competition in some form; at the many points where it meets no competition it finds no business. This fact alone would prevent the adoption of extortionate rates.

Apart from all competition, however, such does not seem to have been its policy. In the adjustment of its tariff's it has evinced a spirit at once shrewd, business-like, and money-making; fully awake to all the advantages of geographical situation, and disposed to forego none of them, but rarely oppressive withal. As a rule, a careful regard seems to have been shown to what any particular branch of business could afford to pay; and this, rather than the cost of the service rendered, or any more remote advantages to be expected from it, would appear to have afforded the basis upon which rates were established. In pursuing this general policy, the company has by no means disregarded local interests. On the contrary, it has not infrequently provoked the enmity of connecting lines in its efforts to protect and develop such interests. For these and other good and reasonable features in its policy the Union Pacific has not, as it seems to the directors, received the full degree of credit which is its due. As a whole, however, its business policy has neither been far-sighted nor liberal. It is, in fact, such a policy as might naturally be expected from a capable local management, anxious for good immediate results, but having no conception of any such broad and, perhaps, statesmanlike views as the directors have endeavored to suggest. Looked upon, however, simply as a feature in the management of a private enterprise, the object of which is to secure the largest immediate returns, at once safe and not unreasonable, upon its outstanding securities, the recent business policy of the Union Pacific is open to few criticisms.

Perhaps, however, the directors could best illustrate their meaning, and at the same time avoid any possible imputation of vagueness, through a few examples drawn directly from the recent tariffs of the company. Take, for instance, the following: During the last few years there has been a great increase in the production of wheat in the vicinity of Cheyenne and in Northern Colorado. This wheat finds a market in the East, as well as among the mountains. It can, however, afford to seek an eastern outlet only at the lowest possible rates of carriage, and those rates the company have to offer it or not get it at all. Recognizing these facts, the Union Pacific has made for this business the extremely low rate of 5 mills per ton per mile from Cheyenne to Omaha; and in so doing they have reasoned that it was sound policy to carry this wheat out even at these rates, or it might be even at a loss, in view of the indirect profit derived from it. For, it was argued, the prosperity of the farmers throughout that region is the prosperity of the road. If the company does carry their wheat to a market at a small loss it brings back their supplies of every description at a considerable profit, and this indirect return amply compensates any immediate sacrifice.

This is a liberal and far-sighted business policy, which, if systemat ically pursued after a careful and intelligent study of both the existing conditions and future possibilities of the country, would leave nothing to be desired. Even in this case, however, it may well be questioned whether the rate named resulted from anything but a careful calculation of what the business could afford to pay. Whether it did or not, however, the proceeding was exceptional, while an example of the policy more usually pursued is found in thecase of coke carried into Utah.

Utah is essentially a mining region. One great obstacle in the way of its development as such is the want of any coal fit for coking. The importation of an abundant supply of coke for use in smelting operations is to the miner of Utah not less important than the cheap export

of wheat is to the farmer of Colorado. It is, in fact, a raw material of prime importance. A liberal and far-sighted policy on the part of the Union Pacific would apparently study a means of furnishing this article of necessity at the lowest possible rate, while a profit would be counted on from the consequent traffic involved in supplying the wants of a large and active business community. While, however, as has been stated, the Union Pacific takes the wheat out from Colorado at a rate of but 5 mills per ton per mile, it charges 15 mills per ton per mile for carrying coke to Utah; although in the former case the haul is but 500 miles (Cheyenne to Omaha), while in the latter case it is 1,036 miles (Omaha to Salt Lake). It is true that the wheat is brought out on a generally descending, and the coke is carried in on a generally ascending, grade; this, however, would by no means account for the difference in rate, which is apparently fixed with a simple view to what the business is believed to be able to pay. The instance cited is that of Pittsburgh coke, which is now laid down in Salt Lake City at $26 a ton, a reduction of $7 from former prices. Of this $26 no less than $24.15 represents freight paid to the several carriers for transportation, of which the Union Pa cific exacts for itself three-fifths, making no concession to the consumer. Meanwhile a good coking coal is now found also in Colorado, and in this case the policy of the Union Pacific is even more pronounced. The Colorado coke destined for Ogden reaches the Union Pacific at Cheyenne, the same point where it receives the Colorado wheat destined for Omaha. The haul is in each case the same, 500 miles; but while on the wheat going out the tariff rate is 5 mills per ton per mile, on coke going in it is four times that amount, or 2 cents per ton per mile. There can be no doubt that either from Omaha or Cheyenne a tariff of 1 cent per ton per mile on coke to Utah would yield the Union Pacific a sufficient margin of profit. On the equally heavy mountain divisions of the Pennsylvania and Baltimore and Ohio roads that rate for much shorter hauls would be regarded as high. The business, by no means inconsiderable now, responds immediately by a large increase in volume to each rednetion in rate. A reduction to 1 cent per ton per mile would mean a sav ing of $5 per ton, or about three times its original cost at Pittsburgh, on all the coke used in the smelting works of Utah.

