in our business. What we must have is facilities to transport our products, and we want to help the railroads to get money and credit, and again we emphasize our whole trouble is want of cars, locomotives, and terminal facilities."Happily, public opinion was reflected in the last Congress in the passage of the Cummins-Esch bill, which is the most enlightened and adaptable legislation of the last quarter of a century.
To return to the conference at Saratoga, the New York Central, the Pennsylvania, and the Erie came to the conclusion that they must have the co-operation of the Baltimore and Ohio. As Mr. Garrett, president and controlling owner of that road, would not come to the conference, the members decided that the emergency was so great that they must go to him. This was probably the most disagreeable thing Commodore Vanderbilt ever did. The marvellous success of his wonderful life had been won by fighting and defeating competitors. The peril was so great that they went as associates, and the visit interested the whole country and so enlarged Mr. Garrett's opinion of his power that he rejected their offer and said he would act independently. A railway war immediately followed, and in a short time bankruptcy threatened all lines, and none more than the Baltimore and Ohio.
The trunk lines then got together and entered into an agreement to stabilize rates and carry them into effect. They appointed as commissioner Mr. Albert Fink, one of the ablest railway men of that time. Mr. Fink's administration was successful, but the rivalries and jealousies of the lines and the frequent breaking of agreements were too much for one man.
The presidents and general managers of all the railroads east of Chicago then met and formed an association, and this association was a legislative body without any legal authority to enforce its decrees. It had, however, two effects: the disputes which arose were publicly discussed, and the merits of each side so completely demonstrated that the decision of the association came to be accepted as just and right. Then the verdict of the association had behind it the whole investment and banking community and the press. The weight of this was sufficient to compel obedience to its decisions by the most rebellious member. No executive could continue to hold his position while endeavoring to break up the association.
