THE article of Mr. Coleman’s, published in the December number of the Atlantic, giving an account of the brutal treatment he received at the hands of the New York and New Haven Railroad, brought out as a sort of echo a quantity of letters and communications, of which Mr. Coleman will make use in due time, when our readers will probably be surprised at the amount of feeling displayed by the writers, — the sense of outrage, imposition, extortion, injustice, which the railroad management of the country excites in the mind of the public. It used to be said that the railroads were badly managed because “ the people did not want anything better ” : cars were crowded, baggage was knocked to pieces, conductors and brakemen were uncivil or brutal, because ours was a simple country, with republican institutions ; not that there was in the minds of the apologists any belief in a necessary connection between republicanism and rudeness or cruelty, but because the existing evils seemed a constituent part of the status quo, which it was an article of the American religion to worship with a blind faith. We were very conservative in those days. The institutional status quo, if we may call it so, is no longer an idol, and we have become sceptical, not to say incredulous, when we hear it said either that the railroad system, or the steamboat or hotel-elevator, or fireproof-safe system is admitted to be “ on the whole adapted to the needs of our civilization.”

The matter may be looked at from a thousand points of view; from that of the passenger maimed for life, the shipper eased of extortionate freight, the swindled bondholder, or the plundered community. We have before us a circular letter written last fall by a Boston firm to its Western correspondents, which gives a very striking picture of the helplessness of the individual in his struggle with great corporations. What the reply of the Boston and Albany Railroad may be we do not know, but it is not fair to presume in these cases that there is a very good one. The important part of the circular is as follows : —

BOSTON, October 31, 1872.

GENTLEMEN : On account of the unusual and unwarranted action of the Boston and Albany Railroad Co., in sending broadcast through the West public notice that no property consigned us would be received by them at Albany for transportation to us, unless freight and charges on such were prepaid, we are forced to take this course to set us right with our friends and shippers throughout the West. During the past two years we have received considerable grain over the Red, White, and Blue Transit Lines, such coming to this city over the B. & A. R. R., one of the copartners to such lines. This grain has been largely short in weight, the losses in transit on cars being many times large and often excessive. We have repeatedly called attention of the R. R. Co. to such shortages, but they have invariably, and usually in an arrogant and arbitrary way (a way peculiar to this corporation, as our merchants all can testify to), refused to pay any attention to our demands. We have submitted to this species of robbery as long as we feel inclined to, and now, having been thus forced to it, take the stand, that, as common carriers, the railroads are liable, and should be held responsible, for failure to deliver property intrusted to them, in like good order and quantity as received by them ; that, when we can prove a certain quantity shipped in a car at the West, we are entitled to a like quantity delivered us here, or payment for the shortage. We therefore declined paying the B. & A. R. R. Co. a lot of their freight bills unless they would allow our shortages, which we were desirous of having them look into, to satisfy themselves as to the justice of. They, however, most positively refused to notice our claims against them, but said we must pay their bills as presented, right or wrong, and, if wrong, trust to their refunding them when they see fit; and as we have not submitted to their arbitrary demands, but have decided to hold out, and let our courts settle the question, they have taken the course — as it seems to us out of sheer malice, to injure us — of notifying all their Western connections to refuse all property consigned us unless freight was prepaid. This is not through fear that they shall lose by us on freight their due, as they have commenced suit against us for amount of their bills, and we have given them a bond to cover same, so they are secure on that score ; but it is done simply so to annoy us as to make us surrender unconditionally to them. We propose to see, however, if we have any rights at all in the matter, or whether the railroad corporations are the supreme law in themselves, and everything must yield to them. The B. & A. R. R. Co. have even gone so far as to refuse to receive at Albany grain for which we hold through bills of lading, contracting to deliver such at East Boston ; and through their influence flour and bran in transit to us, and for which we also hold through bills of lading, contracting to deliver such at Boston, have been stopped at Toledo and Cleveland. We are also daily in receipt of advices from our friends, that cars for shipments intended for us are being refused by them at all points throughout the West.


