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NOR three decades the largest transportation interest of California, the Southern Pacific, controlled as a chattel the Railroad Commission which had been created solely for its own regulation. An aroused public sentiment had established this Commission in the Constitution of 1879 to write the epitaph of railway rule. But all it wrote was the feeble record of its own subserviency.

It is told that one of its early members, rebuked for his frequent calls at the office of the Southern Pacific, replied, indignantly, "And where else, please, should one go to regulate the railway?"

To be sure, where else?

"The State had invoked an inalienable right," said Andrew Furuseth, the sailorstatesman" the right to abdicate."

Then came the spectacular campaign of Hiram W. Johnson and his election as Governor in 1910 upon his emphatic and epigrammatic promise to "kick William F. Herrin and the Southern Pacific out of the government of the State." And after election he proceeded so to do with full vigor of foot and fist.

A railway that could rule could also serve, and the Governor set about to do some longneglected regulating.

Naturally it was assumed by those most intimately concerned that this would take the form of bitter retaliation. To their surprise, however, the Governor conceived and put into execution a policy of benevolent supervision which rested upon the premise that regulation could be made beneficial alike to the corporations and the people.

Strangely enough, he had been in office but two years when his administration, in consonance with this belief, used the same energies that had thrown the Southern Pacific out of the politics of the State, to preserve, in the public interest, that same Southern Pacific from dismemberment and consequent commercial ruin.

1 This article should be read in connection with that on railway regulation by Mr. Blewett Lee, of the Illinois Central Railroad, which appeared in The Outlook of last week.

It required a statesmanlike discernment to distinguish the lines of political and economic cleavage. But this is one of the attributes which has given the present régime in California its peculiar appeal both to radical and conservative.

The Governor revitalized the regulative law; gave it, in the parlance of the moment, "a set of full-grown teeth," and extended its scope to all forms of public utilities-railway, gas, water, telegraph, telephone, electric light and power, steamships, warehouses, wharfs, and pipe lines-a variety to which the abundance of companionship brought a sufficient solace.

The measure of the Commission's authority was fixed indelibly beyond the power of the courts to impair. Its membership was enlarged from three to five and its personnel rejuvenated with the impress of youth and vision, scholarship and ceaseless energy.

At the head of the new board was John M. Eshleman,1 a young and intensely energetic attorney of brilliant mentality, who had a few years before attracted attention for his attainments in philosophy and classical literature at the State University. Associated with him were Max Thelen, also a youthful and scholarly attorney, from the staff of the Western Pacific Railway, who had been a class medalist at the University of California; Edwin O. Edgerton, a lawyer in his middle thirties, distinguished for incisiveness of mind and breadth of vision, an authority on municipal affairs; Alexander Gordon, a veteran farmer and banker, a postgraduate in the school of experience; and Colonel H. D. Loveland, a well known business man and dissenting member of a previous commission.

Mr. Eshleman subsequently was elevated to the Lieutenant-Governorship and his place filled by the appointment of Frank R. Devlin, a former Superior Judge, a progressive leader of the Legislature, and a widely known attorney.

It required but one incident to persuade

Mr. Eshleman, who had been the guiding spirit of the Commission's work, died at Indio, California, on February 28, 1916.

the railway interests to an acquiescence in the new order. The Commission had issued one of its first findings, reducing certain rates on the Southern Pacific. The president of the company called upon the Commission, stated that the ruling could not be obeyed, and that the equities might be satisfied by the arrest of one of his station agents.

Why the station agent?" he was asked. "Why not the president of the company?"

That was all, but the reduced rates went into effect that night.

Governor Johnson had imparted but one word of admonition to his new board.

"Regulate with a firm hand," said he, "but always remember that California welcomes and protects legitimate industry.”

The Commission found itself with sudden authority over twelve hundred public service corporations, great and small, ranging from the transcontinental carriers to a mountain railway which had been presented to a widow in payment for damages for the loss of her husband.

