The Birmingham age-herald., 1907-03-28
KNAPP SEES PERIL
 IN STATES ACTION Commissioner Thinks Hostility to Railroads UnWiSe CITES CASE OF ALABAMA Does Not Hesitate to Declare That Low Rate Bills Are Not Likely
 to Stand the Supreme
 Court Test.

Chicago, March 27.-(Special) )--John Cal
 Ian O'Laughlin sends the following dis
 patch to the Tribune from Washington:
 No more important interview on the rail-
 road and financial situation has been
 given to the press than that which Mar
 tin A. Knapp, chairman of the interstate
 commerce commission, gave to the Tri-
 bune today.
 MT. Knapp has been a close adviser of
 the President upon all important matters
 connected with railroad reform. He is
 not q radical nor on the other hand, Is
 he conservative but he belongs to that
 class of progressives which President
 Roosevelt has organized.
 He discusses the causes of Wall street
 distress, the evils existing in railroad
 management, and the remedies therefor,
 and expresses the opinion that the states
 have exceeded their constitutional rights
 in some of the anti-ralroad legislation
 they have passed.
 Presidents Attitude Not the Cause. There are two prominent aspects of the present railroad situation, the physi- cal and the financial,' MT. Knapp said in answer to a question. Tn the first place, it's causes certainly are not found in any federal legislation enacted or proposed or in the attitude or intentions of the Pres ident. Possibly there is an underlying reason for the present Wall street furry which has not been preceived clearly. The economists divide that accumulation of labor which we call capital into two kinds, fixed and consumable. Our railroads,
 manufacturing establishments, stores, warehouses, forests, and mines are fixed
 capital. Things grown and made for sale
 represent capital consumed.
 Now, our marvellous prosperity was in- duced such an extension of activity as has led to unprecedented investment plants, with the result that over and above the capital necessary to conduct the business for which these plants are created we lack surplus for their enlargement. Con- sequently when the railroads go into the market to get the vast sums needed for
 that increase of transportation facilities which the country imperatively demands, they find active capital so proftably em- poyed that they cannot get money fol increasing the machinery of production without paying rates of interest which would be handicap in the future, If not actually prohibitive. Something of
 that sort is the cause of the present finan- cial situation, more potent than generally Is taken into account.
 Occasional Check a Benefit. "In the second place, one of the incl dents of unusual prosperity is the stimulus it gives to advancing prices, which often reach abnormal and unwarrantable levels. In other words, the current earning power of a given plant whether railroad or factory, is taken as a measure of it's value, whereas the fair and reasonable
 measure is the average earning power of
 that plant during quite a long period of years, including seasons of depression as well as seasons of prosperity.
 "In other words, the boom in business works out fictitious values so naturally and properly when check comes there is a strong tendency for quotations to fall down to the average level which really, as I have said, represents true valuation. While, of course, the venture some and speculative get hard hit when such a setback comes. still 1t may be that a setback now and then is in the interest of the country In the long run" Mir Knapp was asked concerning the effect of the disclosures of rottenness In corporate, including railroad, combina- tions.
 'It goes without saying" he said, that the disclosures of discreditable operations, such as the exploitation of the Chicago and Alton are followed by public resent
 ment, which often visits It's retaliation on the innocent as well as the guilty. Right
 here I think we should take into account
 the undoubted fact that the public con- science has been aroused from it's long
 time lethargy, and has become sensitive, highly sensitive, to the moral character
 of conduct which in other times would
 have been regarded with indifference. As
 there can be no great good without some
 misfortune, the sharp awakening
 brings It's unpleasant consequences. But,
 after all, it indicates marked and en-
 couraging elevation in the standard or
 public and private morals"
 Aqitation Drag on Progress.
 The attention of MT. Knapp was called
 to what he termed the physical or operat-
 ing aspect of the railroad situation.
 "Prosperity abides,' he observed, when things grown and things made can be
 sold at a profit and at such a. profit as to stimulate the growing of more things and the making of more things. The sim ole fact is that for obvious reasons the volume of production to be carried has quite suddenly exceeded the facilities or transportation. The man who has grown something or made something which he can sell at a handsome profit in the con- sumine market, which he cannot reach, naturally finds his efforts defeated and
 his hopes more or less disappointed. He
 cannot be blamed for feeling of intense exasperation, and not unnaturally planes the railroads and is ready to hit them at any place he can and with anything he can get hold of. The weapon he finds nearest at hand and easiest to use Is the state legislature. So we have reciprocal demurrage and 2-cent fares in North Da-
 kota and Alabama.
 "The peculiarity is that this condition of
 physical shortage and inferiority which creates so much distress here and there In every part of the country comes at the
 time when exposures of stock jobbing and the manipulation of railroad securities
 arrest public attention. The unfortunate
 part of it, for there is no use trying to blink at 1t, is that the resulting condi-
 tions, including the present temper of the
 public mind, operate to check and de- lay. if not prevent, an increase of rail-
 road facilities when that increase IS or the greatest importance.
 Absurd to Blame Administration.
 "The absurdity of attrbuting this situa- ton to the acts or policies of the present administration is evident to my mind . ,.;,vo,,Ja rafarepce fo the history of