sults of this law of practical
railway management. Evidently the managers of two competing railway
lines have but two possible courses open. They may, by tacit or formal
agreement, unite in fixing common rates on both the roads, or they _may_
attempt to do business with free competition. But we have already
proven that the latter course must result in reducing the income of the
road certainly below the amount necessary to pay the operating expenses
and the interest on the bonds, and probably it will be insufficient to
pay the running expenses alone. The inevitable result, then, is the
bankruptcy of the weaker road, the appointment of a receiver, and its
sale, in all probability to its stronger competitor. This is the chain
of cause and effect which has wrought the consolidation of competing
parallel roads in scores of cases, and which, if free competition is
allowed to act, is sure to do so.

We can now appreciate the _necessity_ which managers of competing lines
are under to agree upon uniform rates for traffic over their roads, and
at the same time the difficulty of doing this. The strange paradox is
true that while it is _necessary_ to the continued solvent existence of
the competing corporations that such an agreement be made, it is also
greatly to their advantage to break it secretly and secure additional
traffic. It is necessary, therefore, that the parties to the agreement
be strongly bound to maintain it inviolate; and to effect this, "pools"
were established. In pooling traffic, each company paid either the whole
or a percentage of their traffic receipts into a common fund, which was
divided among the companies forming the pool, according to an agreed
ratio. Under this method it is evident that all incentive to secret
cutting of rates and dishonest methods for stealing additional traffic
from another road was taken away.

How widespread and universal is the restraint of competition by railway
corporations may be seen by the following pithy words, penned by Charles
Francis Adams, President of the Union Pacific Railway:

"Irresponsive and secret combinations among railways always have
existed, and, so long as the railroad system continues as it now
is, they unquestionably always will exist. No law can make two
corporations, any more than two individuals, actively undersell
each other in any market, if they do not wish to do so. But they
can only cease doing so by agreeing, in publi