competition by limiting the magnitude of these corporations, in the hope that by this limit there will be such a number of them in existence that, together with the restrictions laid upon them by some reasonable application of the principles of the common law, we will maintain the competitive principle, which has thus far been so advantageous in carrying on the prosperity of the country. We may thus gradually learn the lessons that we want to learn in this respect. But I am particularly urgent about the point that the State should be left just as large a freedom as possible to work out these questions. And I want to point out the fact that the State of New York has recently imprisoned, whether wisely or not I do not know, a certain man for cornering the market on chickens or something of that kind. That is the first time that has been done. I do not know whether it is wise, but it indicates the power which we have all known, and further, in our earlier days, as inherent in the State, and now tend to run to the National Congress for the exercise of similar powers. And the State of Missouri, perhaps unwisely, has driven the Harvester Co. out of its territory. The State of Texas has done similar things in the past. There is abundant power in the State; it seems to me that if any one of our States, with the plenary power of sovereignty in this matter, does not protect itself, it is hardly worthy of protection. Just how to deal with the question as to whether prices should be fixed in case of an article produced in one State and sold in another, is, I suppose, still a moot question. I do not know whether, in case the United States is silent on the subject, a State fixing the price on an article made in another State and sold within its borders is doing a wrong thing or not. I believe if even that in its correct form should be considered illegal that such restriction can be thrown by the States around the doing of business within their borders as will give as much control as anybody will want in manufacturing and commercial corporations. We The next method is that all of that should be left to the State. as a people, as a great body, content ourselves with the fixing of magnitudes alone. What I have just stated has to do with manufacturing and commercial corporations. In respect to railroads, they are understood in their character in a very special sense. I believe we are drifting so much toward governmental control that we can not stop even if we want to, and I therefore ask only for a definite statement as to what principles will govern the commission in the making of rates, which is not indicated in my remarks this morning. I speak of them with an absolute experience of what it means to be butted about by men who do not know what rules they ought to follow for the fixing of rates. And I think it is going to be more and more discouraging for young men to go into public enterprises. I believe that this regulation, unless it be clarified, simply means that every new railroad and every extension of an existing concern will be made by an old and large company, and not by a new company composed of young men wanting their chance in the world. 29657-VOL 2-12-24 I think I can speak of it without personal interest, because I am 50 years old and I do not expect to go into new enterprises. I have engaged in that capacity in my earlier years, but there is no reason why those of us who have a certain limited activity should now try to take it away from those who follow us. But undoubtedly the difficulties of limitation, of reasonable return on capital, such as the courts have been through necessity forced to make, because they have no guide, or as the commissions are making, will render it impossible for young men to start out with an enterprise and get capital of their own-I mean get the capital from others for their enterprise. And your railroad mileage will always be built up by the extension of big lines existing now. And so all the other publicutility work will be done in the same way. That is one phase of it which we may prefer as a people. We may say that we do not want these young people to bring out fool enterprises. All enterprises were, perhaps, fool enterprises in the beginning, but the country has grown by the superabundant energy of John Smith, who was not hampered by the multitude of regulations that are now thrown around public-utility work, and the regulations that are constantly in the air as to other kinds of work; that is, the limitation of the chances of a young man who has not any money. I notice that we are all being protected against the men, but the rules that are applied to that merely because of the magnitude of their operations which, startling as it is, as applied to the men, means that it will absolutely hamstring them. So that I should prefer that the amount of money that can be made out of a public-utility enterprise before it is entered into should be named. If it is named large enough to attract capital, it will go in; if not, it will not. There another lesson will be learned. One of the gentlemen who has been before this committee said: "Mr. Crosby, if you go so far as