raw materials are so adjusted as to permit the manufacture of any
staple article at any logical place of manufacture. On the raw
material of wearing apparel the freight rate is entirely unimportant.
On the lumber that enters into building material, on the ore, coke,
and limestone used in the manufacture of iron and steel the freight
rate is sufficient to become an appreciable factor in the cost of
manufacture. On brick, coal and cement the selling price is the
higher by the amount of the freight charge, which for distances
sometimes not considerable exceeds the value of the commodity at
the place of production. The freight charge, even on those heavier
commodities, however, is far less in proportion to the wage of the
day laborer as well as to the incomes and salaries received in the
United States than in any other country. This is obviously a better
test of comparison than that based upon rates of freight as expressed
in money. To say that a specific rate is twenty cents in the United
States, a shilling in Great Britain, a franc in France, or a mark in
Germany, conveys an inadequate idea. When it is ascertained that the
average wage of the day laborer in the United States is higher in
comparison with the average rate of transportation than in any other
country, the comparison is significant. In this country a continually
increasing amount of railroad transportation can be purchased with
the wage of the day laborer. With the sum of money representing the
value of a given unit of any of the staple commodities of commerce,
also can a continually increasing amount of railroad transportation
be purchased.
That which makes possible the low freight rate of the American
railroads is the magnitude of the scale upon which the transportation
is conducted. The large cars, with a capacity of from thirty to fifty
tons, and the powerful locomotives that draw a score or more of these
loaded cars in one train, permit an almost infinitesimal freight
charge per pound or per yard that, however, yields by the carload or
by the trainload no inconsiderable revenue. For example, the average
weight of the carload of food products is about 30,000 pounds. If the
freight on such a carload be $300 the rate per pound would be only
one cent, and there is scarcely a commodity upon which a freight rate
of one cent per pound makes any difference in the retail price. As
a matter of fact a carload of food products does not bring to the
railroad so much revenue as $300 unless it has been moved from a far
region; for instance, from the Dakotas or Texas to New York. Specific
complaint in regard to the freight rates of the United States for
many years has not, except in a small minority of cases, been based
on the ground that they have prevented foodstuffs from finding a
market, raw material from reaching places of manufacture, or finished
products from distribution. While the difference of a cent or two in
the rate of freight may not in the least interfere with the conduct
of industry or commerce in the aggregate, such a slight difference,
may perhaps determine whether a manufacturer obtain his raw material
from this or that source of supply, whether a wholesale dealer
obtain his stock from the manufacturer in one, or the manufacturer
in another city, whether a retail dealer make his purchases from the
wholesale dealer in this city or in that city. That is, for example,
the prices of the products at the sources of supply being equal, a
difference in the rate of freight may determine whether Cleveland,
Ohio, obtain potatoes from Michigan or from upper New York; whether a
factory in Louisville obtain coal from the fields of southern Indiana
or central Kentucky. A carpenter in Des Moines may perhaps pay a
dollar for twenty pounds of nails without knowing or caring what
the freight rate may have been, or where they may have come from. A
difference, however, of a few cents a hundred pounds in the rate of
freight may have led the hardware dealer to have purchased the nails
in Chicago or St. Louis or even directly from Pittsburg.
As the purchase of raw material tends toward the prosperity of the
region where it is produced, as the operation of a factory tends to
the increase of population, to appreciation in the value of real
estate and the augmentation of business at the place of its location,
so also does the growth of a wholesale business or of a retail
business aid in the development of its surroundings. Producers,
manufacturers, wholesalers and retailers naturally all desire to
extend their sales, to reach further markets in competition with
their rivals, and are supported in this desire by the communities
to whose welfare they contribute. Any difference in freight rates
that gives a producer of raw material, a manufacturer, a wholesale
distributer, or a retail merchant an advantage over a competitor of
another locality is therefore promptly made the subject of complaint.
The pressure brought upon the railroads by such competing producers,
manufacturers and dealers has been a very important factor in the
development of certain arrangements of freight rates, which we shall
term the Regional Rate Structures, each of which has grown out of the
various characteristics of a traffic region and has become adapted to
those characteristics.
