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PUBLIC DOCUMENTS. 



could hardly be read through during the session, and, 

 if read, not one member in a dozen would be the 

 wiser. If Congress should undertake the periodical 

 revision of rates on the 70,000 miles of railroad in the 

 United States, it must remain in constant session and 

 devote its attention exclusively to this work. 



5. " Absolute limitation of dividends." " This form 

 of proposed regulation assumes that the passenger and 

 shipper will receive, in the shape of reduced fares 

 and charges, whatever excess of profits may remain 

 after paying to the shareholder the limit allowed by 

 law." It involves the power of revision, and the 

 necessity for accurate and detailed information, re- 

 ferred to under the forms of regulation already dis- 

 cussed, and hence, in its practical application, would 

 encounter many, if not all, of the difficulties therein 

 mentioned. In England it is pronounced " impossi- 

 ble and undesirable." " Impossible," because it in- 

 volves the necessity of judging " what rates will enable 

 the company to make the given dividend on a given 

 capital," and of determining " what are the proper ex- 

 penses of the companies and what economies they can 

 practise." These are declared to be " matters which 

 require the knowledge, skill, and experience of the 

 managers themselves, and any attempt on the part of 

 any government department to do it for them is im- 

 possible, unless the agents of the government were to 

 undertake an amount of interference with the internal 

 concerns of the companies which is neither desirable 

 nor practicable." '' Undesirable," because it would 

 encourage extravagance, stock-watering, and corrup- 

 tion. 



The assumption that what is withheld from the 

 shareholders would be available for reduction of rates 

 is declared to be a " fallacy, because the company, 

 having no interest in making more than the fixed 

 rate of profit, will have every inducement to use up. 

 the surplus in needless expenditure." " The result, 

 therefore, of limiting the dividends of companies 

 would be to deprive them, monopolists as they are, 

 or will be, of the ordinary motives for efficiency or 

 economy, and to impose upon government or Parlia- 

 ment an impracticable task, the result of which must 

 be either to delude the public by giving a formal and 

 groundless sanction to the schemes of the companies, 

 or to take out of their hands the management of their 

 own affairs." 



The reasons thus forcibly presented against an ab- 

 solute limitation of dividend are quite as applicable 

 to the railroad system of America as to that of Eng- 

 land. It is surely undesirable to increase the present 

 extravagance and waste in railway management. It 

 would be an easy matter for railway managers to 

 keep their dividends within the prescribed limits, 

 without a decrease of rates, by increasing their own 

 compensation, by special contracts for the enrichment 

 of favorites, and by other means but too well known. 

 If the dividend could not extend beyond a certain 

 fixed amount, it would be to the interest of the com- 

 pany to do only enough business to produce that 

 sum, and hence if the movement of 1,000,000 tons at 

 two cents per ton per mile, or of 2,000.000 tons at one 

 cent per ton per mile, would produce the profit 

 limited to the company, the lesser amount of work 

 would be preferred. The direct inducement, there- 

 fore, would be to increase the price and diminish the 

 traffic, thereby giving to the public an inferior ser- 

 vice at an enhanced cost. It is apparent, also, that 

 another result would be to stimulate stock-watering, 

 which has already become so offensive to the public, 

 and which has so largely increased the cost of trans- 

 portation ; for, if the shareholder can receive only a 

 certain fixed dividend on the amount of his capital, 

 he will not be slow in finding some plausible excuse 

 for increasing his stock. 



One of the chief motives for the practice of stock 

 inflations which prevails on some of our leading roads 

 is the fear of offending public sentiment by an exhibit 

 of actual profits. When public sentiment shall have 

 crystallized into a law of absolute limitation, may we 



not expect to see this evil aggravated to an extent 

 even more alarming than at present 3 



Such a limitation of dividends would also tend to 

 discourage the construction of new and competing 

 roads in localities where they are needed, for capital 

 will not readily seek investment where the profits are 

 limited, unless it be accompanied with a guarantee 

 which no one proposes to give. This is illustrated by 

 the fact that a bond of the New York Central Eaii- 

 road, which guarantees 6 per cent., is worth as much 

 in the market as its stock on the expectation of 8 per 

 cent. 



A law of Congress establishing this form of regula- 

 tion would, even if practicable, afford no relief, but. 

 on the other hand, it would result in a withdrawal or 

 every inducement to economy ; in increased expendi- 

 tures and waste ; in enhanced prices for inferior ser- 

 vice ; in an additional stimulus to the reprehensible 

 practice of stock-watering, and in special contracts, 

 jobbery, and favoritism. 



6. ''Division of profits beyond a certain limit between 

 (he companies aim the public. 1 ' 1 This is a modification 

 of the last-named proposition, and is designed to 

 avoid some of the difficulties and objections therein 

 suggested. The theory upon which it proceeds is, 

 that a certain limit being fixed the excess should be 

 divided between the companies and the public, one 

 portion being added to the dividend and the remainder 

 being applied to the reduction of charges. It is true, 

 this method would partially obviate the objection 

 urged against an absolute limitation of dividend, be- 

 cause, -in proportion to the amount which might be 

 added to the profits of the company, an inducement to 

 economy would exist. But other difficulties, which 

 in Great Britain are declared to be "insuperable," 

 would remain. It would involve the obnoxious task 

 of selecting special traffic and special rates for reduc- 

 tion, and of deciding what should be the amount or 

 description of any particular reductions, and in whose 

 favor they should be made. A regulation of this 

 kind was once adopted in England, but it never went 

 into eifcct. It has been tried in France, but, on ac- 

 count of the difficulty of selecting rates and classifica- 

 tions of goods on which to apply it, the reduction has 

 been abandoned^ and one-half the surplus profit is 

 paid into the national treasury. There is, therefore, 

 but little encouragement to try the experiment in this 

 country, where, by reason of the larger number of our 

 roads, and the greater diversity of conditions and of 

 traffic, as well as the instinctive aversion of our peo- 

 ple to meddlesome governmental interference in pri- 

 vate affairs, vastly greater difficulties would be en- 

 countered than in France or England. 



7. ''Maximum rates." It is doubtless entirely prac- 

 ticable for State Legislatures to establish maxima 

 rates which will afford a remedy for local extortions 

 and discriminations ; and it is possible that in certain 

 cases such rates may be established by act of Congress 

 with beneficial results. But it is difficult to see how a 

 general law of Congress, establishing maxima ratesj 

 can be framed that will materially cheapen, the cost of 

 transport on existing lines of railway between the in- 

 terior of the continent and the seaboard. The in- 

 telligent enactment of such a law would require an 

 investigation of all the facts, circumstances, and con- 

 ditions mentioned under the propositions just dis- 

 cussed, and hence would involve the difficulties there- 

 in suggested. 



A commission with authority to establish maxima 

 rates, subject to revision by the courts, has been sug- 

 gested as the means of avoiding the difficulty last 

 stated. But Congress acts only under delegated 

 powers, and a senous constitutional question arises 

 whether it can delegate its powers to another tribunal. 

 I believe it is a well-settled principle of law that an 

 agent cannot, without the authority of his principal, 

 delegate his powers to another agent ; else such sub- 

 agent may again delegate them, and so on without 

 limit. Assuming, however, that no constitutional 

 difficulties exist, the expediency of clothing the Presi- 



