the difference is in kind and not in degree.

The railroad corporation is invested
with governmental power to take private
property against the will of the owner.
In some States the roadway is exempted
from local taxation. The reason for this
is manifest. The public welfare, nay, the
existence of our present civilization, is de-
pendent upon the existence and mainte-
nance of railroads. A stoppage of railway
transportation to-day would quickly bring
starvation to millions and the destruc-
tion of inland industries. The people,
or what was left of them, would relapse
into the conditions of Colonial times.
To the man in the street, and generally
to the man in the easy chair, the railroad
is nothing but a somewhat inconvenient
means of transportation of himself or his
family when the Ford or the limousine is
not available. They both are apparently
oblivious of the fact that practically every
bit of food that enters their mouths,
every garment they wear, the materials of
the buildings they inhabit and in which
they spend their working hours, not to
mention the Ford and the limousine, have
been transported on some railroad. The
railroads, therefore, are not merely
clothed with a public interest, they are
the public interest itself. Everybody is
dependent upon their operation. We
talk about public utilities, but no other
utility affects every one in the whole
country.

In the early days of railroad building,
the problem was presented whether the
community should build the railroads it-
self or intrust that function to individ-
uals. As early as 1828 the Legislature of
Massachusetts appointed a commission
to survey routes for railroads and to re-
port "whether the said roads should be
constructed by the State alone, whether
in part by the State and in part by indi-
viduals or corporations, or whether by
the latter alone." Massachusetts finally
determined upon the policy of intrusting
the construction of railroads to corpora-
tions chartered for the purpose, although
frequently contributing largely from the
public purse, but always reserving the
right of retaking the roads when the
holders had been reimbursed with
cent and

late rates. Massachusetts was thu
with full power in the Legislature to
tinuing its practice of Colonial times
it frequently expended public mo
the construction of highways and b
and later, when charters were gran
toll roads, the Legislature invaria
served the right to dissolve such co
tion "whenever it shall appear t
satisfaction that the income arisin
the said toll shall have fully comp
the said corporation for all money
may have expended in purchasi
taking care of said road, togeth
interest thereon at the rate of twe
centum by the year, and thereup
property of the said road shall be
in this Commonwealth and be at th
posal."

Whether the railroad was to b
by the State or by a private corp
was purely a question of finance."
one case the State raised the mon
the public by pledging its credit,
the other the corporation sold its s
pledged its credit to the same pub
very likely to the same individu
was, in effect, the same money w
It seems clear that in the early
the method adopted to procure i
railroad building, the choice fe
private individuals rather than th
not through any belief in the
efficiency of private managem
because the steam railroad was an
either system was wholly untri
ment the success of which was f
assured, and the community, as
preferred to offer the bait to pri
vestors of a large return rather t
a risk to the public credit.

This bait was nothing more
than a farming out of the power
ation of the State; that is, the p
exacting from the public the mo
essary for the maintenance of
service. The late Charles Francis
Jr., in his first report as Railroa
missioner of Massachusetts, in
this out most clearly. He say
sums exacted from the commu
transportation, whether of perso
property, constitute an exaction
nature of a tax-just as much
water rates, or the assessments
erty, or the tariff duties on in

ature to regu-
vas thus con-
al times, when
lic money in
s and bridges,
re granted for
invariably re-
such corpora-
ppear to their
Le arising from
compensated
1 moneys they
urchasing and
together with
e of twelve per
thereupon the
shall be vested
be at their dis-
as to be built
te corporation
inance. In the

he money from
credit, and in
old its stock or
me public, and
ndividuals. It
oney whatever
'ocure it.

e early days of
oice fell upon
than the public
n the superior
nagement, for
y untried, but
was an experi-
a was far from
ity, as a whole,
: to private in-
ather than run
more nor less
: power of tax-
s, the power of
the money nec-
ce of a public
Francis Adams,
Railroad Com-
ts, in 1871, set
He says: "All
community for
persons or of

the

vestments as may from time to time be required to meet the demands for increased service. In the early days this object was reached by legislative limitation of the dividend rate in Massachusetts ten per cent. Later, railroad commissions were appointed to control rates, and more recently the Transportation Act has partly revived the earlier plan of limiting the dividends to be paid. Local communities through which the road runs are permitted to help themselves to portions of the tax so levied by what is termed the imposition of taxes on the property of the railroad, but what is, in reality, an application to local needs of a portion of the tax collected from the public as a whole. The so-called "recapture" provision of the Transportation Act (Sec. 15a), by which all earnings over a six per cent return are divided between the earning road and a public fund, has been upheld by a judge of a United States court as an exercise of the power of taxation, and his decision has been sustained by the Supreme Court. It is taxation in the sense that it is a division of an exaction from the public for the performance of a public function.

