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Cornell University Library 
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 olin 
 
 3 1924 032 578 241 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924032578241 
 
BY THE SAME AUTHOR 
 
 THE WORKING OF THE 
 RAILROADS 
 
 an elementary exposition of the devel- 
 opment, the working, and the inter- 
 relation of the different departments 
 of railroad administration 
 
 Contents 
 I — The Transportation Function 
 11 — Construction and Operation 
 III— Traffic 
 
 IV — Accounting and Statistics 
 V — Financial and Executive Admin- 
 istration 
 VI — Correlation 
 VII — Integration 
 
 VIII — Relations to the Public and the 
 State 
 
 i2rao, 283 pages. $1.50 net, by mail $1,63 
 
 HENRY HOLT AND COMPANY 
 NEW YORK 
 
RAILROAD FREIGHT RATES IN 
 RELATION TO THE INDUSTRY 
 AND COMMERCE OF THE 
 UNITED STATES 
 
 BY 
 
 LOGAN G. Mcpherson 
 
 Lecturer on Traosportation, Johns Hopkins University, 
 Author of " The Working of the Railroads " 
 
 NEW YORK 
 
 HENRY HOLT AND COMPANY 
 
 1909 
 
 1) 
 
Copyright, 1909 
 
 BY 
 
 HENRY HOLT AND COMPANY 
 
 Published May ^ 1909 
 
 A>a^'5o1 M 
 
PREFACE 
 
 Throughout the general discussion of 1905-06 as to 
 additional Federal legislation for the regulation of the 
 railroads became evident the need for a definite, concrete 
 and fairly comprehensive exposition of the effect of the 
 freight rates of the railroads upon the industry and com- 
 merce of the United States. In the desire to set forth 
 the prime factors in this relation, the anatomy and physi- 
 ology as well as the pathology of the freight rate struc- 
 ture, the writer has visited every part of the country, in- 
 terviewing principal shippers, the representatives of com- 
 mercial organizations and the officers in charge of the 
 traffic departments of various railroads. 
 
 The steps of the development of the freight rate struc- 
 tures have been largely attained through discussions, of 
 which the records have disappeared, and through cor- 
 respondence no longer in existence. They remain in the 
 memory of the veteran traffic managers who have readily 
 imparted much of the information contained in these 
 pages. Their recollection, however, has confessedly not 
 always been exact as to dates, leaving it possible, in parts 
 of the book, to show only the general sequence of the 
 development. 
 
 The mission has been greatly facilitated by th^ lec- 
 tureship on transportation which the writer holds at 
 Johns Hopkins University, and by an extended experi- 
 ence in active railroad service. Partial results of this 
 research have been embodied in lectures delivered at 
 Johns Hopkins University, Columbia University, Yale 
 University, the University of Chicago and the University 
 of Wisconsin ; in articles that have appeared in the North 
 American Review, the Political Science Quarterly, Rail- 
 way Age, Railroad Gazette, Railway World, and news- 
 papers of various cities. These lectures and articles 
 have been freely used in the preparation of this volume. 
 
CONTENTS 
 
 CHAPTER I 
 Introductory 
 
 PAGE 
 
 Division of Labor — Development of Industry and Com- 
 merce — Functions of Transportation — Effects of the 
 Transportation Charge i 
 
 CHAPTER II 
 
 The Channels of Traffic 
 
 Early American Commerce — Its Trend Inland — Railroads 
 versus Canals — Erosion of Traffic Channels by Ex- 
 change of Foodstuffs for Manufactured Products — 
 Movement of Raw Materials of Manufacture — Move- 
 ment of Deciduous Fruits 4 
 
 CHAPTER III 
 
 The Preparation of Foodstuffs 
 
 The Grain Supply — Machinery Introduced in Harvesting and 
 Preparation for Consumption — The Meat Supply — 
 Beef — Hog Products — Lamb — Poultry — Eggs and But- 
 ter — Truck Farm Products — Orchard Products — Su- 
 premacy of the American Apple — Development of the 
 Peach and Grape — The Melon Tribe — Citrus Fruits 
 — The Canning Industry 15 
 
 CHAPTER IV 
 
 The Distribution of Foodstuffs 
 
 Involution of Distribution — The Commission Man — Fruit 
 Growers' Associations — The Refrigerator Car — Cold 
 Storage — Elimination of the Broker in Grain Market- 
 ing — Direct Methods of the Packing Houses — Depart- 
 ment of Agriculture and the Handling of Food Ship- 
 ments — Work of State Colleges of Agriculture — The 
 Railroads and the Education of the Farmers — Problem 
 of Car Distribution — Good Roads and the Problems of 
 Distribution ... 28 
 
vi Contents 
 
 CHAPTER V 
 
 The Distribution of Raw Material and 
 Merchandise 
 
 PAGE 
 
 Elimination of the Middleman — Movement of Cotton,. Iron 
 Ore, Pig Iron, Coal, Petroleum, Lumber, Tobacco, 
 Sugar, Woodpulp, Copper and Lead Ores — Influence 
 of Segregation in Production and Manufacture on 
 Distribution by Rail — Relation of Rates to Character 
 of Freight — Necessity of the Middleman in Distribu- 
 tion of Manufactured Products — The Development of 
 the Main Traffic Channels between Distributing 
 Centers . . . 40 
 
 CHAPTER VI 
 
 The Transportation Charge and Prices 
 
 The Transportation Charge as Related to the Consumer — 
 As Related to Production — Rates and Prices, Illus- 
 trated by Food Products in New York, by Manufac- 
 tured Products in St. Louis, by Staples in General Use 
 — The Transportation Charge as Related to Materials of 
 Manufacture, Cotton, Wheat, Tobacco, Sugar — Special 
 Instances, Bananas, Hides, Fertilizers, Pulp, and Ores, 
 etc. — Shifting Sources as Influencing Rate Structures 
 — Rates on Foodstuffs not a Factor in Price — A 
 Watermelon Rate Incident — Rates on Raw Material 
 enter Cost of Manufacture— Extensive Transportation 
 makes Low Rates Possible 47 
 
 CHAPTER VII 
 
 The Regional Rate Structures 
 
 Determining Causes of the Freight Rate Structures: (i) 
 The New England Rate Structure — Preservation of 
 Manufacturing Interests Dictates Adjustments in Rates. 
 (2) The Trunk Line and Central Traffic Territory — 
 New York, Philadelphia and Baltimore in their Rela- 
 tion to Chicago — Rate-Cutting — The Trunk Line Asso- 
 ciation — The Evolution of The Percentage System — 
 The Central Traffic Association — The JDifferential — 
 Basing Points — The Interstate Commerce Law, 1887, 
 and the Long and Short Haul — The Percentage Sys- 
 tem_ and Local Rates — Ohio Rates. (3) Trans-Mis- 
 sissippi and Trans-Missouri Territory — The . Missis- 
 sippi River as Basing Line — "^ixed Differences," as 
 Affecting Chicago and St. Louis to Southwest, to 
 Missouri River, to St. Paul, to far West— The Col- 
 orado Common Points Rates — Water Rates and the 
 Denver Differential— " Jobbers' Rates." (4) South of 
 the Ohio and East of the Mississippi — Influence of 
 Water Rates and Water Points — Norfolk Differen- 
 tial—Virginia Cities Rate— Erection of Basing Points 
 —The Atlanta Rate. (5) Texas— Intrastate Maxi- 
 
Contents vli 
 
 PAGE 
 
 mum Rate — Common Point Territory — Judge Reagan's 
 Theory of Distribution for Texas — Houston Differen- 
 tial — The Water Rate Again — Texas Railroad Com- 
 mission — Weakness of the Common Point System 
 and effects of Decentralization of Distribution — The 
 Emergency Rate and the Texas Commission. (6) 
 The Pacific Coast and Trans-Continental Traffic — 
 Exports to the Orient — General Character of Trade 
 with the East — Clipper Ships and Trans-Continental 
 Rates — Effect of Mode of Transportation on Mer- 
 chants' Stocks — Development of the Trans-Conti- 
 nental Rate — Back Traffic in Fruits, Fish and Lumber 
 — The Interstate Commerce Commission and the Lum- 
 ber Rate — Inter-Regional Traffic — Regional Gateways 
 and Proportional Rates 67 
 
 CHAPTER VIII 
 
 Commodity Rate Structures 
 
 (i) Grain and Grain Products — Export Trade and the 
 Through Rate-^Attitude of Boston and the Differen- 
 tials — Duluth in the Grain Trade — Competition for 
 Back Traffic in Wheat — Grain Export by the Gulf and 
 Resulting Rate War — ^The Gulf Ports Differential — 
 Flour Rates. (2) Livestock and Dressed Meats Rates 
 — Transportation " on the hoof " and the Cattle Rate 
 — Rates on Livestock and Packing House Products. 
 (3) Cotton — Development of Cotton Milling and 
 Elimination of Excessive Rates — Texas Rates — Com- 
 pressing in Transit and the Compress Fee. (4) 
 Lumber — Shifting Rates due to Shifting Sources of 
 Supply — Effect on Manufactures. (5) Types of Com- 
 modity Rate Structures — Adjustment Necessary be- 
 tween Production and Consumption — Difficulties of this 
 Adjustment Illustrated by Coal, Brick, Glass, Cement. 
 Import and Export Traffic — Through Rates — Insta- 
 bility of Steamship Rates — Ruling of Interstate Com- 
 merce Commission 117 
 
 CHAPTER IX 
 
 Early Tariffs and Classifications 
 
 The Wagon Toll the First Basis of the Railway Rate-r 
 Rates in the South Carolina and Georgia Charters — 
 The "Distance" Tariff— Bulk and Weight Merged in 
 Classifications — Classification in South Carolina, 1855 — 
 Diversified Manufacture Separates Tariff and Classifi- 
 cation — Freight Charges Finally Based on Weight, 
 According to Class — ^Carload Rates 148 
 