Turning now to the coal tariffs of the road, the corporation, as is well known, is a large miner from deposits on its own lands, as well as a carrier. Its mines are situated on the western half of its line, and the coal from them is carried west to Ogden and east to Omaha. From Rock Springs to Omaha, a distance of 830 miles, in one portion of which the heaviest adverse grades in the road have to be surmounted, the freight is about $5.75 per ton, allowing $1.25 as the cost of mining and 50 cents for profit, or a little less than 7 mills per ton per mile. At Omaha the Rock Springs coal comes in competition with that from Iowa, and the rate is thus fixed by competition. On the other hand, the distance from Almy, the point of supply, west to Ogden is 80 miles, and the tariff rate is $2.50 per ton, or a little more than 3 cents per ton per mile; the grades in this case being all descending. In other words, the company carries its coal 830 miles to Omaha, where it meets competition, at the rate of 7 mills per ton per mile; and it also carries it in the other direetion 80 miles to Salt Lake, where it meets no competition, and charges for so doing 30 mills per ton per mile. It may further be mentioned that, owing to descending grades, a locomotive can haul more loaded cars from Almy to Ogden than it can drag back empty from Ogden to Almy.

As it is not the purpose of the directors at this time to examine these

questions of rates exhaustively, but simply to refer to them as illustrating certain general features of business policy, the examples given would seem to suffice. At the risk, however, of entering too much into detail, a single other example may be referred to as showing the course pursued by the company in the familiar matter of charging, in case of competition, more for a shorter than for a longer carriage from the same point.

Arguments may be urged in extenuation of this practice where the competition is severe but temporary. There may be reasons against the complete disarrangement of a system of reasonable local rates merely because an unreasonably low rate to a single point is expedient for the inoment. This happened on the Union Pacific during the last summer, when a violent competition over the Colorado business temporarily forced rates from Omaha to Cheyenne to a quarter part of the local rate then made from Omaha to Sidney, 100 miles east of Cheyenne. The directors do not here propose to discuss the question whether these arguments are entitled to consideration or otherwise under such circumstances as these. What was, however, in the case of Sidney a temporary exception to a rule, will be found at other points on the Union Pacific to be the rule itself. Take, for instance, Evanston as compared with Ogden. The latter point, as being the western terminus of the Union Pacific and the eastern terminus of the Central Pacific, is naturally a competing point-that is, the place can be supplied from either eastern or western distributing centers, from Chicago on one side, or from San Francisco on the other. Accordingly, in order not to lose the business, the Union Pacific is frequently compelled to make competition rates to Ogden, so that the tariff on many articles to that point is lower than it is to other points much nearer Omaha, of which Evanston is one. In such cases the company professes to give Evanston the benefit, as it is termed, of the competing rates-that is, in making the rate from Omaha to Evanston (954 miles) it charges the full through rate from Omaha to Ogden (1,036 miles), and then adds to it the local rate from Ogden back to Evanston (78 miles). In this way Evanston enjoys the benefit of competition by having its geographical distance from Omaha, as compared with Ogden, increased 156 miles, upon one-half of which the full competitive rate, and upon the other half of which the full local rates is charged.

This method of making a so-called competitive rate to local points is, of course, not peculiar to the Union Pacific. It is in use on many of the roads of the Western States, and is a fruitful source of complaint. It is one of those harsh outgrowths which seem to be inseparable from all uncontrolled railroad competition, and the remorseless length to which the abuse was at one time carried contributed more than any, or probably than all other causes combined, to the Granger agitation of 1871–275. To whatever extent such discriminations may have been justified, however, if at all, under the extreme results to which more eastern roads were driven by the pressure of an unbearable competition, there would certainly seem to be no excuse whatever for them in the case of a road circumstanced as the Union Pacific now is. Such a policy of petty discrimination can hardly be deemed otherwise than wholly inconsistent with any high sense of public responsibility.

The instances which have hitherto been cited have been drawn wholly from the tariffs of the company on its local traffic. As is well known, however, this is by no means its most remunerative traffic. The Union Pacific is essentially a through line. Of this portion of its business, also, for reasons which will presently be alluded to in detail, it enjoys a com

paratively undisturbed possession. In referring to its through business, however, it is necessary, in order to avoid drawing unfair inferences, to bear certain considerations clearly in mind. In the first place, though the profit derived from it by the Union Pacific is manifestly large, the total burden imposed upon the public is by no means proportionately heavy. The exceptional profits in great degree result from that system of arbitrary division which has already been referred to. To the ship per it is a matter of no consequence, provided he does not pay for the whole carriage of his goods more than is reasonable, whether the New York Central, or the Rock Island, or the Union Pacific gets more or less than its fair proportion of the whole amount paid. That is a question which concerns simply the various carriers; and, as a rule, they may safely be left to take care of themselves. Meanwhile these through continental rates are especially under the control of the Pacific roads; the Central making the East-bound, and the Union the West-bound. A noticeable illustration of the absence of that sense of high public responsibility in the management of a trust, which the directors have referred to, was during the last season furnished in connection with those Westbound rates.

