Arkansas 1.06 1.68 56.49
California (a)2.55 (a)3.81 49.41
Colorado 1.17 1.40 19.66
Georgia (b)1.03 (b)1.38 33.98
Idaho (c)3.33 (c)4.10 23.12
Illinois .72 1.07 48.61
Indiana .84 1.08 28.57
Iowa 1.13 1.62 43.36
Kansas 1.18 1.52 28.81
Kentucky .79 1.06 34.18
Maryland .76 1.20 57.89
Michigan 1.46 1.80 23.29
Missouri 1.08 1.64 51.85
Montana 1.76 1.94 10.23
New Mexico 1.38 1.46 5.80
North Dakota 1.08 1.61 49.07
Ohio .78 1.10 41.03
Oklahoma 1.34 2.04 52.24
Oregon 3.09 2.34 Decrease
Pennsylvania--
Bituminous .69 1.04 50.72
Anthracite 1.51 1.91 26.49
Tennessee .81 1.25 54.32
Texas 1.52 1.69 11.18
Utah 1.19 1.52 27.73
Virginia .67 1.02 52.24
Washington 1.94 2.09 7.73
West Virginia .63 .99 57.14
Wyoming 1.21 1.56 28.93
(a) Includes Alaska.
(b) Includes North Carolina.
(c) Includes Nebraska.
It will be noted that the cost of coal increased in every state of
considerable production. In California much of the locomotive fuel
used consists of petroleum, and the same fuel is used to some extent
in Oregon and New Mexico.
The number of tons of coal purchasable at the mines in the several
states with $105.00, the gross revenue from the typical shipment
which has been used for illustrative purposes, in 1897 and in 1907,
would have been as follows:
Tons of coal purchasable
for $105.00.
------------------------
Decrease,
State. 1897. 1907. per cent.
Alabama 119 81 31.93
Arkansas 99 62 37.37
California 41 28 31.71
Colorado 90 75 16.67
Georgia 102 76 25.49
Idaho 32 26 18.75
Illinois 146 98 32.88
Indiana 125 97 22.40
Iowa 93 65 30.11
Kansas 89 69 22.47
Kentucky 133 99 25.56
Maryland 138 88 36.23
Michigan 72 58 19.44
Missouri 97 64 34.02
Montana 60 54 10.00
New Mexico 76 72 5.26
North Dakota 97 65 32.99
Ohio 135 95 29.63
Oklahoma 78 51 34.62
Oregon 34 45 Increase
Pennsylvania--
Bituminous 152 101 33.55
Anthracite 70 55 21.43
Tennessee 130 84 35.38
Texas 69 62 10.14
Utah 88 69 21.59
Virginia 157 103 34.39
Washington 54 50 7.41
West Virginia 167 106 36.53
Wyoming 87 67 22.99
In this connection it should be noted that the United States
Department of Labor reports an increase, between 1897 and 1907, in
the price of anthracite of 29.23 per cent., and in bituminous coal
from the Georges Creek region of 85.54 per cent.
COST OF RAILWAY SUPPLIES.
Bulletin No. 75, of the United States Bureau of Labor, shows average
prices for the following articles used by railways, or, as raw
materials, for the manufacture of railway supplies:
Price.
-------------------------------
Articles. Increase,
Unit. 1897. 1907. per cent.