 CHAPTER X 
 
 Early Rivalries and the Beginning of Through 
 Service 
 Modification of the Distance Tariff— Introduction of the 
 
viii Contents 
 
 PAGE 
 
 " Basing Point " — Military and Postal Necessities Pave 
 the Way for Interstate Traffic — Removal of State 
 Restrictions and Allowing Act of 1866 — Development 
 of Fast Freight Lines and General Through Traffic . 156 
 
 CHAPTER XI 
 
 Rate Wars and Traffic Agreements 
 
 Water-Forced Rates — Multiplicity of Junctions — Excess of 
 Transportation Facilities — Competition for Traffic — 
 Resulting Rate Wars — Growth of Rebating — Pooling 
 Traffic — Adoption of the Trunk Line Percentage 
 System — Beneficial Effects of the Traffic Associations 
 — Freight Rate Structures Given Form by Develop- 
 ment of Freight Traffic 165 
 
 CHAPTER XII 
 
 Secondary Freight Services 
 
 Switching — Spurs — " Belt " Lines — Lighters — Private In- 
 dustrial Tracks — Tap Lines — Elevation and Warehous- 
 ing — Special Equipment Cars — Private Car Companies 
 — Refrigerator Cars — Icing — Palace — Livestock Cars — 
 Tank Cars — Coal Gondolas — Mileage on Private Cars 174 
 
 CHAPTER XIII 
 
 Incidental Developments of the Freight Service 
 
 Bill of Lading, Ordinary and at Carrier's Liability — De- 
 murrage — " Reciprocal Demurrage " — Track Storage 
 Charge — Reconsignment — Diversion en route — Milling 
 in Transit — Carload and less than Carload Rates — 
 Effect of Enlargement of Freight Cars — Rate Basis 
 Established on the Hundredweight — The " Spread " in 
 the Carload Rate — Increase in number of Carload 
 Ratings — Resulting Decentralization of Distribution — 
 Increase in " Jobbing " — Origin of the Chain Stores . 188 
 
 CHAPTER XIV 
 
 The Freight Traffic Department of Railroad 
 Administration 
 
 Association of General Freight Agents — Freight Solicitors 
 and Rate-Cutting — Freight Traffic Managers — Indus- 
 trial Agents — Pernicious Legislation — Healthy Effect 
 of Law Against Rebates, Passes, etc. — Freight Officers 
 and Extension of Markets — The Claim Agent — ^Joint 
 Weighing and Inspection — Bureau of Explosives . . 206 
 
Contents « 
 
 CHAPTER XV 
 The Basis for the Transportation Charge 
 
 PAGE 
 
 Primitive Tolls, for Use of Road and Motive Power — ■ 
 Cost of Roadway and Maintenance — Of Equipment 
 and Administration — Consumption of Fuel, etc. — Cost 
 of Transportation — The Ton Mile — Heterogeneity of 
 Freight Traffic — The Classification Basis — Experi- 
 mental Rates — Raw Material Rates for Back Traffic — 
 " What the Traffic will Bear " — Relation of Capitaliza- 
 tion to Rates — The Cape Cod Ship Canal Project as 
 Illustrative — Current Valuation and Rates .... 216 
 
 CHAPTER XVI 
 
 Public Sentiment and Legislation to 1887 
 
 The Passing of the Canal — Encouragement of the Railroads 
 — Early Traffic Small in Volume and Variety — Evils 
 of too Rapid Construction^Rate-Cutting and General 
 Business — Progress Toward Uniformity of Rates — 
 Long and Short Haul Rates — The Granger Laws — 
 The Birth of the Railroad Commission — Interstate 
 Commerce Demands Federal Supervision — The Cul- 
 lom Report — The Interstate Commerce Law, 1887 . 235 
 
 CHAPTER XVII 
 
 The Interpretation of the Interstate Commerce 
 Law 
 
 Provisions of the Law — Proscription of Pooling — Selig- 
 man's Prophecy of Railroad Amalgamation — The In- 
 terstate Commerce Commission and the Long and 
 Short Haul — The Supreme Court and the Commis- 
 sion's Ruling in the Summerville Hay and Danville 
 Cases — The Import Rate Decision — The Freight 
 Bureau Cases — The Rate-Making Power — Judge Cooley 
 on Large and Small Shipment Rates — Failure of the 
 Commission to Abolish Rebates 250 
 
 CHAPTER XVIII 
 
 Further Development in Public Sentiment and 
 Legislation 
 
 The " Midnight " Tariff — Traffic Agreements — Advantages 
 of Pooling and the Evils of Unrestrained Competition 
 — The Anti-Trust Law — Dissolution of the Trans- 
 Missouri Freight Association — Procedure of the Joint 
 Traffic Associations — The Elkins Act, 1903. Effect of 
 Panic of 1893 on the Railroads— The Unpreparedness 
 
X Contents 
 
 FAOE 
 
 for Demands of Sudden Prosperity of 1899— Amalga- 
 mation of Railroads — " Community of Interests " — 
 Cassatt Employs this Agency in Abolishing Rebates 
 — The Carnegie Steel Co. and the Pennsylvania Lines 
 — Renewed Prosperity and Congestion of Traffic — 
 Improper Use of Freight Cars a Primary Cause — In- 
 creasing Revenues of the Railroads and the Senate 
 Investigation 261 
 
 CHAPTER XIX 
 
 Public^Sentiment and the Hepburn Bill 
 
 Reviev^ of Cases Before Interstate Commerce Commission 
 — Prominence Given Rates in Senate Doc. 257, 1904 — 
 The Esch-Townsend Bill — The Hepburn Bill — Its Pro- 
 visions — The Commission and the Rate-Making Power 
 — Complaints to Commission Based on Hepburn Bill — 
 Classification of Hay — Grouping of Cases and Decisions 
 of Commission — Brick Rates — Emergency Coal Rate 
 and Indiana Commission — Oil Rates — Car Distribution, 
 Bituminous Coal, Citrus Fruits — Switching Charges 
 and Elevator Service — Carload Rates — Community 
 Complaints — Review of Number and Character of 
 Complaints 275 
 
 CHAPTER XX 
 
 The Influence of the Commission Toward 
 Uniformity of Procedure 
 
 Accounting Systems — Association of American Railway Ac- 
 counting Officers — The Statistical Difficulty in Uniform 
 Accounts — Uniformity of Classification — The Official, 
 Southern and Western Classifications — Efforts Toward 
 a Practical Uniform Classification — State Classifica- 
 tions — Federal versus State Rate Regulation — Develop- 
 ment of Interstate Traffic and the Freight Rate Struc- 
 tures — The Correlation of Rates — Local Interests and 
 Interstate Rates — Conflicts Between State and Federal 
 Authority .... .... ... 301 
 
 CHAPTER XXI 
 
 Traffic Experts in the Employ of Shippers 
 
 Development of the Intermediary — Far-Reaching Effects 
 of a Rate Change — Sensitiveness of Rates on Com- 
 modities — Necessity for Specialization in _ Rates Af- 
 fecting a Corporation or Firm — City Freight Traffic 
 Bureaus — Traffic Representatives, Good and Bad — Im- 
 proper Exploitation of " Paper " Rates — Railroad En- 
 couragement of the Expert Traffic Representative^ 
 Traffic Clubs— Beneficial Effects in Service . . . 314 
 
Contents xi 
 
 CHAPTER XXII 
 The Commerce of the Cities 
 
 PAGE 
 
 Production, Consumption, and Distribution in Cities Af- 
 fected by Rates — North Atlantic Seaboard, Boston — 
 Buffalo — Pittsburg— Cleveland and Columbus— South- 
 eastern Rates Complaint — Cincinnati — Louisville — Chi- 
 cago — St. Louis— Kansas City— St. Paul and Minne- 
 apolis — Denver — Helena and Butte— the South and 
 Southeast, Richmond, Charleston, Memphis, Mont- 
 gomery, Mobile, and New Orleans— Oklahoma — 
 Texas, Dallas, Ft. Worth, Galveston— Pacific Coast, 
 San Francisco, Spokane — The Situation at Indian- 
 apolis 325 
 
 CHAPTER XXIII 
 
 A Comparison of the Railroads with the Agri- 
 cultural AND Manufacturing Industries 
 
 Capital, Profits, Expenditures Compared in Agriculture, 
 Manufactures and Railroads — Wages Similarly Com- 
 pared 374 
 
 CHAPTER XXIV 
 
 The Progressive Achievement of the Railroads 
 
 Operating Revenues, Expenses, and Income of Railroads — 
 Capitalization — Mileage and Equipment — Traffic — 
 Ratios of Increase, 1875 to 1905 — Intensive Growth — 
 Progressive Efficiency — Over-capitalization and the 
 Interstate Commerce Commission's Report on Inter- 
 corporate Relationships — Traffic Conditions as Ex- 
 planatory of Popular^ Criticism — Problems in Demand 
 of Future for Increase of Facilities — Probable In- 
 crease in Capitalization .... 384 
 
 CHAPTER XXV 
 
 Conclusion 
 
 Lack of Precedent in Construction of Freight Rates — 
 The Freight Rate Structure Complicated by Multi- 
 plicity of Products and Manufacture — The Competition 
 for Capital — Rate Criticism Coincident with Inter- 
 state Traffic — Complaints of Conditions, 1886 and at 
 Present — The Existing Freight Rate Structure a 
 Resultant of Needs of Industry and Commerce . . 397 
 
CHAPTER I 
 INTRODUCTORY 
 
 As we are told, even in the schoolbooks used by chil- 
 dren, our present civilization could not have been at- 
 tained except through the division of labor. In the typi- 
 cal early community the tailor made the clothes, the 
 carpenter built the house, and the smith fashioned the 
 tools, each with his own hands from material obtained 
 near by. Each exchanged his handiwork for the prod- 
 uct of the other and with the farmer for the product 
 of the soil. In time, perhaps, the tailor, the carpenter, the 
 smith, the other artisans of the community, and, likewise, 
 the farmer, enlisted the help of one or more apprentices, 
 or wage workers, as the case might be. Then it was not a 
 simple exchange of the direct handiwork of one workman 
 for the direct handiwork of another. The men employed 
 by each artisan had to be supplied with portions of the 
 products of the others. At a later stage the material used 
 by different crafts was brought from distant places, often 
 passing through more than one process before reaching 
 the artisan who wrought it into its final form. 
 