The public can no more avoid its contri-
bution to railroad rates than it can to the
internal revenue taxes on the tobacco it
smokes. Inasmuch as the tax affects
everybody it makes little real difference
how it is levied or collected. With all
public service the method of payment
therefor is wholly a question of expe-
diency. The collection of ashes and refuse
in cities, for example, is sometimes at the
public expense, and sometimes a charge is
made to the householder. Should the
State see fit to restore the toll houses to
the highways and charge a toll for their
use, such an exaction would clearly be a
tax. The railroads might well give free
service were it not for the maxim of tax-
ation that the best system is the one that
plucks the most feathers with the least
squawking and, in consequence, the bur-
den is less easily perceived if it is borne in
the first instance by passengers and ship-
pers. The direct incidence of the tax is
thus shifted, although the ultimate burden
is not widely different when the expense
of transportation is paid from the public
treasury. In European states where state
ownership of railroads prevails, the gross
receipts from railroad operation go into
the public treasury and are often pledged
to secure foreign loans, while the operat-
ing expenses are paid from the general tax
levy, and whether the railroad is operated
at a profit or a loss is purely a matter
of governmental bookkeeping. Clearly,
where no dividends are paid, rates are
strictly an exaction from the public to pay
for a public service.

The tax collected is thus limited, but in so doing the public have seemingly forgotten that the railroads must increase their facilities to meet the requirements of growing communities, and the money therefor must come either through the public credit or directly from the public. Money is not to be coaxed from the pockets of the investing public unless a satisfactory return is assured. This return must, of course, vary with the risk assumed. For a railroad in a new and sparsely settled community a high bid for money must be made, while a thickly settled and highly industrialized community may secure money on practically its own terms. Only about ten years ago New England railroads could secure additional funds at as low a rate as the cities which they served. Shares in the Boston and Providence railroad, paying a dividend of ten per cent, sold in the market for some years at three hundred dollars per share, returning to the purchaser three and a third per cent on his investment. Not even the State bettered that

It is evident that such farming-out cannot safely be left unrestricted. In the farming-out days of the Roman Empire, the governor of a province was required to pay a fixed sum to the central government as the share of the province of the imperial budget, and the governor received his compensation as tax gatherer in whatever he could exact above that sum. The railroad corporation, on the contrary, reserves a limited sum and holds any surplus of receipts to the order of the public. The Transportation Act aims to permit the railroad corporation to collect enough to maintain the road and equipment and return to the security holders

adopted to secure this result. At one time all new issues of stock were sold at auction to the highest bidder. At another time, the public service commission fixed the price below which new stock could not be issued. If the commission fixed too low a price, valuable "rights" accrued to stockholders. All these methods were aimed at securing the necessary funds for railroads at the lowest cost to the community, and scant attention was paid to claims of stockholders that they should be allowed to make their own investments on their own terms.

The bait to the investing public was
twofold-the somewhat shadowy protec-
tion of the fifth amendment to the Consti-
tution of the United States, and the self-
interest of the public that nothing would
be done to discourage further investments
At the present time,
when needed.
neither of these has sufficient force to in-
duce investments in new issues of railroad
shares, and loaning money through the
purchase of bonds is becoming more haz-
ardous.

But to go back to the functions of the
railroad corporation. The appointment
of the management of the operations of
the road was delegated to the stock-
holders, as it seemed only just that the
persons who furnished the money should
control those to whom they were to look
for the return on their investment; but
the managements, that is the presidents
and boards of directors, are none the
less public officers though privately ap-
pointed. Mr. Adams insists on this, say-
ing, "they are essentially trustees," not
only for the security holders to secure a
return on the investment, but also for the
public to see that it gets the efficient
service so necessary to its welfare. This
doctrine of trusteeship does not rest on
Mr. Adams alone. The Supreme Court of
Massachusetts has on various occasions
considered the relations of the railroads
to the public. Chief Justice Shaw re-
marked, in one opinion: "It is true that
the real and personal property necessary
to the establishment and management of
the railroad is vested in the corporation;
but it is in trust for the public. The com-
pany have not the general power of dis-
Dosal incident to the absolute right of
obliged to use it in a

particular manner, and for the
plishment of a well-defined public
Chief Justice Taft used similar la
A trustee holds the legal title 1
in the recent "recapture" decisio
erty for management, but the rea
is his beneficiary for whom he ma
The railroad corporation is a
mental device to secure the n
money with which to build and e
railroads, and is a convenient i
diary between the general and the
additional function of holding off
ing public. Nowadays it perfor
ment ownership with the attenda
of political interference, althoug
that function is near the vanishin
and whether political or labor uni
ference is the most harmful ma
open question. The combination
deadly.

