no ripened public opinion, no established code of ethics, to govern.  It was a betrayal of the interests of the stockholders when directors formed “construction companies” and granted contracts to themselves at outrageously high prices.  It was an injury not only to shippers, but also to the stockholders, when special rates were granted to friends and to industries in which the directors were interested.  In general, however, the interests and rights of the stockholders were more readily recognized than were those of the public.  A railroad manager is engaged by the stockholders, is responsible to them, and looks to them for his promotion.  Hence their interests are uppermost whenever the welfare of the public is not in harmony with the earning of liberal dividends.  The managers long felt bound to defend the principle of “charging what the traffic will bear” in the case of each individual, locality, and kind of goods, even if this ruined some men and enriched others, and if it destroyed the prosperity of cities to increase the earnings of the road.

Sec. 13. #Political power of railroad managers.# Likewise in various ways railroad managers may exercise great political influence and power.  Some writers maintain that the power to make rates on railroads is a power of taxation.  They point out that if rates are not subject to fixed rules imposed by the state, the private managers of railroads wield the power of the lawmaker.  By changing the rates on foreign exports or imports, the railroads frequently have made or nullified tariff rates and have defeated the intention of the legislature.  High rates on state-owned roads in Europe have been used in lieu of protective duties.  These facts go to show that a change of railroad rates between two places within the country is similar in effect to the imposing or repeal of tariff duties between them.

The wealth and industrial importance of the railroads soon began to give them widespread political power in other ways.  It was commonly charged in some states that the legislature and the courts were “owned” by the railroads.  The railroads, in part because they were the victims at times of attempts at blackmail by dishonest public officials, declared that they were compelled, in self-defense to maintain a lobby.  The railroad lobby, defensive and offensive, was, in many states, the all-powerful “third house.”  Railroads even had their agents in the primaries, entered political conventions, dictated nominations from the lowest office up to that of governor, and elected judges and legislators.  The extent to which this was done differed according as the railroads had large or small interests within the state.  These statements can with approximate truth now be made in the past tense, as was not possible a few years ago.  A better code of business morality has developed, and the railroad management’s relationship of private trusteeship toward the shareholders and of public trusteeship toward the patrons of the road is now much more fully recognized.  The change was not brought about without long and strenuous agitation and effort, educational and legislative, as is in part described below.