Compelling Policy Question: What should be the goal of policies regulating industries?

The Policy Case Study:

S. 1532 To Regulate Commerce (modified/link to original)

This act applies to any common carrier transporting passengers or property by railroad across state lines. All charges made for the transportation of passengers or property shall be reasonable and just. Unjust and unreasonable charges are unlawful.

Sec. 2. Any carrier charging one person more than it charges another for the same service is guilty of unjust discrimination. The violator must pay the person discriminated against the difference in the price charged.

Sec. 3. Any carrier giving any advantage to any person, company, firm, corporation, or locality shall pay damages to the person violated.

Sec. 4. That it shall be unlawful for any carrier to charge more for a shorter trip than for a longer trip. Any carrier violating this is guilty of extortion, and shall be liable for all damages caused by such violation.

Sec. 5. That every carrier must make public their rates and fares.

Sec. 7. That any common carrier violating this act shall be deemed guilty of a misdemeanor, and fined: Provided, however. That whenever such common carrier is a corporation, the person connected to the violation shall be guilty and be personally liable for a misdemeanor, and be fined.

Sec. 8. That for the purpose of regulation of commerce, the interstate commerce commission is established. Three of the commissioners shall be experienced in railroad affairs, three learned in the law, and three experienced in commercial or agricultural business. No person with relations to any railroad company is eligible to be a commissioner. Commissioners must take the constitutional oath and be sworn to the due and faithful performance of the duties thereof;

Sec 10. Any person may ask the commission to investigate a carrier.

The commission may investigate disputes between a railroad and their employees involving the employee’s hours or pay. Employees shall not, during the investigation, obstruct the railroad's operation.

Sec. 13. If any common carrier shall violate or refuse to obey the commission, the circuit court of the United States will be petitioned.

Historical Context:

While the Government’s decades of policies supporting the expansion of railroads has allowed the people of the country to move Westward, some people grew unhappy about the practices of those railroads. All of those who moved West to start a farm rely on the railroads to ship their crops to market. They have no choice but to pay the rate the railroads charge.

In 1789 the U.S. Constitution was written, and the “Commerce Clause” gives Congress the power “to regulate commerce with foreign nations, and among the several states”

In 1867 the Patrons of Husbandry, or the Grange, was founded. The Grange was a group dedicated to helping farmers both politically and socially.

Starting in the 1870's lawmakers started to advocate for regulating the railroads, George W. McCrary’s bill for a commission to regulate interstate commerce carried by railroads passes the House, but Senate took no action. In 1874, John Sherman’s bill to regulate interstate commerce died in Senate.

In 1877, the Supreme Court Case Munn v. Illinois upholds a 1871 Illinois law allowing the State to regulate prices charged by companies storing or transporting grain, saying States do have the power to regulate private companies

1878- Judge John H. Reagan introduces a bill "to regulate interstate commerce and to prohibit unjust discrimination by common carriers." No action was taken.

1880- Mr. Reagan introduced H.R. 4748 “to establish a board of commissioners of interstate commerce”. The House took no action upon it.

1885- Judge Reagan’s bill passes the House, but not the Senate.

1886 Supreme Court Case Wabash, St. Louis & Pacific Railroad v. Illinois rules that States do not have the power to create laws regulating interstate railroads.

1886- Shelby M. Cullom, from the Committee on Interstate Commerce, introduced S.1532 to regulate interstate commerce in the Senate.

Section #1 - Why do some people believe the government has a responsibility to regulate industries?

Shelby M. Cullom (R)Illinois, Speech introducing S.1532 to Congress, 1886 (modified/link to original) Cullom's biography

Cullom was on the Senate Committee on Interstate Commerce.

There is a need for legislation by the National Government to regulate interstate commerce by railroads. The public unanimously thinks that we should act, and Congress has the power to act. The only question left is what kind of an act should Congress pass?

The general theory of S.1532 is that unjust discrimination in the rates charged by railroads is the chief of all evils of the railroads. It is Congress’ duty to strike at that evil above all other things.

This bill declares unlawful unjust discrimination by the railroads. It requires publication of rates and declares it illegal to charge different than those rates. Publicity will be the most effective cure for the evils complained of. Every shipper will know whether he is treated fairly. The operations of the railroads will be seen, so the public may determine the reasonableness of the charges made, which are in the nature of a tax upon commerce.