Other arrangements of freight rates which have grown out of the needs
entailed by the production and marketing of certain of the principal
articles entering into commerce we shall designate as the Commodity
Rate Structures.
(End of Chapter VI.)
THE FREIGHT RATE PRIMER
Adapted from the Illustrated Pamphlet, So Entitled.
Issued by the New York Central and Hudson River Railroad Company.
THE A. B. C. OF THE MATTER.
"There has been much wild talk as to the extent of the
over-capitalization of our railroads. The census reports on the
commercial value of the railroads of the country, together with the
reports made to the Interstate Commerce Commission by the railroads
on their cost of construction, tend to show that, as a whole, the
railroad property of the country is worth as much as the securities
representing it, and that, in the consensus of opinion of investors,
the total value of stock and bonds is greater than their total
face value, notwithstanding the 'water' that has been injected
in particular places. The huge value of terminals, the immense
expenditures in recent years in double-tracking and improving grades,
roadbeds and structures, have brought the total investments to a
point where the opinion that the real value is greater than the face
value is probably true."
(From President Roosevelt's Decoration-Day address at Indianapolis,
May 30, 1907.)
THE X. Y. Z. OF THE SITUATION.
"An army of more than 1,500,000 men is employed directly in the
operation and maintenance of the railroads in the United States,
and millions of other men are furnished employment indirectly in
the mines, the forests and the factories, supplying the railroads
with approximately one and one-quarter billions of dollars' worth of
material and equipment annually consumed.
"These are wonderfully interesting and impressive facts; but the
fact of greater interest and worthy of the most careful thought of
every citizen of this country is that this vast army of men engaged
in producing the commodity of transportation at an average cost more
than _40 per cent lower_ than is shown by any other country is paid
an average wage more than _50 per cent higher_ than is paid in any
other country where railroads exist."
(W. C. Brown, before the Michigan Manufacturers' Association, June
22, 1908.)
LESSON I.
FREIGHT RATES AND THE CLOTHES WE WEAR.
Whom have we here?
Eleven different types of American citizens, standing in a row,
clad in the varied uniforms or togs of their several occupations or
leisure from hod-carrier to the dude in dress suit and opera hat.
These men all live in the Mississippi Valley.
Their clothes were made in New England.
They paid the railroads _nine cents_ apiece for transporting their
clothes, including shoes and hats, from the point of manufacture to
the Mississippi Valley.
The combined freight charges on _all_ the clothes worn by the eleven
men in the group, including shoes and hats, was _less than one
dollar_.
If freight rates were advanced 10 per cent the increased price to
these men on their entire wearing apparel would be _less than one
cent each_.
If they have to pay more than that per cent it will not be because
freight rates are advanced.
LESSON II.
FREIGHT RATES AND AGRICULTURAL IMPLEMENTS.
Consider the McCormick harvester. It mows, gathers, binds and stacks
the bearded grain, while its proud possessor cracks his whip above
the backs of his three-horse team. It has banished the nightmare of
farm mortgages from the great prairies of the West.
This particular harvester we are considering is cutting grain one
hundred miles west of the Mississippi River. It was built in Chicago
and sold for $130.
The farmer paid $1.76 to have it brought to him from Chicago, three
hundred miles away.
If freight rates were advanced 10 per cent the cost of the harvester
would be increased _seventeen and one-half cents_.
LESSON III.
FREIGHT RATES AND COOKING UTENSILS.
Next to the harvester the modern kitchen cooking range has added more
joys and years to the farmer's life than anything in the cornucopia
of modern civilization.
Here is a standard range. It is a thing of beauty as well as a means
for cooking everything your mother used to cook and much more.
The freight on a steel range, weighing from 400 to 500 pounds, from
Detroit to points in the Mississippi Valley, approximates from $2 to
$2.50 per stove on stoves which retail at from $55 to $60 each.
An increase of 10 per cent would add from twenty to _twenty-five
cents_ to the cost of the stove, which, divided by the life of
the stove, taking the low average of ten years, would add one and
one-half to _two cents_ per year to the cost.