 The development of these processes has resulted in 
 the industry and commerce of to-day. The food, the 
 clothing, the implements, the buildings, of every com- 
 munity are of material that may have been brought frbm 
 the field or mine or forest within a dozen miles, or it may 
 have been conveyed a thousand or two thousand miles or 
 more. It therefore follows that there must not only 
 be mechanism for carrying raw material from the source 
 of supply to the various places where, through various 
 processes, it is finally wrought into ultimate form, but 
 there must be mechanism for conveying these finished 
 
2 Railroad Freight Rates 
 
 products to the widespread communities where they are 
 consumed. 
 
 Broadly speaking, the processes through which material 
 passes from the source of supply into the finished prod- 
 uct are those of industry; and the processes through 
 which the finished product passes into the hands of the 
 consumer are those of commerce. There is, of course, 
 much buying and selling of material as it is transformed 
 from one phase of manufacture to another, and, there- 
 fore, the function of the merchant is still prominent in 
 industry, but this is apart from distribution to the final 
 consumer. 
 
 Throughout all industry and all commerce the func- 
 tion of transportation is conspicuous. Products may 
 be carried by dray or wagon for short distances from 
 the field, or merchandise of various kinds to and from 
 the factory, the warehouse or the retail store, and cer- 
 tain of the waterways take part in this function ; but the 
 overwhelmingly preponderating transportation agency in 
 this country is the railroad. The railroads carry raw 
 material from farm and forest and mine to the places of 
 concentration, to the places of preparatory process, to 
 the places of intermediate process, to the places of final 
 process. They carry products from these places of final 
 process to the warehouses in the great distributing cen- 
 ters, to the storehouses in the smaller cities and towns, 
 to the shops of the retail merchants, and, in no inconsider- 
 able degree, to the homes wherein they are used and 
 consumed. 
 
 Entering thus into every process of every industry, 
 and into every process of distribution, the transportation 
 function affects every person who is concerned either in 
 the production or the consumption of any commodity of 
 industry, of any article of commerce. That is, it affects 
 the entire population. The charge for transportation en- 
 ters into the cost of production of every article; the 
 charge for transportation enters into the cost of distribu- 
 tion of every article. 
 
 A survey of the effect which the charges for trans- 
 
Introductory 3 
 
 portation have upon the various industries and the varied 
 commerce of this country must, therefore, include a 
 study of the extent to which they further or hinder the 
 movement of the materials and the products of industry ; 
 of the extent to which they advance or retard the prog- 
 ress of commerce. Those immediately engaged in indus- 
 try are the producers of raw material — the owners of 
 and workers in the fields, the forests and the mines, the 
 owners of and workers in the factories and the mills ; 
 those immediately engaged in distribution are the own- 
 ers and salesmen of the mills and factories, the wholesale 
 merchants and their employees, the retail merchants and 
 their employees. As every farmer and farm-hand di- 
 rectly or indirectly consumes the products of mill and 
 factory, and every manufacturer and worker in mill and 
 factory consumes the products of the farm, and so on 
 throughout industry and commerce, every producer is a 
 consumer and every consumer is a producer. The work- 
 ers in the arts and the professions, while not engaged in 
 material production, consume material products. 
 
 It is also necessary to consider the effect of the trans- 
 portation charge upon the maintenance of the railways 
 and upon their capacity for extension and enlargement 
 to meet the needs of the industry and commerce of the 
 future. The railroads must adequately perform their 
 part as an integral factor in the material activities of 
 the nation, and they must receive the consideration and 
 the support which will enable them adequately to perform 
 that part. 
 
 As the first subject to be considered is the relation 
 which the railroads bear to the movement of commodities, 
 there must be a clear comprehension of that movement 
 and the directions which it takes. 
 
CHAPTER II 
 THE CHANNELS OF TRAFFIC 
 
 The colonists who settled on the Atlantic seaboard 
 were dependent for many generations upon the father- 
 land for all manufactured articles except the crudest 
 handiwork. The commerce which slowly developed was 
 in the products of agriculture taken by wagon or by 
 stage to the seaboard to be sent to Europe by the sailing 
 vessels, which, in return, brought fabrics, firearms, house- 
 hold utensils and even brick and other building material. 
 The more important settlements were naturally, there- 
 fore, on the harbors, Boston, New York, Philadelphia, 
 Baltimore, Richmond, Wilmington, Charleston, Savan- 
 nah. Even until the time of the Revolution there was 
 very little commerce between one colony and another, 
 but the area from which agricultural products were re- 
 ceived for export and throughout which manufactures 
 from Europe were distributed increased as the pioneers 
 fought their way into the interior. During later years, 
 as they penetrated beyond the mountains, at places nat- 
 urally adapted to become bases of supplies, arose clusters 
 of cabins that formed the nuclei of the present cities of 
 Buffalo, Cleveland, Detroit, Milwaukee, and Chicago, on 
 the Lakes; of Pittsburg, Cincinnati, Louisville, St. 
 Louis, St. Paul, and Memphis, on the rivers; Mobile, 
 New Orleans, and Galveston, on the Gulf; of Los 
 Angeles, San Francisco, and Portland, on the Pacific. 
 
 The domestic tranquillity and solidarity of interest 
 brought about by the Revolution gave a stimulus to do- 
 mestic manufacture and to the interchange of products 
 between the colonies. Although this was enhanced by 
 the War of 1812, and it was recognized that there was 
 need of an extension and enlargement of the means of 
 
 4 
 
The Channels of Traffic 5 
 
 communication between the Atlantic seaboard and the 
 interior, the situation had not greatly changed within 
 the dozen years that elapsed before the time when ex- 
 periments were made with the building of roads of rails. 
 The first railroads led from the seaports into the interior 
 for but short distances, but they extended the area tribu- 
 tary to each seaport, bringing products of the soil over 
 greater distances to the seaboard, and furnishing a regu- 
 lar and certain means by which the residents of the 
 interior could obtain the supplies which they did not 
 produce. That is, an early result of the building of the 
 railroads was a furthering of the division of labor, the 
 residents of the towns giving less attention to the grow- 
 ing of food, and the farmers not being obliged to turn 
 their hands to the making of so many things. 
 
 The period from 1830 to i860 was one of contest be- 
 tween the railroads and between the canals which had 
 been built largely by aid of the various States. Toward 
 the close of this era the superior efficiency of the rail- 
 roads was generally recognized, and the canals, with but 
 few exceptions, gradually lapsed into disuse. 
 
 The railroads that had been built westward from 
 Massachusetts Bay extended through Massachusetts and 
 Connecticut to Albany and to New York. Lines from 
 New York had extended to Buffalo ; from Philadelphia 
 to Pittsburg; from Baltimore to the Ohio River. By 
 the time of the Civil War certain of these railroads had 
 reached Chicago, St. Louis, and Cincinnati, and from 
 these cities other lines had been built radiating, not only 
 throughout the interior States, but reaching toward the 
 West and South, the Northwest and the Southwest. The 
 lines from the ports on the South Atlantic and on the 
 Gulf had penetrated to junctions at various places in the 
 southern interior. There was direct communication by 
 rail between Chicago and New Orleans, and lines of 
 rails extended from the Gulf toward the interior of 
 Texas. Along these various routes traffic had increased 
 both in volume and in diversity. 
 The Civil War, interrupting the industry and commerce 
 
6 Railroad Freight Rates 
 
 of the country in general, naturally brought a cessation 
 in railroad building. Immediately after its close, how- 
 ever, construction was resumed and railroads were 
 rapidly extended. They wound a network over New 
 England, the North Atlantic and the Middle States: 
 they stretched farther into the West, sending out 
 branches that covered the region from Missouri and 
 Kansas to Minnesota and the Dakotas ; they reached 
 down into Texas from St. Louis. In 1869 was driven 
 the golden spike that marked the completion of the first 
 through rail route from the Missouri River to the Pa- 
 cific Coast. The railroads of the States south of the 
 Ohio and east of the Mississippi Rivers had resumed 
 active operation and were also iDcing extended, although 
 less rapidly than in the North. 
 
 Every section of the country was thus connected by 
 rail with every other section and the main channels of 
 traffic were then outlined. In the last forty years rail- 
 road building east of the Missouri River has been inten- 
 sive rather than extensive ; sections that theretofore were 
 not supplied with railroads have now been traversed by 
 these agencies until it is an exceptional State of which 
 every county is not crossed by one or more lines. Instead 
 of one rail route to the Pacific Coast there are now 
 half a dozen, and cross lines are gradually extending 
 over vast areas of a once barren West that irrigation has 
 coaxed into fertility. 
 