The Commission has, through five years of service, given to the State of California a system of corporation regulation which has appealed keenly to the public mind and has been received with general satisfaction by the corporations themselves. ·

It founded its doctrine upon the conception that the public interest goes primarily to the prices it must pay and the quality of service it receives in return for its outlay. All that contributed to high quality of service at low cost was desirable. Conversely, all that militated against this end was declared undesirable.

To attain the highest quality of service at the lowest reasonable cost, the California Commission has refused to encourage the ruthlessly competitive conditions of public utility enterprise, but has somewhat naïvely brought about a situation that gives all of the benefits that accrue from competition without its disadvantages. This has developed a business philosophy that has been termed "regulated monopoly with potential competition."

The California Commission has announced the policy that all existing utilities will be protected against competition in their present fields of operation as long as they accord to the public a complete, adequate, and satisfactory service at rates as low as could reasonably be offered by any prospective competitor. The complete service and low

rates must be given voluntarily, immediately, continuously, and uninterruptedly, as a prerequisite to this protection by the State, under the threat of competition.

The moment this policy was proclaimed electric-lighting rates throughout the State of California fell without further order from an average of nine cents and ten cents per kilowatt hour to an average of seven cents. Measured in dollars and cents, this one act returned to the people of the State twice the expense of the Commission during the whole of Governor Johnson's term.

The State had but a few months before been treated to the spectacle of a pitiless warfare between the Northern California Power Company and the Sacramento Valley Power Company. In the endeavor of each to break its competitor's back, prices were cut until power was actually distributed free of cost. The delight of the patrons at this unwonted benevolence and tender regard for their welfare was cut short by a truce between the two belligerents under which prices were restored, not to their former levels, but to heights sufficient to enable both companies to exact from the patrons what each had lost during the competitive struggle, with a comfortable margin besides.

This situation had come to a climax just before the California Railroad Board assumed jurisdiction, and offered a striking and effective illustration of the disastrous possibilities of enforced competition carried to its natural limits.

The Commission instantly issued a warning against rate wars in the public utility service.

In one of the earlier cases it came as a distinct shock to the State when the Board, in a clear-cut decision, barred the Oro Electric Corporation from Stockton. The city was already served adequately and reasonably by the Western States Gas and Electric Company. The Commission held that fruitless duplication would bring eventual injury alike to the old company, the new company, and the customers of both.

Early misgivings yielded to a very general and popular acceptance of the new view. Economic fallacy" became a pet State phrase for wasteful competition.

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"Potential competition" has been no coldstorage theory. When the Newport Beach Company could not or would not give the high standard of service and the low rates to which the Commission believed the people of southern California entitled, the Commission

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shot a competitor into their midst which did. This has been repeated until potential competition is a live and throbbing threat.

In its policy of permitting consolidation the California Commission has assumed a position at variance with that school of economists which still clings to its hope of efficiency only through unrestricted and free competition. In so doing the Commission has proceeded upon its conception that the public concern lies primarily in adequate, complete, and satisfactory service at the lowest reasonable cost. And where this desideratum may be obtained through combinationmonopoly, if you please—the California Commission permits and encourages the monopoly. But the monopoly so formed is immediately responsible to the Commission. If it does not voluntarily attain to the State's fixed standards, the Commission, of course, in the exercise of its authority, compels it so to do.

In most cases this compulsion is not necessary, for the reason that the consolidation or monopoly is sanctioned only on the condition that the public utility corporations thus united guarantee a better degree and quality of public service at more favorable rates and on more desirable conditions than either of the parties to the combination was able to render separately.

It so happens that this policy is in sharp contrast with that of the present National Administration, and the principles underlying both can best be illustrated by two incidents in which the State of California and the National Government had partial jurisdiction.

The American Telephone and Telegraph Company, generally known as the "telephone trust," controls the Pacific Telephone and Telegraph Company, which, in turn, controls probably ninety per cent of the telephone business in California.

