Sec. 14. #Consolidation of railroads#.  Gradually the consolidation of the railroad mileage into larger units put into fewer hands greater and greater economic power.  The early railroads, many of which were built in sections of a few miles in length, have been slowly welded into continuous trunk lines with many branches.  The New York Central between Albany and Buffalo was a consolidation, by Commodore Vanderbilt, of sixteen short lines.  The Pennsylvania system was formed link by link from scores of small roads.  In the decade of the nineties the growth of consolidation went on more rapidly than ever before.  In 1903 it could be said that 60 per cent of the mileage of the United States was under the control of five interests; 75 per cent was controlled by a group of men who could sit about one table.  The country was being divided territorially into great railroad domains, within each of which one financial interest was dominant.  Since that time the policy of the leading roads has been still further unified by great financial alliances and by the method known as “community of interests.”

Toward this result strong economic forces have been working.  Consolidation has many technical advantages:  it saves time, reduces the unit cost of administration and of handling goods, gives better use of the rolling stock and of the terminal facilities of the railroads, and insures continuous train service.  It has the advantage of other large production and the possible economies of the trusts.  Most important, however, from the point of view of the railroads, is the prevention of competition and the making possible of higher rates and larger dividends.  The statement that competition is not an effective regulator of railroads often is misunderstood to mean that it in no way acts on rates.  It is true that competition between roads does not prevent discrimination and excessive charges between stations on one line only; but competition usually has acted powerfully at well-recognized “competing points.”  The larger the area controlled by one management, the fewer are the competing points; the larger, therefore, is the power over the rate and the more completely the monopoly principle applies.  It is a grim jest to say that consolidation does not change the railroad situation as regards the question of rates.

Sec. 15. #State railroad commissions.# When it became evident that public and private interests in the railroads were so divergent, it still was not easy to determine how the public was to be safeguarded.  At first, some general conditions such as maximum rates were inserted in the laws and charters; but these were not adaptable to changing conditions and, for lack of administrative agents, could not be enforced.  Some early efforts at state ownership were disastrous.  The old law of common carriers gave to individual shippers an uncertain redress in the courts for unreasonable rates; but the remedy was costly because the aggrieved shipper had to employ counsel, to gather evidence, and to risk the penalty of failure; it was slow, for, while delay was death to the shipper’s business, cases hung for months or years in the courts; it was ineffectual, for, even when the case was won, the shipper was not repaid for all his losses, and the same discrimination could be immediately repeated against him and other shippers.