Axes, M. C. O. Yankee Each .39 .68 74.36
Coke, Connellsville, furnace Ton 1.62 2.83 74.69
Bar iron, best refined, from mill Pound .011 .0175 59.09
Barbed wire, galvanized Cwt. 1.80 2.63 46.11
Copper wire, bare Pound .1375 .2402 74.69
Doorknobs, steel, bronze, plated Pair .166 .450 171.08
Files, 8-inch Dozen .81 1.00 23.46
Hammers, Magdole, No. 1½ Each .38 .47 23.68
Lead pipe Cwt. 4.32 6.71 55.32
Locks, common, mortise Each .0833 .20 140.10
Nails, cut, 8-penny, fence and common Cwt. 1.33 2.16 62.41
Nails, wire, 8-penny, fence and common Cwt. 1.49 2.12 42.28
Pig iron, Bessemer Ton 10.13 22.84 125.47
Pig iron, foundry No. 1 Ton 12.10 23.90 97.52
Pig iron, foundry No. 2 Ton 10.10 23.87 136.34
Pig iron, gray, forge, southern, coke Ton 8.80 20.99 138.52
Steel billets Ton 15.08 29.25 93.97
Steel rails Ton 18.75 28.00 49.33
Steel sheets, black, No. 27 Pound 0.019 0.025 31.58
Tin, pig Pound .1358 .3875 185.35
Tin, plates, domestic, Bessemer, coke Cwt. 3.18 4.09 28.62
Zinc, sheet Cwt. 4.94 7.49 51.62
Brick, common domestic M 4.94 6.16 24.70
Cement, Rosendale Bbl. .75 .95 26.67
Doors, pine Each .81 1.88 132.10
Lumber, hemlock M feet 11.00 22.25 102.27
Lime, common Bbl. .72 .95 31.94
Linseed oil, raw Gal. .33 .43 30.30
Lumber, maple, hard M feet 26.50 32.25 21.70
Lumber, oak, white, plain M feet 36.25 55.21 52.30
Lumber, oak, white, quartered M feet 53.83 80.00 48.62
Lumber, pine, yellow M feet 16.44 30.50 85.52
Lumber, poplar M feet 30.67 58.08 89.37
Shingles, cypress M 2.35 4.23 80.00
Lumber, spruce M feet 14.00 24.00 71.43
Window glass, American, single,
firsts, 6 by 8 to 10 by 15 inch 50 sq. ft. 2.20 2.81 27.73
Window glass, American, single,
thirds, 6 by 8 to 10 by 15 inch 50 sq. ft. 1.96 2.24 14.29
The bulletin indicates that putty, Portland cement and Ames shovels
are about the only exceptions to the general rule of greatly
increased prices of railway supplies. It is plain that as to all of
the important supplies and materials included in the foregoing list
the $105.00 of gross receipts from the typical shipment heretofore
used as an example would show the same, or a greater, loss in
purchasing power which has characterized the comparisons previously
shown.
Evidence from official sources thus shows that in purchasing the same
quantities either of labor or of supplies the railways have now to
expend much larger sums than they did ten years ago. The official
statistics already quoted are fully supported and their pertinence
to the problem in hand is fully proven by the accounting records of
the purchasing departments of the several railways. The Trunk Line
Association has obtained detailed information concerning purchases in
1897 and 1907, by important railways represented in its organization,
and this information has been carefully and accurately tabulated.
A table showing the largely increased cost of articles which this
tabulation reveals has been made Appendix B and will be found at
pages 194 to 198 of this pamphlet. An examination of this appendix
and, particularly of the classes of labor and of the articles shown
to have greatly increased in cost, discloses the unquestionable fact
that the increased cost pervades the whole aggregate of operating
expenses and that there is no considerable exception to the rule that
every item of operating expenditure is now very much greater than it
was in 1897.
OTHER COSTS OF SUPPLYING RAILWAY SERVICES.
The cost of railway transportation which must be borne out of the
receipts for railway services includes operating expenses, interest
on capital and taxes. Before discussing the increase in the rate of
interest demanded it is worth while to note that the exactions made
by the taxing power upon the railways have also notably increased.
The sums annually paid as taxes on railway property since 1897
follow:
Taxes paid.
Miles operated ----------------------
and included Average
in reports Amount. per mile
of taxes paid. operated.