The bill will create a commission to enforce the law and with ample power to investigate the railroads. This information will enable the law-makers to create any further remedies if needed.

The interest of both the producer and consumer of this country require that the food and fuel, which make up half of the property transported, shall be brought as nearly together as possible, so that the producer shall be able to produce and live and that the consumer shall be able to buy and eat and live.

In 1886, Michigan's Republican Senator, Thomas Palmer said in a speech to the Senate on Interstate Commerce...

(Modified/link to original) Palmer's biography

I expect to give my vote to this bill because it is a move in the right direction and will lead to better legislation in the future.

This effort recalls an Oriental tale: Some fishermen caught a chest in their nets. A voice inside the chest said it was a dwarf who had wondrous powers, who had been imprisoned by a Genie. It said if they released him it would make them rich. They forced open the lid and a misshapen, and weak creature came out.

They provided him with everything to help him grow, and soon he towered above them. His behavior changed, and instead of being their servant, he proclaimed himself their master.

Railways are important. The question is not how to cripple the railroads, but how to promote them, so they may serve the people, rather than to rule over them.

Today half a dozen railroad owners on Wall street dictate the profits or losses of men and communities throughout the land.

The complaint of the people is of discrimination. Railroads are beneficent servants, but they must not become masters. The dwarf has grown large enough for us to impose restrictions upon him, else the old fable will be illustrated in practical life.

All the American citizen asks for is a fair chance. Special privileges for none, equal rights for all.

Zebulon B. Vance (D)North Carolina, Speech to Congress on Interstate Commerce, 1886 (Modified/link to original) Vance's biography

This bill falls far short of doing justice. Rather than just prevent railroads from charging more for short halls than long hauls, we should prevent them from even charging the same.

We have been so often warned of the danger of attempting to interfere with commerce, which we are told should be left alone. This results in damage to the people. It seems that legislators are afraid to move too quickly, to see if the world is going to come to an end before we try something more.

It reminds me of the story of a man who went into a saloon where they sold Jersey lightning. He called for two glasses, which the saloonkeeper poured him. He offered a stranger a drink. After the stranger drank his spirits. The saloonkeeper asked if he going to drink his spirits. He said, "Wait fifteen minutes, and if that man don't die I will try mine." [Laughter.]

It is admitted on all sides that it is an outrage to charge a man who lives 100 miles from Chicago as much money as a man who lives in New York to have goods shipped from Chicago. But so fearful are we of disturbing commerce, that we hesitate to act.

The railroads are extorting the men who only need a short haul.

Debate between George F. Hoar (R)Massachusetts and Zebulon B. Vance (D)North Carolina, on Interstate Commerce, 1886 (modified/link to original)

Hoar—Will the Senator allow me to ask him a question to him?

Vance.—Certainly.

Hoar.—I do not agree that the charge for the short haul is an extortion, whether it be less than the charge for the long haul or not.

These railroads are built primarily for the use of the localities through which they go. Here is a railroad running from Chicago to New York or Boston which says: "If I undertake to charge the same reasonable rates for the wheat which I take from point to point, I cannot compete with the Canadian railroad.”

Vance.—Mr. President, I yielded for a question and I got a speech. I yielded for a short haul and I got a long one. [Laughter.]

I should like to know if my friend from Massachusetts objects in a matter of morals to the suggestion that all men should be charged according to the service which is provided to them; that all men should be taxed according to their ability to pay? I am sure he would not; he has not.

Those of us who favor this relief to the people of this country, who favor this proposition, are attempting within safe and reasonable bounds, to limit the power of a railroad corporation to charge whatsoever it pleases without regard to service or distance. That is what we are attempting to do.

Debate between Samuel James Renwick Mcmillan (R)Minnesota, and Zebulon B. Vance (D)North Carolina, on Interstate Commerce, 1886 (modified/link to original) Mcmillian's biography, Vance's biography

Mcmillian- The bill requires short hauls shall not be charged more than a reasonable and just price. Now, is there any objection to allowing the same road to haul a longer distance for the same sum?

