GOVERNMENT OWNERSHIP OF RAILROADS. BY JUDGE HODGDON, OF MONTESANO. The consideration of government ownership of railroads involves the interests of so many persons and so much property that one may well hesitate before taking a decided stand either for or against such a measure. No one, I take it for granted, would desire to deprive owners of railroad property of their accumulations without just compensation. The question of what would be just compensation is a difficult question, but possibly no more difficult than that which confronts every one who seeks to deprive another of his property when he does not wish to part with it. The railroads of our country have so long resorted to acquiring property by condemnation that it would be practically impossible for them now to claim that they were not subject to the same rule, should the government elect to take possession of the transportation lines of the country. The highest court has been called upon to pass on this question already and in Monongahela Navigation Co. vs. The United States, reported in 148 U. S. 312, which was an action to condemn locks in the river, the court says: "A railroad between Columbus, Ohio, and Harrisburg, Pennsylvania, is an interstate highway, created under franchises granted by the two states of Ohio and Pennsylvania, franchises not merely to construct but to take tolls for the carrying of passengers and freight. In its exercise of its supreme power to regulate commerce, Congress may condemn and take that interstate highway, etc. It may be suggested that the cases are not parallel in that in the present (a river) there is a natural highway; while in that suggested it is wholly artificial. But the power of congress is not determined by the character of the highway. They are simply the means and instrumentalities by which commerce is carried on." And it has likewise been held that corporate franchises may be condemned and that such proceedings would not interfere with or impair the obligation of contracts. Many other cases bearing upon this right may be found and none of the later cases deny the right and the earlier cases doubting it have been expressly overruled. Kohl vs. The United States, 91 U. S. 367. Cherokee Nation vs. Southern Kansas Railway Co., 135 Western Union Telegraph Co. vs. Pendleton, 122 U. S. 347. The same authority, i. e. the Supreme Court of the United States, has repeatedly held that railroads are public highways and as such perform functions belonging to the state and it is only from the grant by the state that private corporations may exercise any authority. In Smyth vs. Ames, 169 U. S. 54 the court says: 66 'A railroad is a public highway and none the less so because constructed and maintained through the agency of a corporation deriving its existence and power from the state. Such a corporation was created for public purposes. It performs a function of the state," and cites prior cases wherein the same doctrine is held. The highest authority having said that the government has the authority, it may be well to see what other nations have done in similar matters and the results obtained. The Statesman's Year Book for 1898 gives a list of fifty-one countries wherein railroads are operated and of these forty-one own their railroads in whole or in part; twenty-one have public railways only and nine have private railways only. The mileage given is, public ownership 146,813 and private ownership 87,834 miles. These figures do not include the United States, the railroads of which, taken with the other countries wherein the railroads are owned by private parties, would make the proportion of public owned roads about one half or one third that of the private owned roads. The railway capital outstanding on June 30, 1898 as shown by the report of the Interstate Commerce Commission was $10,818,554,031 about equally divided between bonds and stocks. This shows an approximate face value of the stocks and bonds, which, in some cases at least, includes the water that has been injected "to into the railway system. It also includes such transactions as occurred in one of the large railroads of the country when the earnings of the road became so much that a percentage would soon be paid to the state or the rates lowered, and to avoid such a calamity the stock was doubled and to each shareholder was given an amount equal to what he already held. No doubt the managers felt that they were but following the scriptures which say whomsoever hath to him shall be given," and without doubt those who were compelled to make use of the road would join in saying "and whosover hath not from him shall be taken even that which he seemeth to have." The amount of stock which paid no dividends was $3,570,155,239, and of bonds $852,401,622 or nearly four and a half billions. Should the government acquire the properties these facts must be considered in arriving at a just compensation. For the year 1898 twenty-eight of the principal railways operating over 95,000 miles of road, showed on an average stock at its highest quotation at 60 and lowest at 37, on one road the highest being 4 and the lowest 1, while another showed the highest at 180 and the lowest 122. In Taylor vs. Secor 92 U. S. 575, Justice Miller said "It is therefore obvious that when you have ascertained the current cash value of the whole funded debt, and the current cash value of the entire number of shares, you have, by the action of those who above all others can best estimate it, ascertained the true value of the road, all its property, its capital stock and its franchises, for these are represented by the value of its bonded debt and the shares of its capital stock. From the above it will be seen that the probable cost of acquiring the roads will be from six to eight billions of dollars, an amount that might cause even a nation to hesitate before assuming such a debt. The method pursued by Switzerland was to ascertain the profits of the road for ten years and then average this, and upon the yearly av erage base the value so that the owners might receive 5 per cent. upon their holdings. The following table taken from the Interstate Commerce Commission report gives the "Income Account of the railways of the United States, considered as a system, for the year ending June 30, 1898. From an examination of the above table it may be seen that the roads as at present managed, taken as one entire system, would be self supporting, including the payment of interest on the purchase price and leave a large sum for extensions and payment of the principal for redemption of bonds that might be issued therefor. Thus while the puschase might involve a debt of twice or three times the amount of the national debt at the close of the civil war the income would make the nation hold on its expenditures. It is a well known fact that government securities can be floated at a much less rate of interest than private concerns, and the saving in interest alone would not be less than $125,000,000 to $150,000,000 per annum. The question of purchasers for so large an amount of bonds or stock as would be required is something to be considered, and yet if one considers the eagerness with which government securities are taken and the reluctance with which they are parted it may not appear so difficult. The year 1898 shows sales of less than 3 per cent. of the outstanding government obligations. The railroad securities during the same year, according to the statement of Henry Clews & Co., were on the New York exchange alone 100,000,000 shares, being twice the full equivalent of the total railway stock; and on the same exchange $700,000,000 of railway bonds. The above would seem to show that so much more desirable are government securities that owners of railway securities would -9 readily exchange them for the more certain and desirable government obligations secured by the income of the roads and guaranteed by the government at the rate of interest now current for government obligations, that is 2 per cent. to 3 per cent. To those who depend upon gambling in stocks and bonds for a living this might not be satisfactory, but to the large class of investors it would be welcome, and to the few who would not care to exchange their present stock there would be an abundance of purchasers so that the money could be paid therefor. Even though it might be possible from the standpoint of legality and practicability to nationalize the railroads, yet no one would be willing to do so unless some positive advantage was to be derived. And what are the advantages? In addition to the stability of railroad securities for the legitimate investing public, the general public would be sure of stability of rates and equality of rates. To one who has never given the matter any particular thought the bare statement of discriminations practiced by different roads would be startling. The Interstate Commerce Commission in their report for 1898, on pages 5 and 6, say in regard to discriminations: "Tariffs are disregarded, discriminations constantly occur, the price at which transportation can be obtained is fluctuating and uncertain. Railroad managers are distrustful of each other, and shippers are all the time in doubt as to the rates secured by their competitors. The volume of traffic is so unusual as to frequently exceed the capacity of equipments, yet the contest for tonnage seems never relaxed. Enormous sums are spent in purchasing business and secret rates accorded far below the standard of published charges. The general public gets little benefit from these reductions, for concessions are mainly confined to the heavier shippers. All this augments the advantages of large capital and tends to the injury and often to the ruin of small dealers. These are not only matters of the gravest consequence to the business wellfare of the country, but they concern in no less degree the highest interests of public morality." And in the report of the same commission in 1899, on page 8, they repeat what they had already said and add the following: "The commission believed. then and still believes that this statement is not exagerated. It is scarcely too much to say that, on competitive traffic moving be |