1897 183,284.25 $43,137,844 $235.36
1898 184,648.26 43,828,224 237.36
1899 187,534.68 46,337,632 247.09
1900 192,556.03 48,332,273 251.00
1901 195,561.92 50,944,372 260.50
1902 200,154.56 54,465,437 272.12
1903 205,313.54 57,849,569 281.76
1904 212,243.20 61,696,354 290.69
1905 216,973.61 63,474,679 292.55
1906 222,340.30 74,785,615 336.36
1907 227,454.83 80,312,375 353.09
---------- ------------ ------
* * $625,164,374 * *
Thus in the years from 1897 to 1907 railway taxation per mile of line
has increased from $235.36 to $353.09, or no less than 50.02 per cent.
COST OF REGULATION.
Closely akin to taxation of railway property are the additional
expenses which have to be met out of railway revenues on account
of public regulation. The increased and, in many cases, minute
regulation imposed by the Hepburn law of 1906 and the rules and
requirements established thereunder by the Interstate Commerce
Commission and by various State enactments have caused the railways
many new and augmented expenditures. Among the many purposes for
which these expenditures have become necessary are those enumerated
below:
1. Preparation, publication, filing, posting, etc., of rate schedules.
2. Compilation and tabulation of statistics, preparation and filing
of annual reports of operation and finance.
3. Litigation under regulatory statutes including cases before
National and State commissions and including legal and incidental
expenses thereof.
4. Appliances and special equipment required by safety appliance laws.
5. Additional employees and additional wages paid on account of laws
regulating the hours of labor.
Besides these and other positive additions to the expenses of
operation there have been considerable reductions in revenue brought
about by the various regulative statutes. Thus there have been
reductions in revenue caused by the following:
1. Orders, or suggestions having practically the force of orders,
requiring changes in the classification of freight.
2. Orders, or suggestions having practically the force of orders,
requiring reductions in rates.
3. Statutory reduction in the rates of compensation for carrying the
mail.
4. Reduction of compensation for carrying the mail made by executive
order.
A painstaking effort to secure accurate statistics concerning recent
increases in these expenditures and losses has been made and data for
that purpose have been supplied by many of the railways operating
east of the Mississippi river. These data are necessarily incomplete
and fragmentary, the accounts of many of the companies not being kept
in such form as fully to disclose the items desired. In few cases
were the data which could be obtained for any line complete--some
companies were able to report particular items while other companies
could not give these, but could supply others. Generally speaking,
it should be realized that the tabulation of these reports makes
a showing which is incomplete mainly in the form of omissions. A
conservative computation discloses that the costs due to increases
in expenses or reductions in revenue imposed by statutes or by
Commissions acting under Federal and State regulatory laws costs
the railways of the United States approximately $200,000,000 in two
years. That this is not an exaggerated estimate will be appreciated
by reference to the principal general items of expenditures as
enumerated on the preceding pages. Until these items shall have been
assigned a proper classification in the accounts of the railroads
the accurate results may not be ascertained, but it will at once
occur to those in any measure informed that there has been an
enormous increase of work and expense placed upon the carriers to
conform to the innumerable requirements of State and Federal laws
and the rulings of the Commissions thereunder, and that this burden
has extended to all departments of the carriers. Litigation and
miscellaneous expenses appear as a large part of these new costs,
and in addition the carriers' revenues have been greatly depleted
either directly by the laws, orders of Commissions or suggestions
having practically the force of orders, resulting in reductions of
freight and passenger charges.
COST OF OBTAINING NEW CAPITAL.