On heating stoves the increase would be about _one-third less_.
LESSON IV.
FREIGHT RATES AND REFRIGERATORS.
What are the cold facts about refrigerators?
What cold storage is to the whole people, the modern refrigerator is
to the individual family.
It preserves all things sweet and clean and wholesome.
Now the freight on a refrigerator, such as is used by the ordinary
family, from Belding, Mich., where they are manufactured in large
quantities, to New York is approximately seventy-five cents.
An increase of 10 per cent would add _seven and one-half cents_ to
the cost of the refrigerator, delivered in New York City.
LESSON V.
FREIGHT RATES AND HOUSEHOLD FURNITURE.
Ever since Grand Rapids became the furniture hub of the Union there
has been no excuse for any American family being without its antique
or modern dining room set.
Look at this suite consisting of a solid table, six chairs, sideboard
and china closet, etc. It could be bought F. O. B. at Grand Rapids
for from $55 to $75, according to the wood and finish.
It weighs approximately 750 pounds and the freight from the factory
to Chicago would be $1.60.
An increase of 10 per cent would add _sixteen cents_ to the cost of
all this furniture.
LESSON VI.
FREIGHT RATES AND A BUSINESS SUIT.
Behold this business suit which no one would be ashamed to wear.
It might cost anywhere from $10 up to $35, according to the
reputation of the tailor or the rent and advertising rates he pays.
The freight rate on such a suit of clothes, including hat and
shoes, for a distance of 300 miles from any of our large jobbing or
distributing centers is approximately _three and one-half cents_.
A 10 per cent increase would add a little more than _one-third of one
cent_ to the cost of this suit, and it would add no more if it cost
$50 or $100.
LESSON VII.
FREIGHT RATES AND "KING COTTON."
"Befo' de wah" cotton was king. Of our exports it still leads all our
domestic products, having no second in sight.
If the entire cotton crop of the United States was compressed into
one bale its value would be about $750,000,000.
Of this bale in 1908 the railways got a little "jag" worth according
to the Interstate Commerce Commission $12,394,000, or less than 2 per
cent.
An advance of 10 per cent in rates on cotton could not add more than
one-fiftieth of a cent per pound to the price of cotton.
LESSON VIII.
FREIGHT RATES AND A SACK OF FLOUR.
Minneapolis, as all good little school children know, is the seat of
the flour industry of the United States.
If they do not learn this at school it is impressed upon their
receptive minds by every illuminated billboard and painted rock that
meets their gaze from Eastport to California.
There are half a dozen brands of flour ground at Minneapolis and
every one is better than all others.
The rate on this incomparable product in carloads from Minneapolis to
New York is 25 cents per hundred pounds.
That is 12½ cents per fifty-pound sack.
This flour is sold to the consumer in New York at approximately $1.85
per fifty-pound sack (or it was when this was written).
An increase of 10 per cent in freight rates would add but one and
one-quarter cents to the price of a fifty-pound sack, or a little
less than two one-hundredths of one cent per pound.
The freight rate on a fifty-pound sack of flour from Minneapolis to
Chicago is five cents per sack. An increase of 10 per cent in rates
would add only five mills per sack between these points, or _one
one-hundredth of one cent per pound_.
LESSON IX.
FREIGHT RATES AND DRESSED BEEF.
The reason cattle are butchered and carried to the consumer as
dressed beef rather than driven to market on foot or hauled as live
stock, is that the freight charge is less and the beef arrives in
better condition.
Little children in New York and Boston appreciate this, if the wise
grown-ups of the West sometimes seem to doubt it.
The rate on dressed beef from Chicago to New York is forty-five cents
per hundred pounds. The average price of this beef to the consumer
in New York is (or was) approximately twenty-five cents per pound.
A 10 per cent increase in freight rates would add _less than five
one-hundredths of one cent per pound_.
If freight rates were advanced 10 per cent, the increased cost in
New York City of a two-rib roast of the best quality, weighing eight
pounds, retailing for $1.92, would be _less than one-half cent_.
