THE DIFFICULTIES OF RAILROAD REGULATION. 9 



the main evil, they recognize pools as the most effective method of 

 combating it. State roads enter into pooling contracts with private 

 roads, railroads divide traffic with competing water-routes. The law, 

 recognizing such contracts, is able to regulate them, and to deal with 

 organizations of railroads better than it could deal with railroads indi- 



vidually. 



In this respect they have the advantage over us in America. In 

 our vain effort to prohibit pools altogether, we have simply intensified 

 their worst features. By refusing to recognize them at all, we have 

 rejected the chance to regulate them. We have done worse than this. 

 By taking all permanent guarantees away from them, we have forced 

 them to pursue a short-sighted policy. The prejudice against pools, as 

 we have often seen them, is not an unreasonable one ; but the fault is 

 in the law quite as much as in the system. Admit, if you please 

 (though it is by no means clear), that the disastrous multiplication of 

 roads in 1882 was mainly due to the short-sighted manipulation of 

 rates under the pooling systems : what then ? Such short-sighted 

 policy was an almost necessary result of a legal theory which refused 

 to enforce pooling contracts, and made their continuance depend upon 

 the voluntary adhesion of all parties. The pool was compelled to 

 adopt a policy which should keep every one in good-humor for the day. 

 The moment the directors of a single road were dissatisfied with pres- 

 ent results, they could break the system down, regardless either of the 

 rights of others or of their own permanent welfare. 



No policy can be more suicidal than this. The temporary inter- 

 ests of the railroads often diverge widely from those of the commu- 

 nity which they serve. Their permanent interests are almost identical. 

 The sound and strong roads, with a permanent character to sustain, 

 are much more likely to be managed in the public interest than roads 

 on the verge of bankruptcy, whose only thought is for the present. 

 Yet all our legislation is directed against roads of the former class. 

 We place them at the mercy of reckless competition in the matter of 

 rates. We allow the building of insolvent competitors by construc- 

 tion companies whose operations are no better than blackmail. We 

 strive to limit their dividends, when the only practical results of such 

 a measure will be diminution of enterprise and increase of extrava- 

 gance. In our fear that the influence of railroad managers may be- 

 come too great, we have devised laws which seriously interfere with 

 their power for good, and leave their power for evil almost unchecked. 



To this sweeping statement one important exception must be made. 

 More by accident than by design, the railroad commissioners in a num- 

 ber of our States have become the representatives of the permanent 

 interests of the railroads and community alike, against the short-sight- 

 ed policy of extremists on either side. The history of the Massachu- 

 setts Commission has presented the most marked instance of what can 

 be done in this way, by a body of men having no power except the 