In the matter of interest on the capital employed the railways
have apparently enjoyed an advantage which would seem to offset
the natural tendency of interest rates to rise in response to the
stimulus of augmented cost, in dollars and cents, of the commodities
entering into the budget of expenditures of the average recipient
of interest--that is to say, the advantage growing out of the fact
that a large proportion of railway capital is secured under long-time
contracts and that many of the contracts now in force unquestionably
run back to a time before the extensive depreciation of the American
dollar began. This advantage is a real one, but its extent is easily
exaggerated. For the purpose of throwing light upon the effect upon
the cost of railway transportation of the rise in interest rates
which has characterized recent years an analytical study of railway
indebtedness (including guaranteed dividends) amounting, in the
aggregate, to $9,499,099,065 has been made. This sum represents
indebtedness now outstanding and includes some duplication owing to
the fact that certain of the securities represented in the aggregate
are themselves based upon other securities deposited as collateral
or held in the treasuries of the corporations making the secondary
issues; duplication which could not be eliminated without adding
vastly to the difficulty of the inquiry with no corresponding gain
in the accuracy of the result. These data are also subject to the
qualification necessarily due to the fact that all of the issues
included were not sold at par. In some cases a small premium was
doubtless obtained and in other cases a slight discount was required,
but, nevertheless, it is believed that the data fairly indicate the
general change in interest rates on capital loaned to railways. Of
the total outstanding indebtedness of $9,499,099,065 the portion
incurred during the years 1897 to 1908, inclusive, amounts to
$5,466,340,252, or 57.55 per cent. The following table shows the
amounts incurred at the different rates during each of the years
named:
Rate of Interest and Amount Incurred During Year and Outstanding.
Year. 6½ per cent. 6 per cent. 5 per cent. 4½ per cent.
1897 -- $11,039,000 $42,126,000 $7,700,000
1898 -- 487,000 7,486,700 207,000
1899 -- 13,094,000 29,197,000 15,896,000
1900 -- 1,133,000 15,926,351 7,979,000
1901 -- 1,777,775 38,840,000 37,845,378
1902 -- -- 44,949,508 19,949,600
1903 -- 1,552,000 53,592,030 22,092,500
1904 -- 256,000 61,191,561 30,241,729
1905 -- 1,810,000 66,346,000 73,996,100
1906 $350,000 1,180,579 141,786,511 40,922,181
1907 -- 30,325,000 289,458,892 177,805,962
1908(a) -- 114,504,970 47,546,385 2,850,000
-------- ------------ ------------ ------------
Total $350,000 $177,159,324 $838,446,938 $437,485,450
Rate of Interest and Amount Incurred During Year and Outstanding.
Year. 4 per cent. 3¾ per cent. 3½ per cent. 3 per cent.
1897 $205,882,500 $ -- $221,663,000 4,998,275
1898 187,898,000 -- 194,724,325 --
1899 277,784,400 -- 126,734,000 43,231,272
1900 83,735,500 -- 62,577,000 43,689,000
1901 382,131,250 330,000 51,635,000 --
1902 348,038,050 -- 58,641,500 --
1903 317,948,000 -- 22,308,000 9,866,435
1904 193,499,500 -- 39,890,000 --
1905 364,507,404 -- 112,645,155 16,000,000
1906 251,037,681 48,262,548 31,098,670 --
1907 210,399,075 -- 423,000 --
1908(a) 101,380,000 -- -- --
------------- ----------- ------------- ------------
Total $2,924,181,360 $48,592,548 $922,339,650 $117,784,982
(a) January to July, only.
Even a cursory examination of the foregoing statement shows that the
average rate of interest demanded by those who supply railway capital
has greatly increased. In 1897 and 1898 the largest aggregate of
new indebtedness was incurred at the rate of three and one-half per
cent. per annum; in 1899, 1900, 1902, 1903, 1904, 1905 and 1906 the
preponderating portion was at four per cent.; in 1907 the largest
aggregate was at five per cent., while in the months of 1908 for
which data are available the greater portion was obtained at six
per cent. Loans at three and three and one-half per cent., which
supplied a considerable aggregate during all of the years to and
including 1906 and particularly in the earlier years of the period,
had substantially disappeared before 1907 and no funds were procured
at less than four per cent. during the portion of 1908 which is
included. The increased volume of loans at five and six per cent. is
equally marked. The following table makes this analysis clearer by
showing the total borrowings of each year and the percentage at each
rate:
========================================================================
Rate of Interest and Proportion of Total Indebtedness
Incurred During Year and Outstanding.
Year. Borrowed. -----------------------------------------------------
6½ 6 5 4½ 4 3¾ 3½ 3
per per per per per per per per
cent. cent. cent. cent. cent. cent. cent. cent.