to suggest that there should be a stated return on capital it will discourage investments more than anything else." That may be true. I am not so sure. But I get so tired of dealing with the commissions that I have to deal with that I would exchange to-day what seems to me to be chartered rights in respect to rates for some specific understanding as to the return on capital. The situation is almost unbearable. If you gentlemen could hear the conversations that take place at the meetings to-day of, say, the American Street Railway Association, where to-day we give an enormous amount of time to all these questions of public relation 15 years ago we were trying to get armatures from burning out and ascertaining what was the right kind of rail joint to use. We still do that more or less, but we have to give the major portion of the time of the higher officials to these considerations. That is all right if we are citizens and subject to the sovereignty of the State. But we do cry out for definiteness. Make it specific, whatever it is, and we will take our medicine. But to-day we are absolutely in the dark. One hardly knows, as he sits around a board of directors' table, whether to order some new cars or not, because in a little while the commission comes along and finds fault with the capital. They may say: "We do not think you ought to expend so much money." If the cars turn out to be a poor type, they have to be scrapped. These difficulties have to be met. We just ask that a greater specific direction be given by legislative bodies to those who are in authority over us. To express my views, I have drafted a bill, which I do not believe the committee wants me to read now, and with the permission of this committee I shall have it typewritten and tendered in as a part of my remarks. The CHAIRMAN. Very well. What is the name of the American company you mentioned a moment or two ago? Mr. CROSBY. The American Street Railway Association. That is the national association of the street railway people. It is not a company. We all get together in very large conventions, the men who are passing their lives in these things, and exchange their views. It has been very helpful to us. We have had it now, I think, consecutively for 25 years. The CHAIRMAN. Well, do any of these companies that you are connected with engage in interstate business? Mr. CROSBY. The Wilmington & Philadelphia Traction Co., which I have in mind, is engaged in interstate business, and a good many of the street railway companies with which I am directly or indirectly connected are engaged in interstate traffic, and the number of lines so engaged is increasing. You get an interurban line, and one interurban line apparently does a whole State business under the Interstate Commerce Commission. I presented this situation to the Interstate Commerce Commission in my correspondence, and asked if they really claimed control of us in the cities of Wilmington and Chester, because we have a line doing a business between the two points, and they answered, "yes." They have not endeavored thus far The CHAIRMAN. I was going to ask you if you have had any serious trouble with them about the rates? Mr. CROSBY. No, sir; we are under State commissions more as to that. But I speak, then, as a citizen of the United States in so far as I see the Interstate Commerce Commission is equally obtaining hold in respect to rates on the big railroads, and we see that it is coming on us pretty soon. But if I do not have any interest in them, I feel a concern about the Interstate Commerce Commision not having a legislative direction in respect to what it shall allow capital a return on, and how much that return shall be. The CHAIRMAN. Do you think it would it would be better to prescribe a whole lot of details for their guidance than to leave it to the use of the word "reasonable"? Mr. CROSBY. All the detail that I had in mind is in these pages of hastily scribbled writing. I do not consider it a detail to be told how much money I may be permitted to make on my investments. I have had to go before a good many people raising money, and we are called upon to make the representations, to make what we call a prospectus. We are asked, "How much can you earn on this million dollars?" Heretofore we have estimated on the situation of the past, and presumed that any street railway company where we had the 5-cent fare as a thing that had been fixed by tradition-but you take an interurban case, you would study it from the point of view of the situation of what we believe the rates would reasonably bereasonably in the sense of producing business. What we would make them was a calculation that followed as a matter of arithmetic from that. Now we can not do that any longer. In a little while after we get started with an interurban railroad the Interstate Commerce Commission, or, if it is inside of the State, some other commission, will come and say, "We do not like these rates." We have a case here from Rockville. I happened to be the president of the company at one time. I have not followed it of late, because I am not actively connected with the affairs of the company. But when