Surely this is not an excessive price to pay for _National prosperity
and industrial peace_.
LESSON X.
FREIGHT ON EGGS, BUTTER AND POULTRY.
Eggs were cheaper when Columbus experimented with them than they are
now, but it cost more to carry a dozen eggs or a firkin of butter ten
miles in 1492 than it would to carry them 100 miles now.
The rate on butter and eggs from points in Eastern Iowa to New
York--a distance of approximately 1,200 miles--is eighty-four cents
per hundred pounds. On dressed poultry from the same points to New
York the rate is ninety-six and one-half cents.
The eggs are sold to the consumer by the dozen and the other
commodities by the pound; _and the consumer pays every farthing of
freight that has accrued from the time the egg is laid, which he buys
in the "original package," or as dressed poultry, or from the time
the cow is milked, from which the butter is made_.
An increase of 10 per cent would add eight one-hundredths of one cent
per pound to the price the consumer pays for butter and eggs, and it
would add nine and one-half one-hundredths of one per cent per pound
to the cost of dressed poultry, for which he pays from twenty to
thirty cents per pound.
LESSON XI.
FREIGHT RATES AND LEATHER BELTING.
Some little children and many of their mothers do not know that
a great deal of the power that makes the wheels go round in this
industrial beehive is transmitted by belting.
The shops of the Lake Shore & Michigan Southern Railway at Elkhart,
Indiana, are equipped with 13,288 running feet, or _practically
two and one-half miles_, of leather belting. This belting cost the
railroad company $6,235, or an average of 46.9 cents per running
foot. The belting was shipped from Boston to Elkhart, a distance of
937 miles. The total freight charges amounted to $18.37, or fourteen
one-hundredths of one cent per running foot. An increase of 10 per
cent would add $1.83 to this cost, or _fourteen one-thousandths of
one cent per running foot_.
This belting, moreover, cost the railroad company $1,082 more than
it would have cost at the prices prevailing in 1899, representing an
increase of 21 per cent. During this same period there was no change
whatever in the freight rate.
LESSON XII.
THE RAILWAYS AND NATIONAL DEVELOPMENT.
Now listen to the sober words of the one man who has perhaps given
more official attention to the subject than any other citizen of the
republic:
"Without regard to the personnel of railroad officials, without
regard primarily to the interest of stockholders, but in the interest
of public welfare and national prosperity, we must permit railway
earnings to be adequate for railroad improvement at advantage and
profit.
"To my mind it is a most impressive fact, so great as to elude the
grasp of imagination, that the railway traffic of the country fully
doubled in the first seven years of this twentieth century. This
enormous addition to the volume of transportable goods overtaxed,
as you know, the existing facilities, and the resulting condition
perhaps accounts for much of the hostility which has been manifested
in various quarters. For the man who has raised something by hard
labor or made something with painstaking skill, which he could sell
at a handsome profit in an eager market, and finds that he cannot get
it carried to destination, and so sees his anticipated gains turned
into a positive loss, is naturally exasperated and unthinkingly
'blames it' on the railroads, and is ready to hit them with anything
he can lay his hands to; and as the state legislature seemed to be
the most convenient weapon he wielded it for all it was worth.
"I dwell upon this a moment further, because it seems plain to me
that the prosperity of the country is measured and will be measured
by the ability of its railroads and waterways to transport its
increasing commerce. With a country of such vast extent and limitless
resources, with all the means of production developed to a wonderful
state of efficiency, the continued advancement of this great people
depends primarily upon such an increase of transportation facilities
as will provide prompt and safe movement everywhere from producer
to consumer; and that we shall not secure unless the men who are
relied upon to manage these great highways of commerce have fitting
opportunity, and the capital which is required for their needful
expansion is permitted to realize fairly liberal returns."
(Hon. Martin A. Knapp, Chairman Interstate Commerce Commission,
in "Annals of the American Academy of Political and Social
Science.")
LESSON XIII.
LOOK UPON THIS PICTURE.