------------------------------------------------------------------------
1897 $493,408,775 -- 2.24 8.54 1.56 41.73 -- 44.92 1.01
1898 390,803,025 -- .12 1.92 .05 48.08 -- 49.83 --
1899 505,936,672 -- 2.59 5.77 3.14 54.91 -- 25.05 8.54
1900 215,039,851 -- .53 7.40 3.71 38.94 -- 29.10 20.32
1901 512,559,403 -- .35 7.58 7.38 74.55 0.07 10.07 --
1902 471,578,658 -- -- 9.53 4.23 73.80 -- 12.44 --
1903 427,358,965 -- .36 12.54 5.17 74.40 -- 5.22 2.31
1904 325,078,790 -- .08 18.82 9.30 59.53 -- 12.27 --
1905 635,304,659 -- .28 10.44 11.65 57.38 -- 17.73 2.52
1906 514,638,170 0.07 .23 27.55 7.95 48.78 9.38 6.04 --
1907 708,351,929 -- 4.28 40.86 25.10 29.70 -- .06 --
(a)1908 266,281,355 -- 43.00 17.86 1.07 38.07 -- -- --
------------------------------------------------------------------------
Total 5,466,340,252 0.01 3.25 15.34 8.00 53.49 0.89 16.87 2.15
------------------------------------------------------------------------
(a) January to July, only.
The foregoing table shows that while, in 1897, the railways borrowed
87.66 per cent. and in 1898, 97.91 per cent. of the new capital
obtained in the form of loans at four per cent. or better, they were
compelled, in 1907, to promise more than four per cent. on 70.24 per
cent. and in the first six months of 1908 to promise six per cent. on
43.00 of their borrowings. The significance of these figures is made
still more apparent by the following table, which shows opposite the
aggregate borrowings of each year, the interest charges thereon and
the average rate upon the portion of the capital which it represents:
Year. Aggregate
interest Av. rate
Borrowed. charges. interest.
1897 $ 493,408,775 $ 19,258,593 3.90
1898 390,803,025 14,744,141 3.77
1899 505,936,672 19,804,814 3.91
1900 215,039,851 8,073,638 3.75
1901 512,559,403 20,856,559 4.07
1902 471,578,658 19,119,182 4.05
1903 427,358,965 17,561,577 4.11
1904 325,078,790 13,571,945 4.17
1905 635,304,659 25,758,601 4.05
1906 514,638,170 21,964,215 4.27
1907 708,351,929 32,722,081 4.62
1908(a) 266,281,355 13,431,067 5.04
-------------- ------------ ----
Total $5,466,340,252 $226,886,413 4.15
(a) January to July, only.
The foregoing shows an increase, in the average interest rate
demanded upon new loans to railway corporations, from 3.90 per cent.
in 1897 to 4.62 in 1907 and 5.04 in 1908. The increase in the rate
from 1897 to 1907 was equal to 18.46 per cent. and from 1897 to 1908
it was 29.23 per cent. In other words, one dollar would pay interest
on as much of the new capital secured by loans in 1897 as $1.29
would of the loans of 1908. The gross revenue of $105.00 obtained in
both years from the typical shipment of fourth class freight between
Chicago and New York, at the unchanged rate applicable to such a
shipment in both years, would pay interest on $2,692.31 secured in
the earlier year and on only $2,083.33 secured in the later year.
The loss in power to purchase loaned capital therefore amounts to
22.62 per cent. In order fully to appreciate the importance of this
rise in the cost of capital it is necessary to realize that very
great sums of new capital are annually required for the necessary
augmentation and improvement of railway facilities. This is made
evident by the total yearly borrowings as shown in the foregoing
tables, but it should be borne in mind that further sums, certainly
not less extensive in the aggregate, have been raised through issues
of stock, which promise no certain rate of interest, although
these sums could not have been obtained unless the subscribers had
considered it probable that they would, in the long run, receive
returns in dividends at least equal to the "going rate" of interest.