Vance.—Who is to say what is reasonable?

Mcmillan.—The commissioners under the bill and the courts can determine that question. Now, you deprive the communities of the benefit of all the competition for long hauls where the roads would be compelled to charge a lower price where there is competition.

Vance.—If the Senator will excuse me, that is precisely what I desire to do. I desire to deprive any portion of the American people of the benefits of competition when that competition is maintained at the expense of the rest of us.

Mcmillan.—But the competition is not so maintained; the short-haul people have the limitation of the law that they shall not be charged more than a reasonable sum, and the courts can enforce that law. Competition should be allowed in the communities that can benefit from it; and by placing this limitation upon it you destroy competition on commerce throughout the country.

Maps Showing the Progressive Development of U.S. Railroads - 1830 to 1880

From the pamphlet "AMERICAN RAILROADS: Their Growth and Development" The Association of American Railroads source

T. Wust drew a cartoon for the New York Newspaper in 1873 titled "The farmer and the railroad monster, Which will win?"

In 1873 cartoonist John Donaghy drew "The Farmers and the Railroads: The Grange Awakening the Sleepers" for the Daily Graphic magazine.

The American Oleograph company published a picture titled "I feed you all!" in 1875.

(summary)

Joseph Keppler drew a cartoon titled "The Modern Colossus of (Rail) Roads" for Puck Magazine in 1879.

William Henry Vanderbilt, President of the New York Central Railroad and several other railroads, stands over all of the railroads as the most powerful tycoon in the U.S. railroad industry.

Standing on his feet are two other powerful industry figures. On the left is Cyrus West Field, who controlled the New York Elevated Railroad Company. On the right is Jay Gould, who controlled the Union Pacific Railroad and other western railroads.

The sign in the foreground reads, "All freight seeking the seaboard must pass here and pay any tolls we demand."

The flag over Field's elevated railway station reads, "L Road; Many nickels stolen are millions gained; by C. W. Field."

The New York Daily Graphic published a cartoon by Frank Bellew titled "The American Frankenstein," in 1874.

caption reads, "Agriculture, commerce, and manufacture are all in my power. My interest is in the higher law of American politics."

G. F. Keller, The Curse of California, The Wasp, 1882 (details)

The New York Daily Graphic published a cartoon by Frank Bellew titled "The American Frankenstein: 'When Frankenstein Beheld the Hideous Monster He Had Created He Started with Terror and Disgust," on March 18, 1873.

Frederick Burr Opper, Uberlaßt ihnen den ganzen Rummel - und damit basta!, translation: Let Them Have It All, And Be Done With It!, Puck (German Edition), 1882

Millionaires and Monopoly owners William Henry Vanderbilt, Jay Gould, Cyrus West Field and Russell Sage are cutting up the United States.

Thomas Nast. "The Senatorial Round-House", Harper’s Weekly, 1886 (source)

Caption:

THE HONORABLE BODY OF LOCO-Focos. “The Bill is a stigma upon every member of the legal profession—”

“It strikes at the honor and dignity of the humblest member of that honorable profession—”

“Until the Senate could be made up of angels from heaven, Senators would be biassed by something—”

“Hurtful to the interests of the country and to the character of the Senate—”

The “Railroad Senator” is standing on “Beck’s Bill”

On June 1, 1886, Mr. Beck, a Democratic Senator from Kentucky, introduced in the Senate of the United States the following bill:

Be it enacted, That it shall he unlawful for any member of either House of Congress to accept employment af attorney at law or payment for services of any kind from any railroad company, or any officer or agent (hereof, which obtained its charter or any grant of lands or pecuniary aid from the United States, and any person who violates this provision shall be guilty of a misdemeanor, and on conviction he fined in any sum not exceeding $5,000 and imprisoned not mure than one year in the discretion of the court.

Beck’s Bill was not made into law.

Section #2 Guiding Question: Why do some people oppose government regulation of industries?

In 1886 California's Republican Senator, and former President of the Central Pacific Railroad, Leland Stanford said in a speech to the Senate on Interstate Commerce...

(Modified/link to original) Stanford's biography

Before being elected to Congress Stanford had become President of the Central Pacific Railroad. CP built part of the transcontinental railroad.