 The stimulus to manufacture given by the Revolution 
 naturally made Boston the early industrial center. The 
 commercial currents set in motion by the exchange of 
 the handiwork of the domestic artisans for the products 
 of the soil deepened the traffic channels already grooved 
 by the barter through the seaports of the products of 
 the soil for the manufactures of Europe. A pronounced 
 step in this development occurred many years later when 
 the building of railroads throughout the Ohio and Mis- 
 sissippi Valleys led to grain from those regions being 
 brought to the East in exchange for the diversified manu- 
 factures of industrial centers that increased in the North 
 
The Channels of Traffic 7 
 
 Atlantic States. This exchange of food products for 
 manufactured products is the primary force that has 
 eroded the traffic channels of to-day. This force, mani- 
 fested in diverse ways, has led to a multiplying and rami- 
 fying of the channels. Foods of various kinds are 
 brought from remote sources of supply to widespread 
 markets. Raw material of one kind may be obtained at 
 the factory's door, while another must be brought from 
 across the continent. As the population has spread' 
 throughout the country, the industrial area has extended, 
 certain manufactures tending to segregate at a feW' 
 centers, while others have become more widely diffused. 
 Central and southern New England, southern New 
 York, eastern Pennsylvania, and northern New Jersey,; 
 are still the principal places of manufacture of the finer 
 fabrics and articles of apparel, of carpets, rugs and vari- 
 ous wares, of the smaller tools and more delicate bits 
 of mechanism, and of countless articles of personal use 
 and adornment. From this region this merchandise flows 
 not only to the communities of the New England and 
 North Atlantic States, but throughout the interior, the 
 South, the Northwest, the West and Southwest, and up 
 and down the Pacific Coast. This merchandise goes 
 through Buffalo or Pittsburg to the interior States of 
 Ohio, Indiana, Illinois, and Michigan, and by way of 
 Chicago or St. Louis to the valleys of the Mississippi 
 and the Missouri. It goes over the rail lines that extend 
 from the Northern Atlantic seaports throughout the South 
 and is also carried to this region by the coastwise steam- 
 ers that connect at the South Altantic and Gulf ports 
 with the railroads leading from these ports into the in- 
 terior. This merchandise goes by rail to the ports on 
 Lake Erie, thence by vessel to the head of the Lakes, 
 and thence by rail throughout Minnesota, the Dakotas, 
 Montana and Wyoming; or, it may go to this section 
 over the all-rail routes via Chicago or St. Louis or 
 through Canada. To the region between the Missouri 
 River and the Rocky Mountains that lies to the south of 
 these States this merchandise may go by all-rail routes 
 
8 Railroad Freight Rates 
 
 via Chicago or St. Louis; or via coastwise vessels to 
 Norfolk, Newport News, Savannah, New Orleans, or 
 Galveston, and thence by rail. To the Pacific Coast 
 this merchandise may go over the rail lines through 
 Canada, by way of St. Paul, or Chicago, or St. Louis, or 
 Memphis; or it may go by vessel to Norfolk, Newport 
 News, Savannah, or New Orleans, or Galveston and 
 thence by rail ; or it may go by vessel to Tehuantepec or 
 Colon, thence by rail across Mexico or Panama, and by 
 vessel up the Pacific Coast; or it may go by vessel over 
 the entire route through the Straits of Magellan, or* 
 around Cape Horn. This merchandise not only may go 
 from the Atlantic seaboard to these various regions via 
 any one of these routes, but it does go in large vol- 
 ume over every one of them; except that the all- 
 water route around the Cape to the Pacific Coast is fall- 
 ing into disuse. 
 
 In reverse direction the grain and grain products of 
 the Mississippi Valley flow throughout the East and 
 Southeast. From the Dakotas and Minnesota they go to 
 the East, either entirely by rail, or across Lake Michigan 
 by car ferry; or via Duluth and vessel to the Lake 
 Erie ports, and thence by way of the railroads or 
 by way of the Erie Canal. From Nebraska, Kan- 
 sas, Iowa, Missouri, Wisconsin, these products move 
 by way of Chicago or St. Louis ; from the region south 
 of Kansas by way of St. Louis, Galveston or Memphis 
 or New Orleans. Livestock and meat products move to 
 the East and the Southeast, over the same all-rail routes 
 as the grain, from the ranches and farms that reach on 
 the north to the Dakotas and on the south to Texas. 
 This does not mean that all of the grain and all of the 
 meat come from this western interior. Wheat is raised 
 in nearly every State, and corn in many of the States of 
 the Union, but in quantities that, except in these surplus 
 grain-growing States in the Mississippi and Missouri 
 Valleys, are usually not more than adequate for home 
 consumption ; and so, also, with cattle and hogs. 
 
 Those who Hve on the farms, in the villages, and in 
 
The Channels of Traffic 9 
 
 nearly all of the smaller cities and towns, obtain butter, 
 eggs, milk, cheese and chickens from near by. But the 
 growth of the larger cities has compelled their inhabi- 
 tants to draw upon more remote sources for these foods 
 which, in commercial parlance, are known as dairy prod- 
 ucts. Eggs are shipped in carloads from as far as Texas 
 and Arkansas on the south and the Dakotas and Minne- 
 sota on the north, from Wisconsin, Tennessee and the 
 Middle States to St. Louis, Chicago, Pittsburg, and the 
 populous seaboard. Butter, cheese and chickens come 
 from an area almost as extended. These products, of 
 course, are supplemented by the surplus production of 
 near-by farms. The larger cities draw milk from con- 
 siderable distances, the milk trains that supply New York 
 starting as far as four hundred and even four hundred 
 and fifty miles from that city. 
 
 The concentration of population in the large cities 
 has also necessitated the going far afield for fruits and 
 vegetables, and therefore has led to the production of 
 these edibles on a large scale on truck farms and in or- 
 chards. The populous region from Boston to Washing- 
 ton obtains vegetables, not only from near-by gardens, 
 but from great truck farms in western New York, east- 
 ern Maryland and southward along the Atlantic Coast 
 to Florida. From the Southeast and from the lands along 
 the Gulf, and even from Utah and California, vegeta- 
 bles and melons are sent in the spring to Pitts- 
 burg, Chicago, and St. Louis; while in the autumn this 
 southern region obtains vegetables from Wisconsin, 
 Michigan, and other parts of the North and from Cali- 
 fornia. Akin to this widely originating and widely 
 circulating traffic is that in berries, peaches, apples, and 
 oranges. 
 
 Seafood enters largely into the traffic of the railroads. 
 Special fish-trains are run on express time daily from 
 Boston to New York, from New York to Philadelphia; 
 fish- and oyster-trains from Philadelphia and Baltimore 
 to Pittsburg, Cincinnati, and Chicago. Fish is also car- 
 ried from the ports of the Southern Atlantic States into 
 
10 Railroad Freight Rates 
 
 the interior, and from New Orleans to St. Louis and 
 Chicago. Special trains with halibut and salmon run 
 directly through from the fisheries in the far Northwest 
 to the Atlantic seaboard. 
 
 The great source of supply of the raw material of 
 leather is naturally identical with the cattle-raising re- 
 gion of the West. The hides from the great packing 
 houses and from other places of slaughter throughout 
 the States are sent to the tanneries, of which the greater 
 number are in the East, although a few in recent years 
 have been built in the Middle West and in California. 
 The greater portion of our wool is clipped from the 
 sheep that graze to the east of the Rocky Mountains, 
 but large quantities also come from Wyoming, Utah, 
 Idaho, Oregon, Nevada, and California. It is sent to 
 scouring and carding mills in the East and woven in the 
 looms of the North Atlantic seaboard. 
 
 Seventy-five per cent, or more of the cotton, — the 
 raw material that forms the basis of by far the greater 
 part of the clothing worn by the men, the women, and 
 the children of every civiHzed nation, — is grown in the 
 States of the South. It moves from the plantations by 
 rail to the mills of Alabama, Georgia, and the Carolinas, 
 to the mills of the North Atlantic seaboard, and through 
 the ports of the South Atlantic and the Gulf also to the 
 markets of New England and to those of Europe. From 
 Texas and Oklahoma quantities are shipped as well to 
 the Pacific Coast and to the Orient. 
 
 Conspicuous channels of traffic are those of iron ore 
 from the mines along Lake Superior by lake vessel to 
 the furnaces near Chicago; and by lake vessel to the 
 ports of Lake Erie, whence it is carried by rail to the 
 furnaces of southern and eastern Ohio, northern West 
 Virginia, Pennsylvania and western New York. The 
 pig-iron into which the ore is converted at these fur- 
 naces is taken to adjacent mills, where it is transformed 
 into rails, beams, and angles that go to all parts of the 
 United States, and into iron and steel ingots, blooms. 
 
The Channels of Traffic ii 
 
 bars, billets, and sheets that are manufactured into ma- 
 chinery, the smaller tools and countless devices. In Colo- 
 rado are iron and steel mills that obtain ore from the 
 Wyoming and Lake Superior mines, their products find- 
 ing markets principally in the West. Mills in Alabama 
 utilize the ores and coal of the South in the fashioning 
 of products that penetrate the South and even to the 
 north of the Ohio River. 
 
 Before the invention of the modern blast furnace and 
 of the processes that have so radically cheapened the 
 manufacture of steel, virood was, even to a greater degree 
 than at present, an indispensable and all-pervading sub- 
 stance of general use. As the forests of New England 
 and the East were cut away, this region was supplied 
 with lumber that was brought down the Lakes and from 
 Canada to Buffalo. Then the furniture factories mi- 
 grated to the vicinity of the Michigan forests, and fac- 
 tories for the manufacture of wagons and other vehicles, 
 agricultural implements, and the various kinds of wood- 
 enware, sprang up in Ohio, Indiana, and Illinois, which 
 remain to-day the principal seats of this manufacture, 
 whence these products radiate throughout the entire 
 country. Michigan is still the leading center for the 
 manufacture of the finer furniture, but excellent grades 
 are made in Chicago, St. Louis, and other places in these 
 interior States, and furniture factories are prospering in 
 the Carolinas and other parts of the South. The lumber 
 used in the Middle States is, however, no longer secured 
 from adjacent forests, for they have been cut down and 
 wasted by flood and fire. Yellow pine is now obtained 
 from the South and the Southwest; pine, fir, and hem- 
 lock from California and the far Northwest between the 
 Rocky Mountains and the Pacific Ocean. 
 
 Other commodities that are conspicuous in transpor- 
 tation have various sources of origin and radiate through 
 divers channels to places of need. 
 
 From the Rocky Mountains, — from Utah and Nevada, 
 Oregon, and New Mexico, — from the northern to the 
 
12 Railroad Freight Rates 
 
 southern national boundary, come the greater portion of 
 the lead, copper, and silver that are wrought into the 
 familiar forms of daily use. 
 
 Material, other than iron and steel, that is used in 
 building and other heavy construction is secured ordi- 
 narily in the vicinity of the various places of use. There 
 are brick kilns and lime and cement kilns adjacent to 
 every large city. The finer kinds of brick and of cement, 
 however, are marketed within radii that extend for hun- 
 dreds of miles from the places of manufacture, moving, 
 for example, from the Missouri River even to the Pacific 
 Coast. 
 