In the month of July last, a sudden announcement was made that the tariffs on through freighting business over the Pacific roads had been altered, and that, while the classification of certain articles had been changed, the rates upon others had been advanced from 50 to 100 per cent. The reason of this movement, which naturally excited surprise as well as indignation among those affected by it, was not at first apparent. It was, however, soon learned. It was purely strategic. The company did not really propose to raise its tariff rates; on the contrary, it was ready to slightly reduce them; but it did propose to take full advan tage of its position to secure as much as possible of the trans-continental business. As a first step toward this, it practically did away with its open tariff, by the very simple process referred to. Under the open tariff, at the old rates, the larger business firms dealing between the two coasts had a choice of routes-that by water and that by rail. They, in practice, availed themselves of this option by sending their coarser freights, or those in regard to which time in delivery was immaterial, by water, at the lower rates; while the more costly wares, or those requir ing immediate delivery, were forwarded overland. The object of the Union Pacific was to put a stop to this practice. This they did by largely raising their freights, which put an effectual stop to shipments under the open tariff, while, at the same time, they offered to all the large firms which would contract to make their shipments wholly by land, special rates at a reduction even from those in force before the change. It was thus a distinct step backward, for it amounted to the abandonment of a published and open tariff in favor of a system of private special contracts.

This move was, therefore, not only one of great importance, but it was open to serious objections. It was made, not by a petty local road, nor⚫ by a competing trunk line, but by a great, subsidized, continental thoroughfare. As such, it might naturally be inferred that it was made only after ample consideration, and with the authority ofthe full board of directors. It is, however, a fact singularly illustrative of the absence of that sense of public responsibility in which the policy of the Union Pacific is now shaped, that this measure, which practically put in irous the trans-continental business of the country, was devised by two freight agents, was never, before being publicly announced, subinitted for consideration even to the executive committee of the board of direct ors, much less to the full board, and was finally put in force to the utter sur

prise of the public, on the verbal authority, so far as can be ascertained, of the president and a single director.

It is unnecessary to comment on such a method of corporate management. It speaks for itself. Meanwhile, so far as the measure is concerned, the objections to it are apparent. The through business over the Union Pacific is mainly done by large houses. This is natural enough, for such houses can, of course, do it most cheaply. The measure under discussion, however, made it impossible that this business should be done by any but the large houses. They have special contracts covering it at less than the published tariff rates. More than this, it locks up, in secret, transactions which more than all others should be public. The special contracts may be equal as between shippers, or they may not. The directors have every reason to believe that they are, but they none the less are lacking in that element of publicity which in such matters will always remain the one real safeguard against discrimination.

The passenger movement over the road is necessarily light, and must not be judged by the standards in use at the East. The people dwelling along the line have small occasion to travel to and fro over it, and through passengers and immigrants are provided with a fair train service at not unreasonable rates. The local fares run to as high a point as 9 cents per mile on some portions of the mountain divisions, which, of course, would be a good cause of complaint if there was any travel to be affected by it. The average local fare is about 3.5 cents. The exceptionally heavy local fare charged between Omaha and Council Bluffs will be more particularly referred to in another part of this report. On through passengers the average fare is 3.13 cents per mile; on through and local both, including immigrants, it is 3.33 cents. These rates would seem to be about 50 per cent. higher than those charged in Massachusetts, for instance; and, taking into consideration the nature of the country and the character and industrial pursuits of the population, they are not on the face of them unreasonable. Indeed, they are not so high as would naturally be expected. What other and different results might be made to appear from a more critical analysis on the spot of the actual working of the tariffs the directors are unable to say. They have had no opportunity to make such an analysis of them.

Before passing from the consideration of the policy pursued by the Union Pacific in its relations with the general business public, there are certain matters touching the course which Congress has adopted towards that company which it seems necessary to refer to. From the wellknown circumstances connected with the construction of the road, as well as from the fact that the United States Government is its largest creditor, Congress has always been in a position to exercise a great, if not a controlling influence even, over it. It might, through a conservative and intelligent public supervision, have developed the idea of responsibility in the management, and compelled the adoption of such a liberal and far-sighted policy as the directors have endeavored to suggest. In doing so, it would naturally have looked to the increased benefits to be derived from the more rapid development of the country, to reimburse the government for its outlays on the enterprise, rather than to any immediate cash repayments out of profits to be derived from a pure money-making system of tariff charges based on hard business principles. It seems fairly questionable whether by its recent legislation Congress has not committed itself in a certain degree to another and a less liberal course. By the act of May 7, 1878, commonly known as the Pacific Railroad funding bill, the government would seem to have given its formal approval to the present business policies of both those corporations, by