Vol. 87 No. 1

Regulation That Regulates

The first year of the operation of the Railway Rate Regulation Law, commonly known as the Hepburn Law, expired last week. Under this statute the Inter-State Commerce Commission has had the power to fix railway rates upon complaint. Predictions that the law would be ineffective and the Commission powerless have been disproved. In place of twenty complaints, which was the average annual number under the preceding law, and in place of eighty one, which was the total for the year before the present law was passed, there have been over three hundred and fifty complaints, within the past year. Of these the Commission has rendered decision in ninety one. In barely more than half of these cases the complaint has been sustained; in all but two of the rest the complaint has been dismissed; in those two a rehearing has been granted. This statement, however, gives no adequate idea of the far-reaching effect of the law. In the first place, in the course of considering these complaints, and as a result of investigations carried on for the purpose of ascertaining facts with regard to the financial operations of railways and the workings of safety devices, the Commission has secured a vast amount of information which would have been otherwise unattainable. More than this, the effect of the law has been shown in actions taken by the railways without any formal complaints. Indeed, the railways have, as a rule, shown little disposition to disregard the statute or to escape from its provisions. Secretary Taft, in his speech at Columbus, declared that "there were filed with the Inter-State Commerce Commission more notices of reduced rates by the railroads than ever had been filed in the previous twenty years of the life of the Inter-State Commerce Law."

$3 a year

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Besides all this, the Commission has made a number of administrative rulings without waiting for complaints, and, in particular, has put into effect the system of accounting, uniform for all roads, which the new law authorized.

A Commissioner's' Criticom

The very success of the law has already made it clear to many

men that it needs still further development. The end of the law's first year finds the Commission burdened with a task that threatens to exceed its powers. Not only are there a multitude of cases continually arising, but among those cases there are some which involve enormous sums of money and the prosperity of large regions of the country. At the meeting of the American Bar Association last week Mr. Charles A. Prouty, a member of the Inter-State Commerce Commission, discussed with some detail the complicated nature of the Commission's work. He pointed out, in very happy language, the fundamental position which the railways occupy in the life of the modern world. The place occupied in former days by the highways, which traditionally were the king's, has now been taken by the railways. Since whoever controls these avenues of transportation "holds the commercial dominion of this land," it is essential that the people maintain them as public ways. For a generation the people, acting through their State governments, have attempted to secure the public rights upon these highways by the establishment of administrative commissions; and since 1887 the Federal Government has asserted a varying degree of power over inter-State roads through the InterState Commerce Commission. This Commission has two interests to conserve on the one hand, the interest of

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the public; and, on the other hand, since these roads have been constructed by private capital, the interest of the owners. More than that, in the performance of its work the Commission, Mr. Prouty says, exercises a double function. the one hand, it is its duty to preserve these highways to the public, and by administrative rulings so to apply the law and so to make regulations as to preserve the rights of the community as a whole. On the other hand, it is its duty to stand between the railways and individuals with grievances, to hear the cases, and to render decision. The distinction between these two functions he makes clear by a supposititious case. A railway charges for freight on a single commodity a few cents per ton more than is warranted. The dealer in this commodity makes no complaint, because he can collect the overcharge from the consumers; and the consumers make no complaint, because in each individual case the overcharge is not sufficient to justify the expenditure of money to right the wrong; and yet the community as a whole may suffer millions of dollars of damage. It is. this wrong, which is not private but public, which it is the business of the Commission to set right. At the same time, according to the Act, all individual complaints against the railways must first be brought before the Commission. In this respect it acts in a judicial capacity. Nevertheless, the Commission is not a judicial body. These two functions, the one legislative and administrative, the other judicial or quasi-judicial, should not be intrusted, in Mr. Prouty's opinion, to the same body. The process of issuing orders as to tariffs and accounts and of prescribing a rate, a regulation, or a practice for the future is, he believes, very different from that of determining, as between a complainant and a railway, the reasonableness of a rate or schedule. He believes that these two processes should be separated. He suggests that those duties which are largely executive should be assigned to a department with a single head responsible to the Executive.