 What the age of electricity may yet have in store no 
 one can tell, but everyone knows that steam has been the 
 source of the power most used by man during the past 
 one hundred years, and that it is coal that has generated 
 steam. The abounding prosperity of the United States 
 is due to no other one cause so much as to its plentiful 
 supply of coal. Hundreds of thousands of acres of this 
 fuel underlie the lands on either side of the Appalachian 
 range almost continuously from the southern borders 
 of New York to central Alabama. There are coal fields 
 in eastern and southern Ohio, central Michigan, south- 
 em Indiana, central and southern Illinois, in parts of 
 Kentucky, Tennessee, Alabama, Iowa, Missouri, Kansas, 
 Oklahoma, Washington, Colorado, Wyoming, Utah, Ari- 
 zona, and New Mexico. There are but few cities of 
 prime importance east of the Missouri River that are not 
 within two or three hundred miles of a coal field. Many 
 of them have coal mines at their portals, and a great 
 many have the choice of coal of different grades from 
 different fields. 
 
 Although this oncoming era of electricity has largely 
 displaced oil as an illuminant in practically all of the 
 cities and many of the towns, there are still countless 
 thousands of homes in these cities and towns, as well as 
 in the villages and on the farms, in which the day is 
 prolonged by the burning of the petroleum-saturated 
 wick. Thousands of gallons of petroleum oil are used 
 
The Channels of Traffic 13 
 
 daily to lubricate valve and gear and journal, and it 
 serves many other purposes in the industries and in the 
 arts. Crude oil, that is, the mineral, as it flows from the 
 well, is found in western Pennsylvania, Virginia, and 
 Ohio, in Kansas, Oklahoma, and Texas. It is transported 
 principally through underground pipes to the refineries, 
 whence it is distributed by rail. 
 
 This catalogue-like array gives but a broad indication 
 of where the principal products of general use and con- 
 sumption have their origin, and whither they are taken. 
 There has been no word as to coffee, which is imported 
 through San Francisco, New Orleans, and New York, 
 and thence distributed throughout the United States; of 
 cane sugar, which likewise radiates chiefly from San 
 Francisco, New Orleans, and New York ; of beet sugar, 
 which is distributed from Colorado, California, Utah, and 
 Idaho throughout the Missouri Valley ; of rice, which in 
 largest m.easure now comes from the lowlands of Texas 
 and Louisiana. From the vicinity of every truck farm 
 canned fruits and vegetables flow to wide markets. From 
 Virginia, the Carolinas, Kentucky, and Tennessee, as 
 well as from parts of Pennsylvania and Wisconsin, to- 
 bacco is sent, not only throughout the United States, but 
 over all the world. 
 
 To emphasize a most wonderful achievement mention 
 has been reserved to the last of the flow of deciduous 
 fruits, of citrus fruits, and of dried and canned fruits, 
 from California. Train-loads of peaches, apples, pears, 
 and plums, oranges and lem.ons, go from the orchards, 
 fields and groves of this rare land of fruits and flowers 
 to distributing centers throughout the country, whence 
 they find their way into every nook and corner of the 
 United States. 
 
 This summary gives no adequate idea of the actual 
 handling of two million freight cars that are in service 
 day in and day out; of the tens of thousands of freight 
 trains that are moving by day and by night, carrying 
 foodstuffs to markets, material to mills and factories, and 
 finished products to warehouses and retail dealers. This 
 
14 Railroad Freight Rates 
 
 is the function of the railroad. Upon its successful per- 
 formance depends the material welfare of the country, 
 and its successful performance in turn rests, upon the 
 prompt and efficient conduct of the processes of agricul- 
 ture, of industry, and commerce, to which some attention 
 must now be given. 
 
CHAPTER III 
 THE PREPARATION OF FOODSTUFFS 
 
 Inasmuch as over one-half of the industrial and com- 
 mercial energy of the civilized world is expended in the 
 provision and preparation of food, reference is here made 
 to various phases of the food supply by way of intro- 
 duction to the service performed by the transportation 
 agencies, the processes of production and the processes of 
 distribution being closely interwoven. 
 
 Bread is the staff of life, and, therefore, the grains 
 doubtless are entitled to first consideration. It is the 
 wheat-grain that contains starch and gluten, the nutri- 
 tious elements that are ground into flour. The larger and 
 the more numerous the grains on the stalk of wheat and 
 the more abundant the stalks to the acre, the more valu- 
 able the farmer's crop. Expert wheat-growers take the 
 trouble to find the individual plants that yield the largest 
 and heaviest grains and use these for seed. In the agri- 
 cultural colleges and schools of the West new varieties 
 are being bred by the cross-fertilization of the wheat 
 blossoms. This delicate operation consists in the careful 
 removal of the stamens from the wheat flower and the 
 dusting or brushing of the pollen from another plant 
 upon its pistils. Durum wheat, a variety with a hard 
 grain that grows in the hot, dry regions of Russia, has 
 been introduced into this country, making productive 
 the semi-arid belt to the east of the Rocky Mountains. 
 It is especially adapted to the manufacture of macaroni, 
 of which there is a growing consumption, and is largely 
 exported. Both with oats and with barley experiments 
 have also been made in cross-fertilization. 
 
 Although the com crop is more important than that 
 of wheat, less than twenty-five per cent, of the corn is 
 shipped out of the county where it is grown; that is, 
 it is not shipped out as corn : transformed into beef and 
 
 IS 
 
i6 Railroad Freight Rates 
 
 pork it goes to the ends of the earth. The quality of 
 corn has also been improved by selection. The yield has 
 been increased, the stalks and roots strengthened. It is 
 not the tallest and the most beautiful stalks that produce 
 the best grains : the sturdy stalks of medium height bet- 
 ter support the ears and give them more nutrition. 
 
 The development in the physical handling of the grains 
 is especially marked by the advanced use of machinery. 
 On the largest western farms, some of which are thou- 
 sands of acres in extent, the planting of grain is by plows 
 and drills driven by steam, the harvesting by steam reap- 
 ers and threshers. From the threshers the wheat falls 
 into wagons, which take it to the railroad station, where 
 it is loaded into cars that take it to the great elevators 
 at such primary centers as Omaha, Duluth, Chicago, 
 Kansas City, and St. Louis. At some stage of its trans- 
 portation grain destined for the table is milled. That is, 
 wheat is ground into flour, corn into cornmeal, and other 
 grains pass through similar processes, which become the 
 more complicated in the case of breakfast foods and kin- 
 dred preparations. Many of the modern flour mills have 
 a capacity of a million barrels of flour a year, working 
 with machinery so perfected that the wheat is not touched 
 by hand from the time it is placed in conveyors, which 
 take it to the top of the mill and start it through the 
 first set of rollers, until, after six alternate grindings and 
 boltings, the flour drops into sacks or barrels. The 
 grain of this country is usually transported in bulk; 
 that is, it is loaded directly into cars and vessels without 
 being enclosed in sacks or wrappings. 
 
 The great packing houses of the Middle West are the 
 sources through which is obtained the greater portion 
 of the meat that finds its way to the tables of this meat- 
 eating nation. Beeves can maintain a livelihood without 
 other food than that gotten by grazing, but to be properly 
 fattened for market they need careful attention. This 
 accounts for the fact that cattle by the thousands, after 
 they have grown beyond calfhocd on the Texas ranches, 
 are transported to New Mexico, Colorado, Kansas, Ne- 
 
The Preparation of Foodstuffs 17 
 
 braska, and even to Wyoming and the Dakotas, where 
 they are fed on a mixture of corn, oats, alfalfa, and cot- 
 tonseed. With the development of Texas, however, this 
 end is accomplished on its farms to a greater degree 
 than before, and of late years packing houses have been 
 established within the State. Cattle are also sent by the 
 thousands to be fattened on corn in the " feed lots " of 
 the corn belt, and to the towns near the oil mills where 
 they are nourished on cottonseed products, undue rations 
 of which sometimes make them blind. The quality of 
 beef has been improved by feeding and caring for the 
 cattle on the farms and ranches during the winter instead 
 of allowing them to run wild as formerly, and both by 
 selection and breeding has been developed to a degree of 
 juiciness and of tenderness unknown not many decades 
 ago. 
 
 The transition in the source of the beef supply, that 
 was first marked by the herds of the western grazing 
 grounds supplanting the cattle raised by farmers and sold 
 to the local butcher, would seem to be on the verge of 
 a new phase. The increasing population of the country 
 demands larger crops of grain, and, therefore, vast areas, 
 from Texas to the Dakotas, that have been used as 
 grazing grounds, are being cut up into farms, the culti- 
 vation of grain being more profitable than the raising of 
 cattle. This means that the unoccupied ranches of Mex- 
 ico will be used for grazing to a greater degree, and also 
 a certain reversion to the old-time practice of every 
 farmer raising a few cattle — a hundred or more — as many 
 as he can properly feed and take care of. Indeed, the 
 methods of feeding have been so developed and are so 
 widely understood that even now cattle from Texas are 
 sent for feeding, not only to the areas first named, but 
 to farms as far east as Ohio, where they are fattened 
 and shipped to the packing houses. The advancing cost 
 of corn and other grains is so increasing the cost of 
 feeding that it will be necessary to devise a cheaper diet 
 as well as to utilize new grazing land. Attempts are 
 now being made to restrict the quantity of corn in the 
 
1 8 Railroad Freight Rates 
 
 beeves' ration, its exclusive or excessive use being inju- 
 rious to the health of the animal and to the quality of 
 the meat. The farmers of southwestern Virginia have 
 for many years grown and fattened entirely upon grass 
 some of the choicest beeves known to the market, and 
 the Blue Grass region of Kentucky is almost as fa- 
 mous for the quality of its cattle as for its horses. 
 
