Part 50 (2/2)

All interstate rates are to be just and reasonable, and the Commission is empowered to say what const.i.tutes just and reasonable rates. In order to prevent rate wars, the Commission is now empowered to fix minimum as well as maximum rates. The Act of 1920 also gives the Commission the power to establish _intra_-state rates, where such rates unjustly discriminate against interstate or foreign commerce. An _intra_-state rate, of course, is one which has to do only with freight or pa.s.senger movements which begin and end within the borders of a single state.

The Act of 1920 extended government control over the railroads in a number of important particulars. To check certain financial abuses, the Commission now has supervision over the issue of railroad securities. For the purpose of increasing the social value of the nation's railroads, the Act of 1920 instructs the Commission to plan the consolidation of existing roads into a limited number of systems.

Another clause in the Act of 1920 provides that no railroad may abandon lines, build new lines, or extend old ones, without the consent of the Commission. In times of national emergency, moreover, the Commission may direct the routing of the nation's freight, without regard to the owners.h.i.+p of the lines involved. Lastly, the Act of 1920 made provision for a permanent arbitration board for the settlement of labor disputes in the railroad industry.

354. THE OUTLOOK.--In view of the defective character of regulatory legislation previous to 1900, government owners.h.i.+p of railroads did not seem unlikely. But since the acts of 1903, 1906, and 1910, and especially since the pa.s.sage of the Transportation Act of 1920, there has been such high promise of efficient regulation as to minimize the movement toward government owners.h.i.+p. Not only are old abuses now more likely to be remedied, but the Interstate Commerce Commission is now empowered to relieve the roads of many undeserved burdens. Especially is the Commission keenly appreciative of the necessity of stabilizing the credit of the railroads. Until this is done the investing public will have little confidence in the railroad business, and the roads will continue to be inadequately financed.

Perhaps the greatest problem now before the Commission is to complete the ”physical valuation” of the railroads begun in 1913. This valuation aims to discover, by investigations conducted by expert appraisers, the actual value of all railroad property in the United States at the present time. On the basis of this valuation the Commission believes that it can estimate the probable amount of invested capital which the railroads represent. After this has been done, the Commission can calculate what rates the railroads must charge in order to earn a fair dividend on their money. The completion of this physical valuation is, therefore, necessary if the Interstate Commerce Commission is to fix rates which are just and reasonable from the standpoint of the public on the one hand, and from the standpoint of the railroads on the other.

QUESTIONS ON THE TEXT

1. What is the economic basis of natural monopoly?

2. Describe the regulation of local utilities.

3. Give the chief arguments in favor of munic.i.p.al owners.h.i.+p.

4. What arguments are advanced against munic.i.p.al owners.h.i.+p?

5. What is the extent of munic.i.p.al owners.h.i.+p in this country?

6. Name some of the fundamental conditions of munic.i.p.al owners.h.i.+p.

7. Outline briefly the development of railroads in this country.

8. How does the principle of decreasing cost apply to railroads?

9. Discuss the evils resulting from railroad development.

10. Why did State regulation fail to eliminate these evils?

11. Discuss the nature and effect of the Interstate Commerce Act.

12. Give the chief arguments in favor of national owners.h.i.+p of railroads.

13. What are the chief arguments against this step?

14. When and why were the railroads taken over by the Government?

15. Explain clearly the nature of the results of government control of railroads.

16. Enumerate the laws under which the Interstate Commerce Commission now administers the railroads.

17. Summarize present railroad legislation with regard to

(a) discriminations,

(b) rates, and

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