I laid it out it was with the best intention in the world, believing that it would earn such money on such an investment. I see from the papers that it has been placed in the hands of a receiver because the Maryland authorities have fixed the rates outside the District at such a point that they can not live on them. Do not assume that I am taking the part of the company, because I am not. But I am saying that illustrates the constant difficulties which we meet. If we had been told definitely that we would not be permitted to make more than 6 per cent, or whatever it was, and no allowance should be made for the long years of drought, we would probably not have put our money in it. In other words, we thought we had a right to experiment on that situation just as we have the right to experiment on going into the shoe business, except only to the requirement of the proper service, and correct our errors and perhaps make up some of the losses in prosperous years that had occurred in bad years. Now, I say, if we were told definitely, we would take our risk. We would not guarantee anything. We risk every dollar we put in, but when we know definitely we are going to be called upon when we get to such a point, then we will not put our money in. It is the same sort of thing that would exist necessarily between two individuals having that relation. The CHAIRMAN. I think you stated that an enterprise might become so large that it would pass the point of economy and reach into the sphere of an increased ratio of cost, did you not? Mr. CROSBY. I think so. The CHAIRMAN. Well, then, if there was another concern that kept within the point of economy, whatever that point might bewhich, of course, would be less in magnitude than the one that had passed the point of economy-the smaller one would be able to successfully compete with the larger one, would it not? Mr. CROSBY. Not necessarily. It might not be able to carry the load long enough. If the large one, although inefficient, has large reserves, it may be able to so injure the more effective one in its early years The CHAIRMAN. It would have to draw on its reserves? Mr. CROSBY. Yes, sir. The CHAIRMAN. In other words, after a concern passes a certain line or size it can not compete with one that has not passed that line; can not produce as cheaply, can it? Mr. CROSBY. I think that is true; save by drawing on its reserve. The CHAIRMAN. That is not producing cheaply? Mr. CROSBY. That is right. The CHAIRMAN. That is, taking away its reserve? The CHAIRMAN. That is not competition? Mr. CROSBY. That is right, except it keeps people out. The CHAIRMAN. Well, now, in time it would draw so heavily on its reserves that it would break down, would it not? Mr. CROSBY. It might or it might not. There are not many people with the courage to break in after they have seen a great big organization successfully conducted for many years. They do not care to go in where other fields may offer opportunities without this great risk which they can not control. The way in which a big surplus might be used is something over which they have no control. The CHAIRMAN. Are you familiar with the relative growth of independent steel producers as against the United States Steel Corporation? Mr. CROSBY. I see in the public print that their ratio is increasing their total business. The CHAIRMAN. Well, the United States Steel Corporation is a very powerful corporation? Mr. CROSBY. Yes, sir. The CHAIRMAN. And they have a large reserve? Mr. CROSBY. Yes. It has used its power in a very different way from most corporations, and in a way which has won the admiration of its competitors. The CHAIRMAN. But the fact that it had this power has not deterred independents from pushing along, has it? Mr. CROSBY. No; because they have seen the fixed policy which the trust, so called, intends to follow. The CHAIRMAN. But subject at any time to a change of that policy? Mr. CROSBY. Yes. The CHAIRMAN. Now, is it not because they realize that men are not going to take out of their pockets and maintain a business at a loss-is it not just good business policy that is marking the conduct of the United States Steel Corporation in that respect? Mr. CROSBY. No, sir. I think they could have swamped the steel business, but I believe that they thought it was unwise to do so. It was a good policy in that sense. The CHAIRMAN. Yes; that was the sense. Mr. CROSBY. They no doubt thought it was unwise to run against the current of the public. Yes; from that point of view. The CHAIRMAN. It was unwise, and whoever had to deal with them would take into account the probability of their being wise instead of unwise? Mr. CROSBY. Well, they had it as a determined policy, known in that particular case. It is said not to have been equally known in some other cases, such as the American Tobacco case. I do not know the facts, except as they drift about in print. But the steel company had so advertised to the world and to its so-called competitors their policy, that they did feel confident that these men had made a wise decision in respect to their price handling. The CHAIRMAN. I think that is all. Senator Newlands, you may inquire. |