 Although we hear far more of beef, it is really the 
 hog that supplies the greater quantity of the meat eaten 
 in this country, either as plain pork or as bacon, ham, or 
 sausage. There is scarcely a farmer, from Maine to 
 California, or from St. Paul to New Orleans, who does 
 not raise hogs as a by-product. They are produced in 
 large numbers in Kentucky, Texas, and Ohio, but the 
 greatest density of the cultivation is in the State of Iowa 
 and the immediately contiguous portions of Illinois, Wis- 
 consin, Nebraska, Kansas, and Missouri. Here the rais- 
 ing of the hog is becoming as much of a science as the 
 raising of a steer. His food is practically the same 
 mixture and as carefully prepared. This greater care has 
 been forced partly by the necessity for avoiding cholera 
 and tuberculosis, which appears to be very prevalent 
 when hogs are allowed to feed on the refuse of the stables 
 and barnyards. It has also been necessary to improve 
 the meat of the hog in order to extend the market for 
 bacon. As it is now, England does not regard American 
 bacon as the finest which reaches her market, paying far 
 lower prices for it than for that received from Ireland 
 and Denmark. It has been ascertained that an exclusive 
 diet of corn is as bad for the hog as for the steer. A 
 regimen of peas, oats, and barley, or of corn mixed with 
 skimmed milk, produces better bacon. This is marked in 
 the products of the San Luis Valley of California, and 
 in many regions of the South where an abundance of 
 vegetables, especially of peas, afford a proper diet. The 
 famous Smithfield hams of Virginia are said to owe their 
 superior quality to the fact that the hogs are fattened on 
 peanuts. 
 
 The sheep of the United States are descended from a 
 
The Preparation of Foodstuffs 19 
 
 flock of Spanish merinos brought to New Mexico in 
 1540, and the sheep of the Western States are still of 
 the merino type, while those grown east of the Missis- 
 sippi River, especially in Ohio and Michigan, are of the 
 English breeds which have been imported within the last 
 twenty-five or thirty years. The greatest number of 
 these animals, however, at this time come from the west- 
 em grazing grounds which they share with the cattle. 
 Like calves, the lambs are permitted to roam on the pas- 
 tures, principally between New Mexico and Colorado, 
 Utah and Idaho, until they have attained a degree of 
 strength, when they are removed to the feeding grounds 
 in Colorado, Nebraska, and Kansas, where they are 
 nourished with a mixture of alfalfa and refuse of the 
 beet. Then they are taken to the Missouri River to be 
 fattened with hay, prior to consignment to packing 
 houses. 
 
 In the great packing houses the carcasses of cattle, 
 hogs, and sheep are whirled through different depart- 
 ments by machinery which disembowels, washes, skins, 
 and cuts them up for the market. When the meat is 
 intended for sale by the butchers, each carcass is cut into 
 two pieces, the " sides," which are hung in the railroad 
 cars. Ham, bacon, and other products are packed in 
 barrels or boxes. 
 
 Of our edible fowl, the wild duck and the wild turkey 
 are indigenous to North America, the name of the latter 
 being due to the fact that Cortez and his followers 
 thought they had rounded India and reached Turkey 
 in Asia. The chicken, the universal fowl, had to be im- 
 ported. The first settlers brought small flocks which, it 
 is to be presumed, multiplied upon the face of the earth, 
 although their descendants have faded into obscurity. 
 When the Brahmas were brought from the Brahma- 
 putra region in India, the Cochins and Langshans from 
 China, the Leghorn from Italy, the Minorcas from the 
 Island of Minorca, the Black Spanish and Andalusians 
 from Spain, the bird with the indefinite name attained 
 high standing in the United States. The barred Ply- 
 
20 Railroad Freight Rates 
 
 mouth Rock is the most popular breed in this country, 
 being prized both for its flesh and its eggs. Great 
 attention of late years has been paid to the feeding of 
 chickens ; an improved method being to scatter a part of 
 their food in straw or hay so that they will have to 
 scratch for it, — exercise being as good for them as for 
 the other bipeds that do not wear feathers. 
 
 In the West, speaking generally, no particular care 
 is given to the feeding and raising of chickens; they 
 are simply allowed to grow. The great packing houses 
 tried in vain to enlist the interest of the farmers in im- 
 proved methods, and finally were obliged to establish 
 poultry fattening stations where they prepare for market 
 chickens bought from the farmers. These are the choice 
 fowl which, in exception to American poultry in gen- 
 eral, can be marketed abroad. The truth is, that 
 although each of the varieties has been developed by 
 breeding and selection until everyone of them is superior 
 to the fowl of the same family in the country of its 
 ancestry, America is not, as yet, in the front rank as 
 a producer of table poultry. The statement of King 
 Edward's poulterer that our best hotels tolerate poultry 
 which would not be accepted in the establishments of 
 epicurean resort in Europe is quite correct. 
 
 As a rule the poultry of the market has been killed 
 and dressed by the packing houses which buy it from 
 the farmer, who no longer kills and dresses it himself, — 
 a conspicuous exception being in southern New Jersey, 
 where the old custom of farm preparation still prevails. 
 From the great ranches of Texas, where they are raised 
 by the thousands, turkeys are often driven like cattle 
 to the marketing centers, whence they are taken to the 
 packing houses. 
 
 Chickens, developed for egg production, are carefully 
 selected from the broods of mothers who lay the largest 
 eggs in greatest numbers, a device having been invented 
 that records the weight and measurement of each egg 
 laid by each hen. Foods and methods of feeding have 
 been devised for the production of the richest colored 
 
The Preparation of Foodstuffs 21 
 
 yolks. These developed methods are, however, not gen- 
 erally followed by the farmer, who, moreover, is not al- 
 ways careful to collect eggs promptly. Often they remain 
 in the nests for several days, sometimes for a week or 
 more, and when gathered are well on the way to decay, 
 although they may pass the test at the primary markets. 
 In England, where the henneries are not so widely dis- 
 tributed, each egg is stamped, under the co-operative 
 system adopted by the British producers, with the num- 
 ber of the farmer and the date received from him. It is 
 thus made possible to trace bad eggs to their sources 
 and repeated carelessness is punished by expulsion from 
 the association. A comparatively recent development is 
 the practice of certain large dealers to remove the shells 
 from the eggs, freeze the whites and yolks together, or 
 separately, in cans of one or more gallons, which they 
 keep frozen to be furnished to such bakeries, hotels, and 
 restaurants as may care to buy them for cooking pur- 
 poses. Eggs are probably as little amenable to handling 
 by machinery as anything imaginable, but still there 
 are mechanical devices for testing their quality. They 
 are packed for shipment in light wooden cases, cross 
 lined with pasteboard so that there is an apartment for 
 each egg. 
 
 The butter on the tables of the residents of the larger 
 cities is not now made by the farmer's wife or daughter 
 in the dairy on the farm. In the dairy States a creamery 
 receives the milk from the surrounding farms, and makes 
 butter of uniform grades under modern conditions. The 
 cream is now removed from milk by a machine called a 
 " separator " ; butter is churned and worked into prints 
 by machinery. There is the farmers' co-operative cream- 
 ery, the creamery owned by an individual, and the large 
 corporate creamery, the industry having reached such 
 a development that one factory often produces fifty 
 thousand to seventy-five thousand pounds of butter in 
 one day. Sometimes the cream is taken from the milk 
 at the dairy and the skimmed milk returned to the farmer ; 
 sometimes the cream alone is delivered by the farmer. 
 
22 Railroad Freight Rates 
 
 The raising of fruits and vegetables was once a part 
 of farming in general. The origin of market gardening, 
 the raising of garden truck on small tracts for sale, can- 
 not be traced. It probably arose in the vicinity of each 
 city with the growth of the population of that city. 
 Truck farming, the exclusive raising of the smaller 
 fruits and vegetables on large areas, became conspicuous 
 not more than twenty-five or thirty years ago. It fol- 
 lowed the demand of the enormously increasing popu- 
 lation of the great centers for such food, and was made 
 possible by the coincident development of transportation. 
 The first truck farm region to become conspicuous was 
 that near Norfolk, Virginia, from which the first ship- 
 ments by rail were made in 1885. Truck farming on a 
 large scale has developed in western New York, on Long 
 Island, in New Jersey, on the eastern shore of Maryland, 
 and Virginia, and the extension of the industry has been 
 made picturesque by its expansive inauguration along 
 the Atlantic Coast from Florida northward through the 
 Carolinas. Of recent years the southern portions of 
 Alabama, Mississippi, and Louisiana, and eastern Texas 
 have been devoted to this purpose. Potatoes and cabbage 
 are not grown exclusively on truck farms, but in many 
 States are rotated on the farms with corn, oats, wheat, 
 and clover. 
 
 The seed for onions, lima beans, and many other an- 
 nuals, is now produced principally in California on seed 
 farms in the irrigation land where the growers can bet- 
 ter control the elements than where the weather is 
 spasmodic. Operators of the great truck farms in all 
 parts of the country draw upon these Californian farms 
 for seed. 
 