What is this I see?
Smokeless chimneys! Closed factories. Spiders' webs across the doors
of opportunity. Grass growing rankly in the streets of industrial
towns. Dejection on the face of nature and of man.
What does it mean?
The railways have ceased to earn enough to meet expenses and provide
for the progressive maintenance of their equipment and plant.
Why, are not their receipts greater than ever?
True, but their expenses have increased more rapidly than their
earnings and their net revenues have only been maintained by
postponing purchases that must be made some time or the railways will
be incapable of performing their public service with safety, dispatch
and economy.
In 1908 and 1909 the railways scrimped maintenance $300,000,000 and
this will have to be made good some time, some how, before they are
on as sound an operating basis as they were before the panic of 1907.
What must be done to avert the consequences described above?
A readjustment of freight rates, involving a reasonable increase
applied to such articles and commodities as can stand it, without any
appreciable hardship either to manufacturer, merchant or consumer,
means the difference between grinding economy and a fair degree of
prosperity.
THE REVERSE OF THE PICTURE.
Would a 10 per cent increase in freight rates mean such a difference?
It most certainly would.
It would mean the difference between closed shops and suspended
improvements and the resumption of improvements with the ability
to resume the large purchases of material and equipment, giving
full employment to labor and furnishing improved transportation
facilities, which, within a very short time the commerce of the
country is going to demand more insistently than ever. To hundreds
of thousands of workingmen it means the difference between steady,
well-paid employment and walking the streets looking in vain for work.
LESSON XIV.
NARROW MARGIN BETWEEN EARNINGS AND EXPENSE.
"I have looked up the statement of about 80 per cent of the principal
railroads of the country and find that during the last half of the
year 1907, after the tremendous increase in expenses had become
effective, while the gross earnings of the railroads increased
$57,413,078 over the same period of the preceding year, their
expenses increased $80,235,823, showing a net loss for the period,
despite the tremendous business handled, of $22,822,745.
"The converging lines of cost and compensation in railroad operation,
which for years have been steadily approaching each other, are now
separated by so narrow a margin that in order to pay fixed charges,
taxes and operating expenses, with even a very moderate return to
shareholders, there must be either _a moderate increase in freight
rates_ or a very _substantial reduction in the wages of railroad
employes_."
(W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)
LESSON XV.
WHICH SHALL IT BE?
"Is it not better, Mr. President, that you and I, and tens of
thousands of people who buy and use automobiles, should pay a dollar
or two more freight on our machines than that the family of the
engineer, the conductor, the brakeman, the switchman or the humble
section hand shall be deprived of the actual necessities and comforts
of life, which we know they must give up if the monthly pay check is
reduced?
"No question of greater importance confronts the people of the
country today, for upon its righteous solution hangs the momentous
issue of an early return of prosperity or a continuance of the
depression of the past six months, emphasized and darkened by
a struggle with organized labor such as this country has never
experienced."
(W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)
LESSON XVI.
MORAL.
"_Our prosperity came with the prosperity of the railroads; it
declined when adversity struck the railroads. We do not believe we
can have the full measure of prosperity again until the railroads are
prosperous._"
(National Prosperity Association of St. Louis.)
PROGRESSIVE SAFETY IN RAILWAY OPERATION
By A. H. SMITH,
Vice-President of the N. Y. C. & H. R. R. Co.
An Address Delivered Before the National Association of Railroad
Commissioners, at their Annual Convention, held in Washington,
D. C., November 16, 1909.
In examining into the state of an art of such far-reaching importance
and such diversified nature as that of transportation by rail, it
seems necessary to acquaint ourselves with its beginnings and growth;
to determine the elements upon which its development relies and the
necessity which has invoked the various steps of improvement in
the plant devoted to transportation and the art of employing and
controlling it in the performance of a public service.
The lay observer will scarcely appreciate, in the absence of the
actual analysis, that there exists so many branches of this subject,
each branch of which, by itself, may be considered the object of a
separate professional science and a distinct human industry.
EARLY RAILROAD HISTORY.