There is a great difference between the possession of a power and how that power is used. The Constitution gives Congress the power to regulate commerce between the States, but railroads have nothing to do with the goods they are shipping, so regulating them has no relation to commerce between States.

What do my State rights friends say to the general Government interfering and controlling their local institutions?

Now, then, if railroads are so beneficial to the public, shouldn’t the investors be permitted to reap the rewards of their investments? Investors should not be discouraged by the fear that the value of their investment may be lessened by legislation.

Further, in all these efforts at regulation I find no protection to the railroad companies, no guarantee against impairment of income. If legislation interferes to decrease income, it is taking their property.

If railroads are public benefits, why should they be made the objects of direct and injurious legislation?

All will admit that no legitimate enterprises should be discouraged, particularly those that add most to the convenience and comfort of the people, and to the wealth, strength, and dignity of the nation.

William J. Sewell (R)New Jersey, Speech to Congress on Interstate Commerce, 1886 (Modified)

Before being elected to Congress Sewell worked in the Railroad industry in New Jersey

If business is going to be demoralized by this legislation, if adopted by Congress, we ought not to pass it.

I remember when the extreme limit of transportation by rail was to the Ohio River. The energy and the genius of our people has pushed mile after mile westward by the building of railroads. Today we present the spectacle to the world of being able to bring products two thousand miles to the seaboard, and allowing the community to have the benefit of competition.

The railroad men of this country are the best merchants and the brightest minds we have today. You will never build great railroads without them.

It takes a great man to be a successful railroad manager. He does not enter upon the business of railroads to help the community he lives in, but as a way to earn himself a position, and for his family, if he has any, their bread. He has no prejudice, no feeling. He is as well equipped as any man can possibly be to do as near right as any one man can.

It is not fair to say that those men are going to oppress the people. They are the men today who have built up this country to be the great nation that it is.

Matthew C. Butler (D) South Carolina, Speech to Congress on Interstate Commerce, 1886 (Modified/link to original) Butler's Biography

Mr. President, I have not participated in this debate because I have been opposed to the bill. I simply want to say that I shall vote against the bill for four reasons:

First. Because Congress can not interfere with railroads operated only within one State’s borders, so the bill does not and can not cure the evils of the railroads.

Second. Because I prefer to leave the solution of the question to the laws of trade and competition and to the States.

Third. Because I am convinced that any legislation on the subject by Congress will prove ineffective and will not be able to correct the wrongs committed by railroad corporations; and

Fourth. Because the assumption by Congress of jurisdiction and control of this vast and complicated problem will aggravate the evils. It will result in corruption and favoritism.

Edward C. Walthall (D)Mississippi, Speech to Congress on Interstate Commerce, 1886 (Modified/link to original) Walthall's Biography

There are major objections to this commission. Congress is supposed to act only under delegated powers. Where is the power delegated for Congress to create this commission?

Congress may create a commission and give it powers, but only if those powers are so limited that the commission would not have the authority to make final decisions. But then it could not do anything useful.

Does any Senator feel safe giving a commission the power to regulate the rates and control railroad companies? And, if it cannot fix rates, what good can it serve?

But, even if this power is given to them, the work is more than they could handle. There are more than 1,500 railroads in the United States, stretching over about 140,000 miles of territory. By the time the commission gathers all their data, so much time will have passed they would need to start over.

There are other objections to an interstate-commerce commission, growing out of the fullness of its powers, the disastrous consequences of its mistakes, and the dangers and temptations its members will face; but those are obvious, and I don’t need to discuss them.

This plan is so impracticable, that even if it is constitutional, I would prefer a simpler one.

Puck magazine published a cartoon by Frederick Burr Opper titled "The good monopoly missionaries and the wicked island" in 1883.

What was the result of the debate over S.1532?

In 1887 S. 1532 was passed into law and became known as the Interstate Commerce Act. The Act created the Interstate Commerce Commission (the ICC). The Act was the first attempt by the Federal Government to regulate a private industry. The ICC was created to regulate the railroads, but amendments to the law have allowed it to also regulate other forms of transportation.

The ICC was abolished in 1995 and its responsibilities were given to the Surface Transportation Board.