Such private griefs as these, however, are matters of small moment. If we wish to see the system as it affects larger interests, we must look at such iniquities as those practised by the Erie Railroad, with its retinue of judges and legislators ; at the doings of the “ reformers ” of the Atlantic and Great Western ; at the proceedings of the “ Marginal Freight” Company, recently unearthed by the Legislature of Massachusetts ; or at the affairs of the Union Pacific Railroad, the typical corporation of the day, with its land grant of 12,800 acres to the mile, and government subsidy besides, its Credit Mobilier parasite, its hundred millions of worthless stock, and its principal projector distributing shares among members of Congress at nominal prices, allowing it to remain meantime in his own name, and taking it back when they become frightened.

As to the evils of the present condition of things, there is a remarkable unanimity of opinion ; as to the remedy, no one who has any to propose has yet found it possible to convince the public that it can do more than stay the ravages of the disease for a time. That railroads are gigantic monopolies, over which the principle of competition has no control ; that their enormous wealth enables them to set themselves above the law and above justice ; that they are in the hands of irresponsible and unscrupulous men, whose sole interest in transportation is the money that can be made out of the public by it; that the building of roads out of the proceeds of bonds, secured by a land grant from the government, and flooding the country with an imaginary security known as stock, which represents nothing except the opportunity for speculation, is corrupting and pernicious ; that a railroad to-day means, to the greater number of the people who project and create it, simply a fraudulent device for extorting a quantity of money from the public under cover of a public service : — all this is admitted. There is also a general unanimity of opinion, among those who have given much thought to the subject, as to the functions which railroads ought to subserve. No one doubts that railroads are, in modern times, the real highways of a country, or that the charges paid by passengers and freight are in reality a “ transportation tax ” levied upon the business of the country, whether the tax is collected by private or public hands. It is obvious, therefore, that the tax for fares and freight ought to be considered, like income or stamp taxes, in connection with the general tax system of the country, and that the first question in regard to it ought to be, How can the necessary income be raised so as to bear least heavily upon the industry of the country ? Any one can see for himself that the production of the most necessary articles of commerce must depend on the possibility of getting them to a market; and the possibility of getting them to a market depends, in modern times, on railroads. Pennsylvania, for example, is the great centre of the production of coal and petroleum in the United States ; but the market for coal and petroleum in New York is governed primarily by the arrangements which the producers in Pennsylvania are able to make with the transportation lines. So much is this the case, and so ruinous of late years have become the delays caused by the differences between producers and transporters, that vigorous attempts are now continually making to solve the difficulty by a union of the two, and the creation of a joint monopoly. These consolidations are only just beginning. Their natural end would be the consolidation, in the hands of a vast consolidated railroad, of all industry which needs transportation for its products. This is the solution of the “railroad question” which most recommends itself to railroad men.