It is interesting to note that the aggregate of new capital secured
by loans in each year has very largely exceeded the total interest
payments to all capital obtained by borrowing. This is shown by
the following table, the data in which, except those as to the sums
obtained by loans, are from the reports of the Interstate Commerce
Commission:
Per ct. int.
New capital Interest on paym'ts new
Year.(a) borrowed. funded debt. borrow'gs.
1898 $ 390,803,025 $ 237,578,706 60.79
1899 215,039,851 241,657,535 47.76
1900 215,039,851 242,998,285 113.00
1901 512,559,403 252,594,808 49.28
1902 471,578,658 260,295,847 55.20
1903 427,358,965 268,830,564 62.90
1904 325,078,790 282,118,438 86.78
1905 635,304,659 294,803,884 46.40
1906 514,638,170 305,337,754 59.33
1907 708,351,929 323,733,751 45.70
-------------- -------------- -----
Total $4,706,650,122 $2,709,949,572 57.58
(a) Accurate data for payments to capital in 1897 are not available.
FROM THE VIEWPOINT OF THE PURCHASER OF THE SERVICES.
So far the extent and significance of the changes in the value,
or purchasing power, of money have been considered from the point
of view of those who produce and sell railway transportation. But
equally striking changes will appear and similar conclusions are
inevitable when recent history is reviewed in the aspect which
it presents to those whose earnings are devoted, in part, to the
purchase of the services which the railways supply. For the important
consideration to the wage-earner who wishes to travel by rail or
who buys commodities that have been so carried, or to the producer
whose products must go to market over railway routes, is not, how
much money must be paid for the railway services, but, rather, how
much labor must be expended, or what quantity of his goods must be
produced, in order to obtain that sum of money. If the earnings of
a particular wage-earner have increased from fifty to seventy-two
cents per hour, a railway service is cheaper, to him, if it costs
twelve cents than it was at ten cents when his earnings were on the
fifty-cent basis, for he now procures with the fruit of ten minutes'
toil what formerly cost the result of twelve minutes' labor. In
Bulletin No. 77, just issued by the United States Bureau of Labor,
the official statistician presents data showing the relative wages
per hour of many different classes of wage-earners, not including
railway employees, in 1897 and 1907. While these data show that
wages have almost uniformly advanced (there are ten somewhat
questionable exceptions among the 342 classes) the data supplied by
the Interstate Commerce Commission show that during the same period
average railway freight rates have declined from 7.98 mills to 7.59
mills per ton per mile, or 4.89 per cent. A table presenting and
based upon these official statistics and showing the relative wages
per hour of the various classes of labor, in 1897 and 1907, the
percentage increase in wages rates per hour and the increased command
over railway freight services which these wage-earners have obtained
through the combined effect of higher wages and lower ton-mile rates
is given in Appendix C[F]. In studying the data presented in this
appendix it should be borne in mind that the wages are relative
and not absolute. They mean, for example, that the average male
blacksmith in the agricultural implement industry was paid, in 1907,
$1.25 for the same quality and period of labor for which he was paid
a little less than ninety-six cents, in 1897. This increase amounted
to 30.58 per cent. of the wages rate of 1897, and, combined with a
decreased cost of railway freight service of 4.89 per cent., which
made 95.11 cents go as far in purchasing the latter in 1907 as one
dollar would go in 1897, gave him 37.29 per cent. greater command
over railway freight services.
In an earlier bulletin, No. 75, published during the current year,
the Bureau of Labor continued its "index numbers," which show,
in similar manner, the average relative wholesale prices of the
commodities entering into the ordinary budget of family expenditures.
For the purpose of presenting the changes in these prices on a
uniform basis the Bureau represents the averages for the ten years
from 1890 to 1899, inclusive, as one hundred per cent. and reduces
the averages for each year to percentages of the averages for the
basic period. The following table presents these figures for the year
1897 to 1907, inclusive:
Relative Wholesale Prices.
Cloths Fuel Metals
Farm and and and
Year. Products. Food. Clothing. Lighting. Implements.