While our government has at times given direct aid to encourage the building of railroads, as by the gift of public lands, they have been developed chiefly by private enterprise.  They are owned by private corporations which do business under charters granted by the state governments (rarely by the national government) and regulated by law.  Control over them has been exercised chiefly by the state governments, except in matters affecting interstate commerce, which falls under the control of Congress.  As the parts of our country have become more closely bound together and interdependent, largely by the influence of the railroads themselves, an increasingly large part of commerce has become “interstate” in character, and railway transportation has become more and more a national concern.  The result is an increasing control by the national government

INTERSTATE COMMERCE

In 1887, Congress created an Interstate Commerce Commission with power to inquire into the management of the business of “common carriers,” such as railroads, steamship lines, and express companies.  It was later given power to fix rates which such carriers could charge.  Other laws were passed, such as the Sherman Act, or “Anti-Trust Law,” of 1890, which made unlawful any “contract, combination ... or conspiracy in restraint of trade.”  These and other laws checked abuses that characterized railroad management at that time, but, on the other hand, they are said in some respects to have hampered the economic and efficient development of the country’s transportation system.  The Sherman Law, for example, absolutely forbade the consolidation of competing railroad lines under one management, although such consolidation often makes for efficiency and economy.

GOVERNMENT RAILROAD ADMINISTRATION IN WAR

When the United States entered the recent war, the weakness of our transportation system quickly became apparent, and the need for the most effective transportation service led the government to take unusual steps to secure it.  The President issued a proclamation by which, in the exercise of his war powers, he “took possession and assumed control of each and every system of transportation in the United States and the appurtenances thereof.”  This meant assuming control over 397,000 miles of railways owned by 2905 corporations and employing more than 1,700,000 persons.  The management of this great transportation system was intrusted to a Railroad Administration with a Director General of Railroads at its head.  The ownership of these railroads, however, remained with the private companies, which were to receive compensation for the use of their property, and were to receive back the railroads after the war was over.

ADVANTAGES OF GOVERNMENT MANAGEMENT