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ROBERT BACON Banker; U. S. Secretary of State, 1909; Ambassador to France, 1909–1912. Now candidate for Republican
nomination for Senator from New York
THE RAILWAY CONTROVERSY : ITS PROGRESS
basis to arbitration, but would compromise by Congress together in joint session on the leaving the question of pay for overtime to an afternoon of August 29, and addressed to investigating board. The managers asserted this joint session a special personal Message, that even this would involve them in such an announcing that his mediation had failed, that enormous expenditure that they could not he had no means of compelling the railways acquiesce. This phase of the controversy and railway managers to refrain from war, can be best illustrated by the table below. and that he desired power so to compel Ten hours now constitute a day's work, and them. He recommended to Congress six a man is paid pro rata for overtime. The proposals, all to be enacted by statute, as men demanded that eight hours should consti- follows: tute a day's work, and that a man should be 1. A reorganization and enlargement of the paid time and a half, or price and a half, as Inter-State Commerce Commission, to give it it is called, for overtime. The men point more power and make it more efficient. out, with considerable reason, that the effect 2. The creation of eight hours as the legal of this demand for price and a half for over- day of labor for all railway wage-earners time would be to reduce their hours of labor. engaged in the operation of trains in interUnder the pro rata system of paying for State transportation. overtime there is no inducement to the rail- 3. The creation through appointment by way employers to reduce the working hours the President of a small body to observe the of the individual. If A is paid $4 for eight operation of this eight-hour law, and to report hours, he would be paid pro rata $8 for six- its actual financial and social effects to Conteen hours' work. But at price and a half gress for subsequent Congressional action. he would receive $10 for sixteen hours. It 4. An explicit statement by Congress that would therefore be the policy of the railways it will approve the consideration by the Interto hire two men at $4 each to do the sixteen State Commerce Commission of an increase hours' labor. Thus more men would have of freight rates, if such an increase is proved jobs at less cost to the railways in money, to be necessary to pay the additional cost of and less cost to the men in exhausting hours an eight-hour day. and conditions of labor. The President pro- 5. A law establishing compulsory arbitraposed that eight hours a day should con- tion in industrial disputes, and forbidding stitute a day's work, and that the men should strikes or lockouts until the dispute has been be paid pra rata for overtime, leaving the submitted to arbitration under such a law. question of time and a half, or price and a 6. A law empowering the President, in case half, to arbitration.
of military necessity, to take control of railway property and railway workmen, and operate
the railways by drafting the railway workIf A is paid $+ per day for 10 hours'
men into the military service of the United work,
States. For 12 hours he gets $4 plus 2 hours over
The latter proposal was doubtless sugtime pro rata, or 40c. per hour, which equals gested by the experience of France in its $4.80.
great railway strike in which Minister Briand THE MEN'S DEMANDS
ordered the trainmen to run the trains as A must be paid his $4 fór 8 hours' work,
soldiers of the Republic under martial law. and “price and a half " for overtime.
The necessity for the suggestion at this time, For 12 hours he would get $+ plus 4 the President says, is found in the fact that hours overtime at 75c. per hour, which equals “almost the entire military force of the $7.00.
Nation is stationed upon the Mexican border THE PRESIDENT'S PROPOSAL
to guard our territory against hostile raids.
This military must, of course, be furnished A would be paid $+ for 8 hours and pro
with supplies and be promptly transported rata for overtime, leaving price and a half
to any other part of the country should need to arbitration.
arise." For 12 hours he would get $+ plus 4 hours
It is hardly necessary to add that as we go overtime at 50c. per hour, which equals $6.00.
to press these suggestions apparently meet
with the complete approval of neither ConOn his failure to persuade both parties to gress nor the railway unions nor the railway accept his proposal, the President called employers. Such suggestions almost never
PRESENT BASIS OF PAY
do satisfy all parties. The grounds for the President's course of action in this controversy are clearly set forth in the following extract from his special Message to Congress :
I unhesitatingly offered the friendly services of the Administration to the railway managers to see to it that justice was done the railroads in the outcome. I felt warranted in assuring them that no obstacle of law would be suffered to stand in the way of their increasing their revenues to meet the expenses resulting from the change so far as the development of their business and of their administrative efficiency did not prove adequate to meet them. The public and the representatives of the public, I felt justified in assuring them, were disposed to nothing but justice in such cases and were willing to serve those who served them.