At the present time, and with m
roads, the stockholders have, in
no control of the managemen
Pennsylvania Railroad, for exam
ports that nearly one half of it
holders are women, holding one
the stock, with an average ho
forty-seven shares. Of the one
and forty thousand stockholders t
age holding is only seventy share
manifestly out of the question
vast number of people with sm
vidual interests to unite in any c
movement, and boards of direc
usually self-perpetuating. As a
writer has said, "authority to
largely delegated to executive com
and the entire directorate meets
stated intervals and then pretty
to felicitate the officers and emplo
to approve the work of the manag
The stockholders are a pitiably
lot, and it has long been a financi
that a minority of a third, or even
always control the election of d
This minority is not infrequen
trolled by banking interests, an
sarily and properly so. The gre
of stockholders cannot or, at leas
provide the money for extension
pansion, and such money is, and
under existing conditions raised
investing public through bank
purchase, or underwrite, new issu
curities and place them with the

editorial articles in the Boston Herald some two years ago, but the readers could not be induced to comprehend that these absurdities were paid for by the public and every one paid his share, minute in each instance, but colossal in their sum total. There still persists a feeling that these payments are the spoils of a war between capital and labor and represent justifiable loot from rapacious capital in which the public as a whole has no interest except to cheer on the victor. The time may, nay must, come when the public worm will turn and the railroad labor unions will find this elaborate structure of absurd and selfish rules toppling about them like a house of cards.

The disinclination to controversy over
wages has been heightened by the attitude
of the National Government, particularly
during the war-time administration. The
Adamson Act and the action of the direc-
tor general in encouraging and approving
agreements with the various labor unions
have fettered the hands of the railroad
executives to such an extent that there is
left little incentive to resist further en-
Now that
croachment by the unions.
these agreements have been turned back
to the managements and unions to re-
adjust, the unions show little inclination
to surrender the advantages they have
gained. The provisions of the Transpor-
tation Act tend to make these conditions
permanent. The attitude of the unions
is that of the famous remark about the
public attributed to Commodore Vander-
bilt.

One alarming condition is the insistence
of the unions on the right of promotion by
seniority. It is true that the agreements
provide that, ability and merit being
equal, seniority shall prevail in promo-
tions in the classified service, but the man-
agement is no longer allowed to settle
questions of ability and merit, as all de-
cisions are ultimately appealable to the
Labor Board, sitting in Chicago, who fre-
quently upset the judgment of the execu-
tive officers, laying down as a principle
that "the intent of this rule is to es-
tablish seniority as the first consideration
in selecting the successful applicant for a
bulletined position." Vacancies must be
on the local bulletin boards.

The man

agement of a transcontinental rail
appointed a man, not an employee of
railroad, to have charge of the shippi
wool at Miles City, Mont., as that
was sharply competitive and the
pointee was personally acquainted
the shippers of wool and could at
business. The wool-shipping seas
short, so that the office was open
fifty-five days and the appointment
necessarily temporary. An employ
the road, who was entitled to the pla
the basis of seniority, applied the
and was rejected because the position
temporary, he was already employed
he had no personal acquaintance wit
district. On appeal, the Labor Boar
clared him entitled to the job and, a
office had long since been closed fo
season, ordered the railroad to pay
the difference between the salary he
received in his regular job and wha
would have received had he obtaine
desired place.

The deadening thing about this a
cation of the seniority principle is th
puts upon the railroads much the
burden that encumbers the army, v
a second lieutenant has been reason
sure of becoming a colonel, and perh
general, if he lived long enough. In
of peace that may do no harm, but
eral Pershing's main task in France
weeding out the incompetents and re
ing them with men of energy, capa
and leadership. The railroads sorely
authorities should take steps to see
all three of these qualities, and the p
The American Telephone and
the railroad managements secure th
graph Company, a rival in magnitud
capitalization of any railroad sys
annually sends its agents to colleg
interest young men of promise in te
ony as a career. The General Ele
Company and the larger New York b
also make special efforts to enlist b
and enterprise, but we do not hear o
railroads making any such adva
Educated young men of promise ar
entering the service of our railroads
what is even more disheartening, ar
encouraged to do so by the active
agements. This somewhat rigid doc
of seniority interferes with holding
inducements to such men, as, in the