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of California was endeavoring to adjust a difficult telephone problem in the northern part of the State. The Pacific Telephone and Telegraph Company occupied this field, in competition at one point with the Glenn County Telephone Company and at another with the Tehama County Telephone Company.

These two smaller corporations had been built and financed on local sentiment. They were wholly unable to give service in any degree commensurate with that of the Pacific company. The two smaller companies had lines and equipment which would have been of immense value to the larger company. For a complete service patrons were obliged to subscribe to two systems.

The California Commission faced the alternative of permitting the Pacific company to ruin its two smaller competitors or to buy them out on fair terms. It adopted the latter expedient, and permitted and encouraged the consolidation which gave the Pacific company a monopoly and at the same time gave to the residents of the northern part of the State a service many times superior, far more extensive, and at a reduced cost, which in some instances amounted to only one-half the former charge.

After the practical results of the entire operation were clearly set forth, the Department of Justice of the National Government acquiesced in the California proposal.

The same department of the Federal Gov ernment instituted a suit to dissolve the joint ownership of the Central Pacific and Southern Pacific Railroads. The California Commission found that they had been so interwoven and intertwined as to constitute a single unified system. It had jurisdiction over related features of the case, and expressed the view that the result of the Government's purpose would not bring about a desirable competitive condition, but, instead, would dismember the Southern Pacific, leaving one efficient and strong railway corporation with a weaker one at its mercy; that the severance would seriously impair the railway service; and that the continuance of the consolidation under regulation was distinctly in the public interest. This matter is still before the Federal courts.

The same policy saved the Tulare County Power Company and its six hundred farmer stockholders from financial ruin by enabling them to sell their properties on an equitable basis to their powerful competitor. Not only

did it save them from great financial loss, but the conditions of the consolidation actually brought them a higher grade of electric service at a cheaper price.

One of the earliest functions of the Commission was the adjustment of extortionate charges and practices wherein it found certain railway and express companies earning annually more than one hundred per cent on their investments. After the curtailment of these and similar exactions, reaching some $7,500,000 annually, the Board addressed itself to so regulating the rates and methods of public service companies that the corporation should enjoy a fair and prosperous measure of profit.

Although the scope of the law would permit that this profit be limited to a mere interest rate of return upon the investment, the California Commission has proclaimed and prided itself upon a liberal policy which authorizes the utility corporations to earn not merely that which is theirs by right, but that which should go to them out of a broad sense of equity and fair dealing.

This has its purpose not only in a sense of justice to the corporation, but of proper care for the public interest; for the Commission, in effect, says to the corporation :

We want you to earn ample profits so that you shall not only pay the interest to your bondholders and dividends to your stockholders, but shall have a surplus in addition; and in return for this we propose that a portion, at least, of this surplus shall be used in the public interest.

This surplus is the index of the company's credit, and a high credit means an ample and steady flow of investment money into the coffers of the public utility corporations for reinvestment in the public service of the State.

A typical illustration of this policy was embodied in a decision recently rendered in connection with an irrigation system in the northeastern portion of the State. The system now irrigates eighteen thousand acres of land. A protest was filed against the rates and a request made for additional service. The Commission found that the company was earning a substantial profit with a generous surplus, and that it had an abundance of unused water. Accordingly, the Commission refused to alter the profitable rate, but instead directed the company to place under irrigation immediately an additional twelve

thousand acres of land, to the mutual satisfaction of both the company and its patrons.

The California Commission has come to be a board of equitable adjustment as between the public service corporations and the public. Each has its right of ready appeal, and both make the most of it. The individual is not even obliged to go through the formality of an appearance in court. A letter or post-card has brought to many a humble complainant the swift remedy for his just grievance.

It was interesting, but not unusual, when recently the representative of the largest traction and power interest in southern California announced in a public speech: "The regulation of utilities by the State Railroad Commission has been just as beneficial to the corporations as to the public."

