The Nonpartisan Leader Newspaper, January 24, 1921, Page 5

‘ . A Reasonable Profité—and No More! How the People Are Protected Against Unfai’r'Bigv Business in North =] WENTY years ago the American pub- & | lic began to get tired of the high- handed methods and the extortionate charges of American railroads. The result was a long fight that ended . in the creation of the interstate com- merce commission and state railroad commissions _in various progressive states. The interstate commerce commission had juris- diction over railroads operating in more than one state; the state railroad commissions over -opera- tions wholly within the state. Both the interstate commerce comnission and the various state rail- road commissions were given virtually the same powers. They had authority to regulate railroad rates and earnings in their own respective spheres. The method followed was this: (1) A complaint against unfair railroad rates could be made either by a shipper or by the commission itself; (2) a “physical valuation” of the railroad’s property was then made, that is, the physical value of a rail- road’s shops, engines, real estate, trackage, etc., was determined by competent engineers; (3) the ‘earnings of the railroad in question over a term of years were then studied to determine whether large profits were being made on the basis of the physi- cal valuation; (4) if profits proved to be extor- tionate (as they generally were) railroad rates were ordered reduced to an amount that would give a “reasonable profit,” generally 6 to 8 per cent, and . N0 more, In the early years the railroad commissions of nearly all states and the interstate commerce com- mission saved millions of -dollars to farmers and other shippers by reducing extortionate railroad rates. The voters had been so thoroughly aroused by the “public be damned” attitude of the railroads that they saw to it that honest men who would pro- tect the public were chosen for the various commis- sions. So promising was the work of the commissions - that the voters demanded that they be given power to fix rates for other public utilities as well, includ- ing telephone companies, electric light companies, water companies and the like, and this step was taken in a majority of the states. THE PUBLIC FORGOT—BUT NOT THE CORPORATIONS But having obtained a good law the interest of the public:slackened, as it often does. The public started to take an interest again in prizefights, " murders, divorces, prohibition and other matters and to forget the necessity of keeping good men in the various railroad and public utility commissions to protect their interests. But the railroads, the light companies, the tele- phone companies, the gas companies, the water companies and the like did not forget. They work- ed tirelessly, day and night,to get men on the vari- ous railroad and utility commissions that would protect their interests, rather than the public—and they finally got them. : The various railroad commission and public util- ity commission laws necessarily were double-edged instruments. If a railroad company could be com- pelled to lower rates, because it was making: too much profit, obviously it must be allowed to raise rates if making no profit or too small a profit. On hasty consideration one might think that the provision for a physical valuation by' engineers would serve to protect the public against any in- justice. But there are more ways of killing a cat than by skinning it. Railroads and other public utility corporations do not pay their lawyers fees of from $10,000 to $100,000 a year for nothing.. - With men favorable to the corporations on the railroad and public utility commissions the corpora- tions began rushing to these commissions for per- mission to raise rates, just as shippers had pre- viously rushed to the commission for reduced rates. There were a thousand and one ways by which valu- ations could be increased beyond all reason, and the corporations, with the help of railroad commissions friendly to them, worked all of them. In the state of Washington, in a telephone case, it was brought out that engineers for the public service commission of that state, in valuing tele- § . phone instruments, had taken the separate valua- tion of each coil of wire, each battery, each mouth- Dakota—and in Other States piece, etc., and added them together to find the value of the complete instrument. Naturally sepa- rate pieces for repair purposes are charged at a higher rate. * By following this method the tele- phone company got a valuation on each telephone instrument something like a dollar higher than the price at which the complete telephone instrument could be bought wholesale. By giving railroads credit for the present value of land grants which were donated to them by the government they were able to show enormous valu- ations. These valuations were so high that if they had been taken for taxation purposes the railroads would have been compelled to pay tremendously in- creased taxes. The railroads and other utilities thereupon put forward the profound argument that corporation property has two distinct values—one for rate-making purposes (as large as possible) and the other for taxation purposes (as small as pos- sible and always smaller than the taxation value). And so great was the power of the railroads and other corporations that state tax commissions, state railroad commissions and even state supreme courts listened to this claim, considered it and approved it—without even cracking a smile, in public, at least. In a majority of the states the railroad and pub- lic service commissions passed out of the hands of the people and into the hands of the corporations because the people were not watchful enough. In North Dakota the people are organized in the Non- partisan league and have elected officials to_watch AND PROFI P ""‘v, ‘! ' Z their interests. Some of the officials in North Da- kota proved recreant to their trust and sought to allow railroads and other corporations increases in rates to which they were not entitled to by law, but the League farmers have been strongly enough or- ganized to block every unjust increase that has been sought and have attended promptly at the next election to the officials who proved unfaithful. In North Dakota today, largely due to the watch- fulness of William Lemke, the new attorney gen- eral, who was -appointed as spécial legal represen- tative of the state by Governor Frazier when the former attorney general and other officials appear- ed to have gone over to the railroads, every attempt _to raise railroad freight and passenger rates within the state has been blocked, though railroads have for months been charging increased rates on inter- state traffic, under an order by the interstate com- merce commissicn which allowed the railroads an exorbitant valuation on their property. It has remained for North Dakota to pioneer in a new field in regulating profits, other than those of railroads and what are generally known as “public .utility corporations.” The theory of all railroad and public utility corpo- ration regulation is that corporations serving the public have a right to reasonable profits, but no more. Dr. E.'F. Ladd, president of North Dakota Agri- cultural college, had been studying the grain mar- keting situation in North Dakota. Where farmers’ (Continued on page 16) AND WHAT LADD SAYS—HE MEANS /fleE ’//’% i . —Drawn especially for the Leader by John M. Baer. N