Those

duties which he describes as largely judicial, he suggests, should be assigned to an enlarged commission withdrawn

from personal and political influences. "The time has come," he concludes, "when the Commission should be relieved of all its duties except the hearing and deciding of complaints." Mr. Prouty does not make it clear to us how the administrative function of fixing a rate for the future can be separated from what he regards as the judicial function. of hearing complaints about rates. In the meantime, however the organization of the Commission may be perfected, its present achievements are a cause for gratification.

Government by Commission

in Georgia

Probably the most important action of the Georgia Legislature, which adjourned August 17, was the passage of a public utilities bill following closely the line of the New York public utilities bill. It is called the Railroad Commission Bill, as its object was to increase the membership and enlarge and define the powers of the Georgia Railroad Commission. There has been a Railroad Commission in Georgia for a score of years, but the railway interests which so long dominated the State seemed always able to control the majority of this Commission. As a result the intra-State rates of Georgia were a third higher than the corresponding rates in adjoining States, and the public indignation against this state of affairs culminated in the election of Hoke Smith as Governor on a platform of railway rate reform. After the overwhelming demonstration of the popular will afforded by Mr. Smith's election the Commission set about doing what it could have done long before. Freight rates were reduced on some classes of goods, and, upon petition of the Farmers' Union, passenger rates were also reduced by the old Commission, to go into effect September 2. Under this order of the Commission the railways of the State are divided into four classes, with a passenger rate of two cents a mile for class A, two and a quarter cents for class B, two and a half cents for class C, and three cents for class D. The new Railroad Commission Law of Georgia was opposed in the Legislature by the representatives of the railways, there being the

largest railway lobby in evidence that has been seen in years at the Capitol. In spite of this opposition, however, and with the aid of Governor Smith, the bill was passed. Following the meeting of the Legislature, Governor Smith suspended from his position on the Commission the Hon. Joseph M. Brown, who had been long regarded as a stanch partisan of the railways. The Hon. S. G. McLendon, who had already been elected his successor by popular vote and would take office on October 1, was immediately appointed to succeed Mr. Brown. Two other able students of railway problems were appointed to fill the two new places provided by the law, and thus a majority of the reorganized Commission were on the side of the wished-for reduction in freight and passenger rates. The jurisdiction of the Commission is extended by the new law over public docks, wharves, terminal companies, sleeping and palace car companies, telegraph and telephone companies, street railways, and electric and gas-lighting plants. Following the precedent set by North Carolina, the violation of the orders of the Commission are made criminal offenses against State law; and while, of course, the right of appeal to the Federal courts is yielded, the public utility companies must obey the orders of the Commission pending the final decision of the point at issue. The rate-fixing power is conferred upon the Commission in clear terms, and no pubic utility company is allowed to issue additional stocks or bonds or to borrow money on its securities without the consent of the Commission. Thus, the new law in Georgia is a far-reaching measure.

indicate the direction of merely local breezes and not of the great trade-winds of the country's political seas. Inquiries were sent to editors of Republican newspapers, Republican Congressmen and legislators, and other political leaders of the party in eleven States of the Middle West, including Illinois, Indiana, Michigan, Wisconsin, Minnesota, North and South Dakota, Iowa, Nebraska, Missouri, and Kansas. Four questions were asked: Do you approve the progressive policies of the President? Do you prefer a candidate of the progressive school for his successor, or a man of more conservative views? Of the following suggested nominees, Cannon, Fairbanks, Knox, Hughes, and Taft, which are your first, second, and third choices? Have you any other candidate in mind? More than seventeen hundred replies were received, and of these only sixty-five answered no to the first question. About as many failed to answer the question, but 1,569 registered their indorsement of the President's policies. A slightly smaller number want a progressive successor, but still the preponderance is overwhelming, 1,435 to 176. In the vote for favorite candidates the result is no less noteworthy. Secretary Taft leads for first choice with 944 votes, with Senator La Follette-although his name was not mentioned in the list prepared by the Tribune-second at 239, Speaker Cannon third at 191, Governor Hughes fourth at 184, and Vice-President Fairbanks and President Roosevelt nearly tied for the fifth place at 159 and 158 respectively. The votes credited to Mr. Roosevelt, says the Tribune, "are from persons who objected to the form of the third question and refused to name any other candidate" than the President. A majority of the replies sent in showed that the writers would prefer Mr. Roosevelt's nomination to any other; some of them want him "if he will accept," while others say he should be named "in spite of himself." Mr. Taft not only is the leader in the entire section, but is the first choice of eight of the eleven States. Illinois, Indiana, and Wisconsin each being loyal to a 66 favorite son "Cannon, Fairbanks, and La Follette, respectively. On this basis the Tribune