The corporations measure this benefit by the hundreds of thousands of dollars that have been saved to them by the new State policy which protects their honest investment from the ravages of ruthless competition, by the substitution of supervision for prosecution, and by the policy of intelligent regulation in lieu of dissolution. They acknowledge it unwittingly in their flaming announcement of the Commission's approval of the $500,000,000 of stocks and bonds they have offered for sale. It is acknowledged also in the interesting record which shows in five years three thousand decisions, with less than one half of one per cent on appeal to the courts; with property appraisals of $250,000,000 with less than one per cent in controversy. And with the single exception of electric railways, which have been affected adversely by automobile competition, it is reflected in their augmented and unprecedented earnings.

Of course such a policy as has been pursued by the California Commission could not be satisfactory to the extremists on either side; neither to the crooked or backward-looking corporation official nor to the demagogue. But it has registered in unmistakable fashion the full measure of its appeal in the hearts of the people of the State.

To one who has been in the councils of the Commission, and who has aided and watched in the practical application of these policies, it would appear that here may be found the nucleus and the hope of a new attitude of government in America toward business.

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EFFECT DISCERNED IN TREND OF STATE Its effect can best be discerned in the trend of the civic development of the State itself, for Idaho was not established with set institutions nor convictions before suffrage was a factor. Admission as a State was granted in 1890, and six years later, in November, 1896, the suffrage amendment was passed at the general election and the ballot became a reserve power back of the influence of women. In the early years of Statehood Idaho was a rough-and-ready land with sparse settlements and few railways. first settlers were gold-seekers, prospecting a bit on their way to California; then, following, came a hardy few who sought new homes because the fire of adventure was in them. The destruction of the Civil War drove others to this almost unknown land. Although the early stories of Idaho do not partake of the reckless disregard of human life incident to some pioneer communities, it was not until the general exodus to the Far West brought hundreds of citizens, ambitious and abounding in energy, that it began its great change in civic ideals.

Woman suffrage cannot claim the entire credit for this change from the free and open days of the saloon and gambling tables, but woman suffrage became alive at the time the change began and was one of the factors. Two years after Idaho became a State, at the Republican State Convention, several of the prominent office-holders were intoxicated in public. This was a period in the history of prohibition when the Republican party in some of the older States was passing prohibition enactments. The spectacle of drunkenness was so disgusting to one of the delegates, now a distinguished citizen, that he determined upon a woman suffrage policy as

the surest remedy. Two years later he was one of the most arduous workers in the campaign for suffrage, which was indorsed at the conventions of all three parties. This citizen claims that this was the turning-point for State-wide prohibition, which reached its goal last January, when every saloon was closed by statutory enactment.

INFLUENCE OF WOMEN'S VOTES NOTICEABLE IMMEDIATELY

The influence of woman suffrage was noticeable immediately upon the passage of the amendment. H. E. McElroy, a prominent attorney and candidate for Governor on the Progressive ticket in 1914, wrote at the time the women cast their first ballot: "It was tacitly understood among politicians that the standard must be raised in order to avoid scratching by the new voters. In fact, the expectation is universal, for some cause or other, that women will make independent voters, and party names will not save undeserving candidates."

James H. Hawley, afterward Governor of Idaho, said of the first election in which women participated: "The ladies turned out very generally on the day of election, and were everywhere treated with the greatest respect, and never in my experience have I seen a more orderly election. The very presence of the ladies at the polls seemed to entirely eliminate many of the objectionable features of former elections."

MEN AND WOMEN COMRADES

Naturalness is an expressive word for the manner in which women exercise their citizenship in a State which has developed under the suffrage régime. Men and women are comrades in civic endeavor. The condition • of sex organization based upon sex, and not upon the general obligation of citizenship borne by all, to which Charles E. Hughes has recently called attention, will be found to be a condition preceding woman suffrage and not accompanying it. The privilege of the ballot for twenty years in Idaho has broadened woman's outlook, and pride in sex accomplishment has correspondingly lessened.