CHAPTER 10.

State ownership of railroads.-Evils of United States ownership would not accompany State ownership.-Rate of interest on bonds issued by State in purchase of the roads.-Bonds would remain in the State.- Money in savings banks in United States would buy bonds.-Advantages and disadvantages of State control and State ownership compared.-Civil service under State ownership.-Strikes would cease. - Construction of new roads.

The State having by law ascertained the present value of the railroads within its borders, would be in a position to know the exact amount it would have to pay should State ownership be decided upon, a plan that may be adopted by the people under the belief that it would be the best means for securing reasonable rates of transportation. State ownership would not bring with it the evils that would attend United States ownership. There being fifty States and Territories, the power of appointing to positions on the roads would be divided among that number of executives or boards. having no connecting interests, instead of being lodged in the hands of one person or board. The governments of these fifty States and Territories would probably never all be at the same time under the control of one and the same political party, and that fact would prevent a unity of action on the part of the State governments, against the interests of the people. The government of each political division would be confined to the control of the railroads within its jurisdiction,

while United States control over interstate commerce would prevent the unjust discrimination of any State against the commerce of a sister State. State ownership would not bring with it such tiresome red-tape rules as prevail in all Federal business transactions. Under State ownership, in case of any disagreement between the patrons of the road and the road officials, the fountain-head of justice would be near home; a man could get redress, if entitled to it, in the State where the injury was received. The impositions of this foreign corporation business would cease under State ownership. The "insolence of office" in the road officials would not reach that degree under State ownership that is found in the United States official who has a friend at court. If the abuse of requiring political funds to be raised by the heads of departments by contributions from their subordinates is to be continued, under State ownership they would not all go to assist one of the political parties, as they would under the ownership of the General Government.

Of two evils, it is said one should always choose the least, and on that principle there might be many more reasons given in favor of State ownership as against United States ownership. Should the State finally conclude to buy the roads within its borders, it could make the bonds upon which the money was borrowed for that purpose, exempt from taxation within the State, and thus find plenty of purchasers for bonds bearing 34 per cent. interest, redeemable at the option of the State after a

certain number of years. From the fact that they would be taxable anywhere outside of the State, such a provision would tend to keep the bonds at home. There might be constitutional objections in some of the States against making the bonds exempt from taxation, but as it would be to the advantage of all the citizens to get bonds issued bearing the lowest possible rate of interest, and consequently getting a low rate of fares and freights, the objection could be easily overcome by amending the constitution for the sole purpose of issuing such bonds. There is at the present time $2,000,000,000, nearly onehalf enough to buy all the railroads in the United States, in the savings banks of the country, every dollar of which would quickly go into such bonds as above described, issued by the States for the purchase of the railroads, for the reason that the money invested in such bonds would not be taxed, would draw better interest than the savings banks pay, and would be just as safe as if invested in United States bonds. Does anyone suppose that the State of Texas would have any difficulty in borrowing $150,000,000 on 3 per cent. non-taxable bonds issued for the purpose of buying the railroads of the State? No doubt the whole amount would be taken by the people living in the State. The assessed valuation of the property in Texas in 1895 was $865,120,989; its actual value is probably three times that amount. Should the State buy the railroads, a sinking fund could be created, into which a sufficient per cent. of the earnings of the roads could be paid each year to redeem the bonds at

maturity, the interest promptly paid, and at the same time the people have lower rates than the roads now give them. Should the Federal courts persist in talking about "original cost of construction" as a basis for fixing rates and earnings, the States may be obliged to take the roads under the power of "eminent domain" in order to protect the people against oppressive rates.

It is argued by some that in the event of the public buying the railroads, instead of paying their present value the price paid should be the amount that it cost the corporations to construct them; because, they say, had the public constructed the roads they would have cost the people as much as they cost the corporations, which is doubtful. But were it true, these honest souls forget that if the people had built the roads they would not for the last sixty years or less have been paying enormous rates while the high-priced materials and rolling stock were being worn out and replaced at little

cost.

State control and State ownership appear to be the only alternatives by which the railroad question can be safely and finally settled. There would be advantages and disadvantages attending each of these alternatives, not possessed by the other. State control without ownership would leave the roads in the hands and under the immediate management of the corporations, and while avoiding a vast increase in the number of State. offices and places to be filled by the appointing power of the State, which might give that power an undue in

fluence in State and Federal elections, it would leave the combined power and corrupting influences of all the corporations constantly at work against the public, for the advancement of their private interests. So far as the question of expense is concerned, in either case it would be, as it now is, paid by the people. The question is, By which of these two plans would the expenses of maintaining and operating the roads be lowest? Ordinarily, private enterprises of every kind are conducted more economically than are public enterprises of the same class; but whether private management of the railroads when only a certain income could be earned would be less expensive than public management, is doubtful. Take away the incentive of possible profits, and private management would probably require constant interference on the part of the State, in order to keep down "operating expenses." However, under the supervision of a competent Railroad Commission of the State, under proper regulations controlling the purchase of materials and supplies and the letting of contracts for work to be done, the operation of the roads might be left with the corporations without injury to the public interest. Under proper control the interest of the railroads would become the interest of every man, woman and child in the State.

Under State ownership, the property secured in the purchase of the roads would be different from almost any other kind of property bought by the State, in this, that while almost all other kinds of State property are