calculates that Mr. Taft would have 160 delegates to the National Convention, Mr. Cannon 54, Mr. Fairbanks 30, and Mr. La Follette 26. In the vote for second choice Governor Hughes leads with 560, Mr. Taft being second with 322, and Mr. Cannon third with 259. For third choice Mr. Hughes leads again with 280. The outcome of this canvass is significant as indicating that, whatever may be the attitude of Wall Street and the great industrial and financial interests of the country toward the President, the Republicans of the powerful Middle West are strong in their approval of his policies; that they want as his successor a progressive man who will carry on those policies; that at the present time Secretary Taft is looked upon by them as the best man to carry them on; and that Governor Hughes has somewhat unexpected popularity in that region as a second choice.

The municipal situThe Coming Election ation in San Franin San Francisco cisco is complicated, and has both hopeful and threatening aspects. Mayor Taylor's right to his office has been sustained by the Supreme Court. The same court has also sustained the conviction of Schmitz, and although there may be a further appeal, a new decision could not be had before the term of office to which Schmitz was elected as Mayor expires. The better se timent of all parties in the city approves of Mayor Taylor's appointments to the Board of Supervisors and his action in calling upon the various municipal boards to drop politics and bring the city into a normal condition again. The results of the primaries recently held have been encouraging as regards the Republican and Democratic parties, but discouraging as regards the Labor party. Of the vote cast by the Republicans, Mr. Ryan, who stood for the support of the prosecution of graft, received 7,965 votes, while the opponents of that policy, generally called Herrin Republicans, polled 4,539 votes. The regular Democrats, who were also in favor of the vigorous prosecution of grafters, polled 1,991 votes as against 1,052 in opposition.

But that combination of factions in the Labor party headed by McCarthy, who stands for all that is worst in labor circles, who is an upholder of Schmitz and takes orders from this convicted felon, succeeded in bringing out 3,536 votes, as against the 1,959 of the Union Labor division, which approves of the action of District Attorney Langdon, himself originally a Labor candidate, in pressing the prosecution both of bribe-givers and bribe takers. It is hardly conceivable that in its convention the Labor party should renominate Schmitz, but there is still some talk of doing so, and much danger that, at all events, the party may, as a cor- respondent of The Outlook expresses it, "rate the Labor Union cause and theory as of higher importance than cleanliness and honesty." This danger is the greater because the Examiner, Mr. Hearst's paper, which formerly supported Mr. Langdon, has broken away from him politically. There have been rumors also of a combination between the labor unions and Mr. Calhoun and Mr. Herrin, representing respectively the street-car corporation and the Southern Pacific Railway the reason alleged being that the corrupt corporation interests, since they were defeated at the primaries of the other parties, must combine with the labor element if the prosecution of wealthy bribe-givers is to be stopped. Such a coalition would of course involve a settlement of the strikes on the streetcar lines. The conviction last week of Louis Glass, of the Pacific States Telephone and Telegraph Company, is a heavy blow to the forces of corruption, as the first conviction of a bribe-giver acting for a corporation. Friends of reform can only hope that the disclosures and prosecutions of the year will arouse public indignation to such a pitch that nothing may prevent the choice of honest and efficient municipal officers. For a clear, connected, and fair-minded account of "The Fight for Reform in San Francisco" in its earlier stages we direct the attention of our readers to the article under that title by Mr. George Kennan in the current number of McClure's Magazine; and we must quote from that article a single personal incident which