 The principal tree fruits of the United States, with the 
 exception of the native plum, are descendants of Euro- 
 pean varieties, seedlings having been grown by the early 
 settlers by the thousands. Thus, all of our multiple 
 kinds of apple trees trace their pedigree back to the 
 European wild apple. The American varieties have re- 
 sulted more through accident than design, a seedling 
 
The Preparation of Foodstuffs 23 
 
 here and there developing a juicier fruit or a better 
 flavor which, by careful culture, has been preserved until 
 it has become a fixed type. It was found, for instance, in 
 an early year of the nineteenth century, that a particular 
 apple tree on the farm of Colonel Loami Baldwin, in 
 Massachusetts, yielded unusually palatable apples. Scions 
 cut from that tree and its descendants have been grafted 
 so widely that the Baldwin apple is produced almost 
 wherever there is an apple orchard. Throughout the 
 northern United States this designation of the Baldwin 
 apple, as that of other varieties, does not, however, mean 
 the same thing at all times and in all places. Apples 
 are grown very generally along the Atlantic seaboard 
 from Maine to North Carolina, Georgia, Alabama, and 
 throughout the entire region extending from the Lakes 
 southwestward and westward to the Arkansas and the 
 Missouri Rivers. The production of the States of Arkan- 
 sas and Missouri has in recent years become conspicuous, 
 several of the counties having five hundred thousand 
 trees and over. The finest and most carefully handled 
 apples come from the far Northwest, — from Washington, 
 Oregon, Colorado, and California. These, although they 
 seem to be of widely different origin, have been developed 
 from scions transplanted from the orchards of the East. 
 The Oregon Spitzenburg is the Spitzenburg of Esopus 
 on the Hudson, and the Newtown Pippin of the North- 
 west is the Newtown Pippin of Long Island's colonial 
 days. The drier air of the Rocky Mountain region and 
 the far Northwest develops a firm texture in the fruit, 
 and the growers of these regions take unusual pains to 
 keep the trees free from fungi and insects. The result is 
 that the choicest grades of these apples bring inordinate 
 prices. Shipments are made to the Russian nobility 
 through Vladivostock, to the " crowned heads of Europe," 
 and they are sought by the wealthy of all lands. These 
 apples have brought, by the box at the orchard, as much 
 as fifteen cents apiece, which is equivalent to a retail price 
 in New York of from twenty-five to thirty cents. It 
 is not at all necessary, however, to pay any such price 
 
24 Railroad Freight Rates 
 
 for excellent apples of delicious flavor. Even Spitzen- 
 burgs and the Newtown Pippins often retail from the 
 fruit stands at five cents each, and superior grades of 
 various kinds can be purchased by the quantity for much 
 less. Throughout the summer of 1900 there was a con- 
 tinuous exhibit of American apples at the Paris Expo- 
 sition. Since that time the European demand has steadily 
 increased and has frequently exceeded the supply. In 
 Great Britain, as on the Continent, however, American 
 apples find competition late in the spring with the apples 
 of Tasmania and New Zealand. 
 
 Although the peach originated in China, was taken to 
 Western Asia and to Europe, whence it was brought to 
 the United States, it is significant that the Chinese gov- 
 ernment is obtaining from this country seedlings of 
 peaches and other fruits to investigate the possibility of 
 their propagation in China. Anyone who has visited a 
 chop suey restaurant knows the difference between the 
 little wizened peach of China and the luscious product 
 of our home orchards. Peaches are not nearly as hardy 
 as apples, and do not grow under as great a variety of 
 conditions of soil and climate. They ripen in the Georgia 
 and Texas orchards in June and July; come later from 
 Arkansas, Missouri, Maryland, Delaware and New Jer- 
 sey; in the early autumn from the mountains of West 
 Virginia, from New York State, and Michigan ; and 
 very fine peaches are obtained from California. Peaches 
 in appreciable quantities are also now received in New 
 York from South Africa, where they ripen during what 
 is our winter. 
 
 Our choicer varieties of pears, such as the Bartlett 
 and Flemish Beauty, are mostly of European origin, 
 though some of the very best in quality, such as the 
 Seckel and the Sheldon, have been developed in this 
 country from the European stock. More recently an- 
 other type has been introduced from China and Japan. 
 Pears grow in about the same localities as peaches. 
 
 The plum is an own cousin to the peach, but the most 
 of its several species are much hardier. It grows 
 
The Preparation of Foodstuffs 25 
 
 throughout the temperate belt, and has attained high 
 development on the Pacific Coast. Here certain varieties 
 of the European species are manufactured into prunes 
 that have gained the ascendancy in the markets of this 
 country and are largely exported. 
 
 The grape of our eastern vineyards is conspicuously 
 a fruit for vi^hose successful development the American 
 growers are little indebted to Europe. Although, of 
 course, the grape was known to the Hebrews and the 
 Egyptians, the discoverers of America found it on this 
 continent. There was in later years a determined effort 
 to supplant the native with the European grape, but this 
 failed utterly, our grapes of to-day being descendants 
 of the early American type that triumphed over the 
 European varieties through sheer fitness. The fruit was 
 originally of inferior quality, — widely different from the 
 Catawba, the Concord, the Delaware, and the Niagara 
 grape of to-day, all of which differ from the grapes of 
 Europe. These statements, however, apply only to the 
 grapes that are grown east of the Rocky Mountains. 
 In California the European grape found a congenial 
 home, and its culture has attained marked success. 
 
 The familiar pictures of the darky and the watermelon 
 indicate no recently acquired fondness of the colored race 
 for the refreshing fruit, for we are indebted to Africa 
 for both the fruit and the race, and they have both spread 
 pretty thoroughly over the United States. A generation 
 or so ago we ate muskmelons for two or three months 
 of the summer ; now we have the cantaloup in abundance 
 from April until October. It comes from Florida and 
 California from April until July, from Texas, Georgia, 
 and the Carolinas, during June and July, from Idaho, 
 Utah, and Colorado from the middle of July to the mid- 
 dle of October. A well-known and highly prized variety 
 is the Rocky Ford melon, which comes from Colorado, 
 beginning the latter part of August and continuing until 
 frost. The Rocky Ford is simply the old Netted Gem 
 melon, which was first planted in the Rocky Ford region 
 fifteen or twenty years ago by settlers who wanted to see 
 
26 Railroad Freight Rates 
 
 if melons for their needs could not be raised at home: 
 the soil and climate did the rest. The popularity of the 
 Rocky Ford is now such that Georgia growers go to 
 Colorado for the seed. As the melon has to be annually 
 planted afresh, and in Georgia will retain the Rocky 
 Ford flavor and consistency for but one generation, it is 
 necessary .to obtain the seed anew each year. Therefore, 
 in Colorado, acres and acres are planted for the seed, 
 the melons being fed to hogs and cattle. One acre will 
 produce melons yielding two hundred pounds of seed, 
 and it is not uncommon for one Georgia buyer to take 
 half a ton of seed at a time. As a pound of seed will 
 plant an acre, such a purchase provides seed for one 
 thousand acres. In certain regions of Canada these de- 
 licious melons are literally hand raised and milk fed, an 
 incision being made in the stem, during the period of 
 growth, into which milk is injected. 
 
 The citrus fruits are not native to the United States. 
 It has not been more than thirty or forty years since 
 practically all of the oranges used in this country came 
 from the shores of the Mediterranean. The orange is 
 grown with complete success in Florida, where it was 
 probably brought by the early Spanish explorers, and in 
 California, where it was likely introduced by the mission- 
 aries. The oranges of southern Florida are the sweetest, 
 but the crop of California now largely supplies the mar- 
 ket, the navel orange, which had its origin in some young 
 trees brought under the auspices of the Department of 
 Agriculture from Bahia, Brazil, about 1870, now fur- 
 nishing from eighty-five to ninety per cent, of the annual 
 consurnption. 
 
 The lemon has been propagated from trees obtained 
 from Sicily. It is now produced in California by the 
 hundreds of thousands of dozens per annum, and is ap- 
 parently destined to drive the Sicilian lemon from the 
 American market. The European fruit is still received 
 in quantities at the Atlantic seaports and the dealers of 
 these cities sell it in the interior without a great deal 
 of effort as far as the Alleghany Mountains. The Cali- 
 
The Preparation of Foodstuffs 27 
 
 fornian lemons have the entire field as far east as the 
 Mississippi River. In that portion of the Mississippi 
 Valley which lies between the river and the Alleghany 
 Mountains the citric cousins are at bitter warfare. 
 
 Everyone knows that things that our grandmothers 
 used to put in cans and jars for winter use are now pre- 
 served by the large canning establishments, some of 
 which own farms of from five thousand to eight thou- 
 sand acres. The canned products embrace tomatoes, 
 beets, string beans, lima beans, corn, spinach, a dozen 
 varieties of peas, squash, asparagus, dandelion, rasp- 
 berries, strawberries, blackberries, huckleberries, pine- 
 apples, pears, plums, apples, figs, quinces, gumbo, and a 
 combination of gumbo and tomato. The canned goods, 
 however, that enter most largely into consumption are 
 tomatoes, corn, and peas. There are great canneries in 
 Indiana, Ohio, and Illinois, in Delaware, Maryland, and 
 New Jersey, in Connecticut, New York, and Massachu- 
 setts. Corn is also canned in Maine, Wisconsin, Michi- 
 gan, and Kansas. The canneries of California annually 
 send canned fruits and vegetables in greater volume and 
 of great variety throughout the country. 
 
 There are other articles of food, nuts, spices, and tea, 
 to specify no further, consumed by thousands of tons 
 every year. But it is the grains, the meats, the fruits, 
 and vegetables that form the major portion of the diet 
 of every person of this country who has passed infancy. 
 Every day of the year they are in movement, in hundreds 
 of thousands of freight cars, from the fields to the ele- 
 vator, the pasture to the packing house, the truck farm 
 and the orchard to the produce house. 
 
CHAPTER IV 
 THE DISTRIBUTION OF FOODSTUFFS 
 
 It is evident that if everything that serves as food were 
 produced in the locality where it is consumed the trans- 
 fer from the producer to the consumer would be an easy 
 matter, especially if the production were all the year 
 round in the quantities desired from day to day by the 
 consumers. This condition is approximated in the vil- 
 lages where the dairyman drives his wagon in from the 
 farm each morning and around to the houses of his cus- 
 tomers, leaving with each the milk for the daily need. 
 
 When the place of production is remote from the place 
 of consumption the producer cannot sell in person to the 
 consumer, and this is clearly all the more out of the 
 question when the production is on a very large scale, 
 sufficing for the needs of a multitude of consumers. 
 Even if the production were in the same locality with the 
 consumption, but were restricted to a brief period, the 
 consumption would either be restricted to that period, or 
 either the purchaser or the consumer or some interme- 
 diary agency would have to store the food during the al- 
 ways limited period of production to be disposed of 
 during the more extended period of consumption. Where 
 the consumption of the product is so vast that one inter- 
 mediary cannot know all the consumers and their desires, 
 there is necessarily a number of secondary agencies, each 
 in a position to know and to provide for the wants of a 
 limited number of consumers. That is, in the case of 
 production on a large scale in a region remote from the 
 place of consumption on a large scale, there must be a 
 wholesale receiver of the product and retail distributors 
 who obtain their stocks from him. 
 
