Previously to the regulation of express rates by the Interstate Commerce
Commission and to the beginning of the parcel-post in this country, the
profits of the express companies were undeniably swollen. By just how
much they were unreasonably large, it is practically impossible to
determine; although the Interstate Commerce Commission did on several
occasions officially assert unduly large profits in the case of the
Wells-Fargo Company.
As described above, three of the five leading companies had issued no
stock at a fixed par value, but had distributed a certain number of
shares of ownership. They had started in business with a limited
equipment (Franklin K. Lane declares that it had not exceeded $1,000,000
in value) and had purchased new equipment mostly from current profits.
Some companies have capitalized their profits. Others have carried them
along from year to year in a profit and loss account. By their contracts
with the railroad companies, they have become practically a part of the
railroad system, and hence whatever equipment and property they
themselves possess have served up to the present time as little basis
for determining their just profits. For instance, as the decision of the
Interstate Commerce Commission's report of 1912 pointed out, some one
company may invest money in certain equipment which another company
hires. They both may make the same percentage of profit on the same
amount of business, but in the first case the profit would loom small in
comparison with the property of the company, whereas in the second case,
it would loom unnaturally large. In other words, a charge on capital in
the first case would be classified as an item of operating expense in
the second.
And yet, despite all these considerations, the fact that from 1909 to
1912 the net profits of the companies were from 17% to 65% of the value
of their properties, coupled with the common sense knowledge that in
those years there was no inward or outward compulsion upon the directors
of the companies to charge one cent less than the traffic would bear,
makes it certain enough for practical purposes that the express
companies' profits were unethically swollen.
Whatever the profits before 1913, however, they have sadly dwindled
since, as the following figures of the Interstate Commerce Commission
will indicate:
Fiscal Operating Operating Net Operating
Year Revenues Expenses Revenue
1909 $132,599,191 $120,305,182 $12,294,009 or 9%
1910 $146,116,316 $131,608,035 $14,508,281 or 10%
1911 $152,612,880 $141,025,251 $11,587,629 or 8%
1912 $160,121,933 $151,831,956 $8,289,977 or 5%
1913 $168,880,923 $163,088,205 $5,792,718 or 3%
1914 $158,891,327 $157,128,012 $1,763,255 or 1%
1915 $148,994,960 $145,037,555 $3,957,415 or 3%
1916 $179,206,649 $167,063,210 $12,143,439 or 6%
Calendar
Year
1916 $196,137,768 $185,523,071 $10,614,727 or 5%
1917 $229,455,188 $227,256,116 $2,199,072 or 1%
1918 ... ... $5,579,601 _Deficit_
(First five months)
NOTE:--In studying the above figures, it must be remembered
that approximately one-half of the operating revenues are paid
to the railroads for transportation, so that for practical
purposes the ratio of the total operating revenue to the net
operating revenue with respect to the direct business of the
express companies--the collection of packages for the railroads
and the delivery from the railroads--would be approximately
twice the percentages in the above table.
_GOVERNMENT POSTAL EXPRESS VS. PRIVATE EXPRESS COMPANIES_
At certain periods of each year, the Post Office Department takes a
count of the packages mailed in the parcel-post, the postage collected
on them, and their total weight. These periods of count are the first
two weeks in April and the first two weeks in October. By multiplying
their sum by 13, we can thus obtain a fairly accurate figure for the
total number of parcels mailed within the year in 1917--roughly
1,120,000,000. On the other hand, the number of parcels carried in that
year by the express companies may be put at 280,000,000. (Note 1.)
Accordingly in 1917 the number of parcels expressed in the United States
was roughly as follows:
By Parcel-Post 1,120,000,000
By Express Companies 280,000,000
But in 1912, if the average express charge was the same as in 1909, and
no reason is known why it should not have been, the number of parcels
carried by the express companies was about 320,000,000. In that same
year the number of parcels carried by the post office, under the
four-pound limit, was 240,000,000. In other words, the effect of the
entrance of the Government into what had been a field of private
enterprise resulted within five years in an increase of more than 450%
in the extent of the service rendered by the Government, whereas the
express company's services to the public in that time actually decreased
12-1/2%, although the extent of the total services rendered by the two
combined agencies increased 250%.
Nor can the increase in the parcel-post business be explained by the
assertion that the Government performs this business at a great loss.
The balance sheet of the Post Office Department since 1912 has been as
follows:
1912 $1,781,435 _deficit_
1913 4,551,984 surplus
1914 4,390,796 surplus
1915 11,297,861 _deficit_
1916 5,853,655 surplus
1917 9,887,398 surplus
Now, it is obvious that the financial account of the entire Post Office
Department is composed of too many divergent elements for the financial
account of the parcel-post alone to have any conclusive bearing upon it.
But it is equally obvious that if so extensive and particularly so
expensive a function of the Postal System as the parcel-post had been
conducted at a considerable loss, the fact would be reflected, to some
extent, at least, in a growing deficit of the Department as the parcels
conveyed grew in number from 240,000,000 in 1912 to 1,120,000,000 in
1917. Nor have the railroads made good before the courts or before the
Interstate Commerce Commission their contention that their recompense
for carrying parcels is unfairly low.