But when all this is admitted, how much nearer are we to a solution of the question ? There are one or two branches of it, to be sure, which are comparatively simple. The laws relating to railroad securities are in an absurd condition. Forty years ago, when railroad construction began, it was the universal custom to build roads “on stock.” A number of men subscribed the amount required to lay the track and equip the line, and in return received certificates of indebtedness, in the shape of stock. If more money was needed, after the railroad was finished, money could be raised on bond and mortgage. The stockholders were, in those early days, the real owners just as much as a man is the owner of a house for which he has paid, though some one else may hold his note for part of the purchase-money. The stockholders were therefore entitled to elect directors, and, through them, to manage the property. Before long, however, as the wealth of the country, and, with the wealth, credits, increased, it was discovered that this process might be reversed; that as soon as a charter was obtained, the promoters of the enterprise, instead of paying money into the treasury, and constructing the road with it, might, if they pleased, mortgage the road to begin with, issue bonds, and with the proceeds of those bonds build the line. Then the stock could be divided among the promoters, and as soon as it became valuable they could sell it, and count their sale as so much clear gain. The next step was the invention of “ land grants,” which made the mortgage a far simpler matter. At present the system is this : Half a dozen patriotic gentlemen go to Washington and urge the necessity of building a road through some unsettled part of the West, for the purpose of developing the resources of that section, or making a connecting link in one of the great national highways between the Atlantic and the Pacific, or moving the crops to tide-water, or some other equally important object. As they are generally gentlemen who have friends in Congress, and who pay their political assessments with even more regularity than their taxes (Mr. Thomas C. Durant testified the other day in the Pacific Railroad matter, that he had contributed $ 10,000 to the election of a senator from Iowa; and Mr. Burbridge, that he had contributed $ 5,000 towards the election of another from Nebraska, and that he always contributed from $ 1,000 to $ 2,500 a year toward politics), their petition is listened to readily. According to their representations, it is impossible to build the road without a subsidy. Congress at once gives them a grant of land by way of assistance. This they immediately mortgage, issuing bonds for the amount of the mortgage, and at the same time put into their own pockets the stock. The sales of the bonds yield enough to build the road; and the income is perhaps enough to pay the interest on them. But meantime the projectors are getting no returns for their money. By this time, the stock, if the road looks at all well, has some value, and they begin to sell it. Gradually, as they want more money, they sell all of it, and very likely by this time they have made a profit out of the road quite sufficient to reimburse them for their trouble. But what has become of the road ? The stockholders own it, and the stockholders are now speculators who have bought up the shares on the market, and have no interest in the stock, except to get rid of it at an advance. Here begins a series of speculations in the stock which generally end in “ corners,” new issues, and general depreciation of the property. The speculative stockholders elect a speculative board of directors, and with their help issue new mortgages, enter into contracts with other roads, of the lease or guarantee kind, and at last they cease to be able to pay interest on their debt,— the original mortgage. Meanwhile, the real owners of the road, the people who paid for the bonds, have no voice in the management, and are, throughout, at the mercy of the “stock.” They can, of course, foreclose the mortgage, but, for this purpose, there must be united action on the part of several hundred small investors, widows, orphans, and trustees, scattered over the country, and foreign countries, not accustomed to act together, and ignorant of one another’s whereabouts; besides this, by the time that foreclosure is possible, the work has been done, and the property has lost its value.

It is plain that the retention of the legal ownership of railroads in the hands of the stockholders, in the case of roads which have been built “ on bonds,” is an entire mistake. The ownership of a railroad ought to be in the hands of those who have really built it with their money, or, to put it in another way, those who wish to own a road ought to be obliged to pay for doing so. No doubt, if land grants are given up, the opportunity of a great deal of this kind of speculation will be done away with ; but a more radical remedy is needed, and the only sure means of preventing such speculation completely seems to be the abolition of the borrowing power of railroads. If railroad mortgages were made impossible, railroads would necessarily be built by the money of those who felt a sufficient interest and confidence to subscribe.

This, however, is not the main question. Even if railroads were deprived of the power of borrowing on mortgage, and every line in the country were owned by the men whose money had built it, we should be as far as ever from having got rid of monopolies. Railroads would still be immense corporations, with “ perpetual succession,” totally unrestricted by competition. It would still be for their interest to combine, and the general tendency of railroad combination would be exactly what it is now : it would tend towards a gigantic consolidation of all the lines under one management, having, within the limits suggested by the managers’prudence, absolute control of the markets and also of the legislation of the country, so far as it affected their own interests. With packed legislatures, with paid or intimidated judges, and with a civil service consisting of several thousand cunning clerks and able-bodied brakemen, conductors, and switch-tenders, they would be in just that position most dreaded by all lovers of liberty, —a powerful and enormously rich corporation, surrounded by a timid, weak, and hopeless public. While we were still engaged in singing paeans over the glorious institutions of our happy country, we should suddenly find that our institutions had disappeared, and that we had riveted round our necks the chains of a worse despotism than any we ever lamented for our fellow-creatures. This is really no imaginary picture, as any one will admit who recollects the stronghold, absolutely inaccessible to the law, which Fisk and Gould erected and for a time maintained in New York, or the military operations of the employees ofthe Erie and the Susquehanna Railroads during the “ Susquehanna War,” and who has followed with any attention the helpless struggles of the government of the United States — formerly supposed to be quite able to take care of itself—in the foul toils of the Union Pacific Railroad.

Two ways have been suggested (both of which have been tried) of meeting these difficulties. The first is that of supervision by the State. According to legal theory, a railroad is, like any other corporation, a creature of the State, called into existence and endowed with certain powers for the public benefit. These powers it must exercise with care and according to law, under penalty of the revocation by the State of its right to exist. On paper this looks well enough, but it is needless any longer to discuss the value of State supervision, because we have had it now for forty years, and the results are what we see around us. Instead of the State’s supervising the railroads, the railroads supervise the State.