The representatives of the brotherhoods accepted the plan, but the representatives of the railroads declined to accept it. In the face of what I cannot but regard as the practical certainty that they will be ultimately obliged to accept the eight-hour day by the concerted action of organized labor, backed by the favorable judgment of society, the representatives of the railway management have felt justified in declining a peaceful settlement which would engage all the forces of justice, public and private, on their side to take care of the event. They fear the hostile influence of shippers, who would be opposed to an increase of freight rates (for which, however, of course, the public itself would pay); they apparently feel no confidence that the Inter-State Commerce Commission could withstand the objections that would be made. They do not care to rely upon the friendly assurances of the Congress or the President. They have thought it best that they should be forced to yield, if they must yield, not by counsel, but by the suffering of the country. While my conferences with them were in progress, and when to all outward appearance those conferences had come to a standstill, the representatives of the brotherhoods suddenly acted and set the strike for September 4.
The railway managers based their decision to reject my counsel in this matter upon their conviction that they must at any cost to themselves or to the country stand firm for the principle of arbitration which the men had rejected. I based my counsel upon the indisputable fact that
there was no means of obtaining arbitration. The law supplied none; earnest efforts at mediation had failed to influence the men in the least. To stand firm for the principle of arbitration and yet not get arbitration seemed to me futile, and something more than futile, because it involved incalculable distress to the country and consequences in some respects worse than those of war, and that in the midst of peace.
I yield to no man in firm adherence, alike of conviction and of purpose, to the principle of arbitration in industrial disputes; but matters have come to a sudden crisis in this particular dispute and the country had been caught unprovided with any practicable means of enforcing that conviction in practice (by whose fault we will not now stop to inquire). A situation had to be met whose elements and fixed conditions were indisputable. The practical and patriotic course to pursue, as it seemed to me, was to secure immediate peace by conceding the one thing in the demands of the men which society itself and any arbitrators who represented public sentiment were most likely to approve, and immediately lay the foundations for securing arbitration with regard to everything else involved. The event has confirmed that judgment.
I was seeking to compose the present in order to safeguard the future; for I wished an atmosphere of peace and friendly co-operation in which to take counsel with the representatives of the Nation with regard to the best means for providing, so far as it might prove possible to provide, against the recurrence of such unhappy situations in the future—the best and most practicable means of securing calm and fair arbitration of all industrial disputes in the days to come. This is assuredly the best way of vindicating a principle, namely, having failed to make certain of its observance in the present, to make certain of its observance in the future.
We are not among those who ascribe to the President political motives in the position and action which he has taken in this grave crisis. His special Message to Congress is dignified, strong, and discloses an earnest desire on his part to avoid the arbitrament of industrial war. Whatever may be said of the practical wisdom of certain features of his plan, its spirit and general purpose should receive the support of the country.
COMMISSION GOVERNMENT II–PUBLIC UTILITY REGULATION IN CALIFORNIA
BY PAUL A. SINSHEIMER
FINANCIAL EXPERT CALIFORNIA RAILROAD COMMISSION, AND SPECIAL
VOR three decades the largest trans
portation interest of California, the
Southern Pacific, controlled as a chattel the Railroad Commission which had been created solely for its own regulation. An aroused public sentiment had established this Commission in the Constitution of 1879 to write the epitaph of railway rule. But all it wrote was the feeble record of its own subserviency.
It is told that one of its early members, rebuked for his frequent calls at the office of the Southern Pacific, replied, indignantly, “ And where else, please, should one go to regulate the railway ?”
To be sure, where else?
“ The State had invoked an inalienable right," said Andrew Furuseth, the sailorstatesman—" the right to abdicate.”
Then came the spectacular campaign of Hiram W. Johnson and his election as Governor in 1910 upon his emphatic and epigrammatic promise to “kick William F. Herrin and the Southern Pacific out of the gove ernment of the State." And after election he proceeded so to do with full vigor of foot and fist.
A railway that could rule could also serve, and the Governor set about to do some longneglected regulating.
Naturally it was assumed by those most intimately concerned that this would take the form of bitter retaliation. To their surprise, however, the Governor conceived and put into execution a policy of benevolent supervision which rested upon the premise that regulation could be made beneficial alike to the corporations and the people.
Strangely enough, he had been in office but two years when his administration, in consonance with this belief, used the same energies that had thrown the Southern Pacific out of the politics of the State, to preserve, in the public interest, that same Southern Pacific from dismemberment and consequent commercial ruin.
It required a statesmanlike discernment to distinguish the lines of political and economic cleavage. But this is one of the attributes which has given the present régime in California its peculiar appeal both to radical and conservative.
The Governor revitalized the regulative law; gave it, in the parlance of the moment, “a set of full-grown teeth,” and extended its scope to all forms of public utilities-railway, gas, water, telegraph, telephone, electric light and power, steamships, warehouses, wharfs, and pipe lines—a variety to which the abundance of companionship brought a sufficient solace.