The other is the absorption of the railroads by the State. Although this scheme has not been much agitated, the agitation is pretty sure to come, just as the agitation for the absorption of the telegraph service by the post-office has already come. The railroads are not any better managed than the telegraphs, while the evils of consolidation and monopoly are very strikingly illustrated by both services. The Postmaster General, in his recent report, states what is, we suppose, an undeniable fact, that the press associations, by combination with the telegraph companies, are enabled, through discriminating tariffs, to make the establishment of newspapers which have not the privileges secured by association a matter of difficulty; and every one knows in a general way that the “ freedom of the press,” supposed to have been secured to us by the struggles of our ancestors, means in modern times rather the liberty of the already existing press to do and say what it pleases, than the liberty of any one who feels himself wronged or oppressed to find through the press a medium of communication with the public. Capital, of course, can always find expression, but it is not capital in these days which suffers acutely at the hand of the oppressor. No doubt if the telegraph became a branch of the post-office, and were well managed, opinion would be less severely taxed than it is now. And if the railroads were managed by the State, and well managed, the evils of the railroad system would be greatly modified.

The question of expense has not the importance which, at first sight, it seems to have, because, as we have said, there is no real revenue from railroads under any circumstances. A certain number of millions of dollars are levied by some one every year for transporting men, women, and children, merchandise and baggage, over the roads. Whether this sum is collected by the government or by corporations, it is a tax, which represents the interest on the capital sunk in the construction of the highways, and which the public must in any case pay. The community will be neither richer nor poorer, whether this tax is collected by Vanderbilt or by the United States, unless there is a difference in the economy and skill exercised in the collection. Suppose a country with a single road, the capital of which is $ 100,000,000, and which costs exactly $ 50,000,000, and which pays seven per cent on the capital, or fourteen per cent on the cost. Under the present system the difference between fourteen and seven per cent goes into private pockets. If the country assumes the road, issues bonds for $ 100,000,000, and manages it exactly as it was managed before, the fourteen per cent will still be collected; seven of it will go into the pockets of the original owners, and the other seven will just be equivalent to the interest on the bonds issued. The public which pays the tax is in precisely the same position in either case. On the other hand, suppose that the road was wastefully managed while in private hands, that twenty-one per cent instead of fourteen were wrung out of the public by the company, and that a third of it was used in purchase of fast horses, wine, and other luxuries for the directors. In such a case, this third is so much pure burden on the industry of the country ; and if the State by assuming the road would save it, business would be lightened of taxation by just that amount,— an effect which the industry of the country would soon show.

In other words, the question is one of better or worse management; and when we have said as much as this, we have almost admitted that, with politics in its present condition, the assumption of the railroads by the state is not a thing to be desired by anybody except by senators and congressmen, who are seeking places for their friends. Bad as the present management is, there is at least the satisfaction of knowing that in serious cases, where an unusual number of people have been slaughtered, or an exorbitant amount of thieving done, there is something like responsibility. Companies can be sued, and even be made to pay heavy damages. Individuals, too, may be forced to restore stolen goods. But with the roads in the hands of the United States or of the separate States, no one would have any redress, for official responsibility is broken down, and there is no means of proceeding against the United States, as we can against Gould or Vanderbilt. With railroads in the hands of the government, political hacks would take to the road, and plunder the public, as they now do in the post-office and the custom-house. The change would simply add another hundred thousand or so of offices to the already enormous spoils which are at the disposal of victorious parties in State and national politics. With this patronage “ civil-service reform ” and “ decentralization ” would become mere empty phrases, because they would be no longer possible. We should then know, not merely what it is to be plundered, but what it is to be governed by a “ ring ” of the most fabulous power, with machinery so perfect that nothing short of violence could have any effect with it.

In short, when the civil service is really reformed, and the departments at Washington and other capitals are managed on principles which insure, as far as practicable, efficiency and honesty in the officials, it will be time enough to think of the transfer of the railroads to the government, as it will to think of the transfer of contested election cases to the courts, when we have secured a strong judiciary, and of a thousand other reforms, when we have secured a competent force with which to carry them out At present, changes of machinery will do us little good which do not at the same time bring with them more radical alteration in the motive power itself.