The measure of the Commission's authority was fixed indelibly beyond the power of the courts to impair. Its membership was enlarged from three to five and its personnel rejuvenated with the impress of youth and vision, scholarship and ceaseless energy.
At the head of the new board was John M. Eshleman,' a young and intensely energetic attorney of brilliant mentality, who had a few years before attracted attention for his attainments in philosophy and classical literature at the State University. Associated with him were Max Thelen, also a youthful and scholarly attorney, from the staff of the Western Pacific Railway, who had been a class medalist at the University of California ; Edwin 0. Edgerton, a lawyer in his middle thirties, distinguished for incisiveness of mind and breadth of vision, an authority on municipal affairs; Alexander Gordon, a veteran farmer and banker, a postgraduate in the school of experience; and Colonel H. D. Loveland, a well-known business man and dissenting member of a previous commission.
Mr. Eshleman subsequently was elevated to the Lieutenant-Governorship and his place filled by the appointment of Frank R. Devlin, a former Superior Judge, a progressive leader of the Legislature, and a widely known attorney.
It required but one incident to persuade "Mr. Eshleman, who had been the guiding spirit of the Commission's work, died at Indio, California, on February 28, 1916.
! This article should be read in connection with that on railway regulation by Mr. Blewett Lee, of the Illinois Central Railroad, which appeared in The Outlook of last week.
the railway interests to an acquiescence in rates must be given voluntarily, immediately, the new order. The Commission had issued continuously, and uninterruptedly, as a preone of its first findings, reducing certain rates requisite to this protection by the State, under on the Southern Pacific. The president of the threat of competition. the company called upon the Commission, The moment this policy was proclaimed stated that the ruling could not be obeyed, electric-lighting rates throughout the State of and that the equities might be satisfied by California fell without further order from an the arrest of one of his station agents. average of nine cents and ten cents per kilo
“ Why the station agent ?” he was asked. watt hour to an average of seven cents. Why not the president of the company ?" Measured in dollars and cents, this one act
That was all, but the reduced rates went returned to the people of the State twice the into effect that night.
expense of the Commission during the whole Governor Johnson had imparted but one of Governor Johnson's term. word of admonition to his new board.
The State had but a few months before Regulate with a firm hand,” said he, been treated to the spectacle of a pitiless “but always remember that California wel- warfare between the Northern California comes and protects legitimate industry.” Power Company and the Sacramento Valley
The Commission found itself with sudden Power Company. In the endeavor of each authority over twelve hundred public service to break its competitor's back, prices were cut corporations, great and small, ranging from until power was actually distributed free of the transcontinental carriers to a mountain cost. The delight of the patrons at this unrailway which had been presented to a widow wonted benevolence and tender regard for in payment for damages for the loss of her their welfare was cut short by a truce between husband.
the two belligerents under which prices were The Commission has, through five years restored, not to their former levels, but to of service, given to the State of California heights sufficient to enable both companies a system of corporation regulation which has to exact from the patrons what each had lost appealed keenly to the public mind and has during the competitive struggle, with a combeen received with general satisfaction by the fortable margin besides. corporations themselves.
This situation had come to a climax just It founded its doctrine upon the conception before the California Railroad Board assumed that the public interest goes primarily to the jurisdiction, and offered a striking and effecprices it must pay and the quality of service tive illustration of the disastrous possibilities it receives in return for its outlay. All that of enforced competition carried to its natural contributed to high quality of service at low limits. cost was desirable. Conversely, all that mili- The Commission instantly issued a warning tated against this end was declared undesir- against rate wars in the public utility service. able.
In one of the earlier cases it came as a To attain the highest quality of service at distinct shock to the State when the Board, the lowest reasonable cost, the California in a clear-cut decision, barred the Oro Electric Commission has refused to encourage the Corporation from Stockton. The city was ruthlessly competitive conditions of public already served adequately and reasonably by utility enterprise, but has somewhat naïvely the Western States Gas and Electric Company. brought about a situation that gives all of the The Commission held that fruitless duplicabenefits that accrue from competition without tion would bring eventual injury alike to the its disadvantages. This has developed a old company, the new company, and the cusbusiness philosophy that has been termed tomers of both. “ regulated monopoly with potential com- Early misgivings yielded to a very general petition.”
and popular acceptance of the new view. The California Commission has announced “ Economic fallacy” became a pet State the policy that all existing utilities will be phrase for wasteful competition. protected against competition in their present “ Potential competition " has been no coldfields of operation as long as they accord to storage theory. When the Newport Beach the public a complete, adequate, and satis- Company could not or would not give the factory service at rates as low as could high standard of service and the low rates to reasonably be offered by any prospective which the Commission believed the people of competitor. The complete service and low southern California entitled, the Commission