 Fruits and vegetables that do not quickly perish, such 
 as potatoes, cabbage, and apples, were formerly consigned 
 
 28 
 
The Distribution of Foodstuffs 29 
 
 by the growers to dealers at the great market centers, 
 who sold them and remitted the proceeds of the sales to 
 the growers, charging commission for the service. Sale 
 on commission, however, has been subject to such abuses 
 that it is becoming more and more the custom for these 
 products to be sold outright on the farm or at the ship- 
 ping station to the large dealers. The apple industry, 
 for example, has become so concentrated that a dealer 
 may directly own orchards in each of the great apple- 
 growing regions, and may contract for the entire crops 
 of many other orchards to which he sends his own em- 
 ployees to pick and pack the fruit. 
 
 Not only because of the exigencies of the markets, but 
 in large measure because of the evils of the spirit which 
 man has not entirely outgrown, the disposition of the 
 quickly perishable fruits and vegetables under the com- 
 mission system has been especially pernicious. Growers 
 distant from the markets have not always hesitated to 
 include products of inferior quality and not of the highest 
 degree of soundness in their shipments to the dealers. 
 The commission man remote from the farmer, who had 
 no means of inspecting his methods, would sometimes re- 
 port to the farmer that his shipment had arrived in bad 
 condition and unmarketable, and perhaps even ask him 
 to remit for the freight charges. There have been in- 
 stances in which the commission dealer has done this, 
 notwithstanding the fact that he had sold the consignment 
 at good prices. He has also been accused of selling con- 
 signments to himself and thus turning the profits of a 
 good market to his own pockets. These evils still exist, 
 but they have been greatly diminished. 
 
 In that they must be promptly disposed of, the pro- 
 ducer of quickly perishable fruits and vegetables who is 
 distant from the markets is under another disadvantage : 
 the vagaries of the sun and the rain sometimes delay 
 the ripening of his crop until it comes strongly into com- 
 petition with the crops of other regions and a glut ensues 
 in the markets. A glut is also often caused by the 
 hasty consignment of superabundant shipments to a de- 
 
30 Railroad Freight Rates 
 
 nuded market. If shipment has been on consignment to 
 a commission merchant the loss falls on the grower. 
 Better adjustment is being reached through two causes : 
 the development of means of preserving the products for 
 longer periods ; the formation of associations of growers 
 having similar shipping and marketing interests, and the 
 appointment of representatives on behalf of such associa- 
 tions to look after these interests of their members. 
 
 The most efficient of these organizations is the Cali- 
 fornia Fruit Growers' Exchange, representing the citrus 
 fruit producers of California. There is a manager in Los 
 Angeles and an agent in each of the large cities of the 
 United States. The manager receives reports from the 
 local exchanges and packing houses of the quantities of 
 fruit available for shipment, and from the agents tele- 
 graphic reports of the prices in various markets, the 
 stock on hand, and the extent of the demand. The man- 
 ager is thereby enabled to direct shipments to the best 
 advantage, and to this end is permitted by the railroads to 
 divert shipments while en route in accordance with the 
 telegrams showing the requirements of the markets. The 
 agents in the various cities inspect the shipments upon 
 receipt and oversee their disposition. 
 
 There are associations, in greater or lesser degree re- 
 sembling this organization, in the Georgia fruit district, 
 in the Norfolk truck region, and in other localities of 
 great production. Their formation, however, has been 
 retarded. The grower does not like to have the details 
 of his business and the names of his customers dis- 
 closed to his neighbor and competitor. If he can now 
 and then, by individual dickering, get a somewhat better 
 price than his neighbor, he may transgress his loyalty to 
 the association even at the risk of losing the higher aver- 
 age price obtainable through its services. 
 
 The development of truck farming on a large scale in 
 regions remote from the markets compels transportation 
 facilities through which the truck products, even the 
 quickly perishable, may be transported from the farms to 
 the markets. The retention of perishable food products, 
 
The Distribution of Foodstuffs 31 
 
 in order that they may be available over extended periods, 
 necessitates storage facilities by means of which decay 
 is arrested. 
 
 JThe transportation mechanism that has made possible 
 tlie shipment over great distances, and the storage 
 mechanism that makes possible this retention for pro- 
 longed periods, are practically the same device. In con- 
 nection with transportation it is designated as refrigera- 
 tion ; in connection with preservation in warehouses it is 
 known as cold storage. Organic matter quickly decays 
 if allowed to remain without special attention in an or- 
 dinary atmosphere. The decay is hastened if the ex- 
 halations from the product are not withdrawn from the 
 compartment; meats, fruits, and vegetables, like the 
 living body, all needing fresh air to keep them from 
 suffocating. If such products as fruits and vegetables 
 are warm when packed they part with their heat but 
 slowly; the ripening processes proceed with undue ra- 
 pidity, and the result is premature decay. The knowledge 
 of this led to the leaving of holes in barrels and apertures 
 in boxes, and to the provision by railroad companies 
 of ventilator cars. The early types of these were simply 
 box cars with slats instead of boards around the upper 
 sides. 
 
 The first refrigerator car was placed in service in 
 1868. It had galvanized iron tanks so arranged along 
 the sides that they could be refilled from the top with a 
 freezing mixture of ice and salt. In this car shipments 
 were made of strawberries and of peaches which re- 
 mained in sound condition during ten days in transit. 
 A successful consignment of dressed beef made to Boston 
 in this car in September, 1869, is credited with being 
 the beginning of the great industry. Various types of 
 refrigerator cars were devised, and in 1887 began the 
 through shipment of fresh fruits and vegetables from 
 starting point to destination in the same refrigerator 
 car, which was iced as often as necessary. 
 
 The system of transportation under refrigeration 
 quickly developed. Inasmuch as the need for such trans- 
 
32 Railroad Freight Rates 
 
 portation from any truck or fruit region is limited to the 
 brief period during which the crop ripens and is gathered, 
 very few railroads have found it profitable to include 
 refrigerator cars in their equipment. When required 
 they are obtained from the private car companies, any one 
 of which may own hundreds or thousands of these cars, 
 sending them to this region in the spring, to that region 
 in the summer, to another in the autumn, and likely to 
 California or Florida during the winter. This adjust- 
 ment of the refrigerator car supply to the demand can- 
 not be made by a railroad company for itself, except, 
 perhaps, by a very few of the great systems whose lines, 
 extending to regions that are widely separated by dis- 
 tance and by characteristics of soil and climate, can give 
 practically continuous employment to such cars. The 
 great packing companies needing transportation under 
 refrigeration for their meat products all the year round 
 were the first to construct and maintain refrigerator cars 
 in considerable numbers. This quickly led to these com- 
 panies furnishing the greater number of these cars re- 
 quired for the transportation of poultry, butter, and eggs, 
 fruits and vegetables. The ownership of the vast ma- 
 jority of the refrigerator cars also led to these companies 
 being in a position to dictate over what railroads the 
 traffic should be sent, and therefore they obtained a 
 certain control over the transportation charges. The 
 icing charges were levied at the will of the refrigerator 
 companies, and, as they had a practical monopoly of the 
 service, such charges were often exorbitant and became 
 the basis of many complaints. It would seem, however, 
 that the enactment of Congress compelling the charges 
 for icing to be definitely fixed and published in the same 
 tariffs with the transportation charges has largely, if 
 not entirely, removed the cause for such grievances, and 
 that the useful functions of the system of transportation 
 under refrigeration are becoming generally recognized. 
 As the first transportation under refrigeration was di- 
 rected to the conveyance of perishable articles of food 
 to Chicago, so also did the system of cold storage attain 
 
The Distribution of Foodstuffs 33 
 
 its first conspicuous development in Chicago, which is 
 to-day the principal cold storage center of the United 
 States. Cold storage buildings of the latest type have 
 thick walls of concrete lined with air chambers through 
 which fresh air is continually fanned. Each chamber is 
 encircled with pipes, through which ammonia or chilled 
 brine is driven, keeping the temperature at freezing 
 point, at zero or lower if desired. At the time of the 
 most abundant supply thousands of barrels of apples, 
 thousands of tubs of butter, thousands of chickens and 
 turkeys, and thousands of cases of eggs, may be placed 
 in any one of these cold storage houses. They are also 
 used for the storage of chilled beef and mutton and, to a 
 more limited extent, of frozen beef and mutton. Prac- 
 tically all of the fish carried over long distances are 
 frozen, and large quantities are carried in cold storage 
 houses. 
 
 There has been much discussion as to the kind and 
 extent of the change in the quality of articles of food 
 while they are in cold storage. Critics of the system 
 vigorously assert that deterioration begins from the time 
 they are placed in cold storage and continues in ac- 
 celerating degree throughout the period during which 
 they are kept there. Those who have developed the sys- 
 tem state that if a product is originally sound there is 
 no deteriorating for an extended period so long as it is 
 kept frozen — weeks in the case of some products, months 
 in the case of others, and a year or m.ore in the case of 
 poultry. 
 
 It would seem that a necessary step toward the ef- 
 ficiency of cold storage and the safety of the cold-stored 
 products is an extension of preparation by freezing or 
 cooling the products before they are placed in storage. 
 It has been the custom to gather some fruits before 
 they have ripened that they may ripen in transit and in 
 storage. There is no question that the quality and even 
 the wholesomeness of such fruits is inferior to that of 
 those which have been allowed to ripen on the tree or 
 the vine. A process of freezing in advance has lately 
 
34 Railroad Freight Rates 
 
 been applied to strawberries, with the result that they 
 can be kept in good condition in storage for five or six 
 weeks. The extension of this process is one of the 
 problems which the Department of Agriculture is endeav- 
 oring to solve, with every prospect of success. 
 
 In the marketing of the quickly perishable foodstuffs 
 that are produced by countless growers and consumed 
 by a multitude of consumers, there is not the pronounced 
 tendency toward the concentration of handling that is 
 marked in the case of foodstuffs not so quickly perishable, 
 and conspicuous with the more durable products of 
 other kinds. 
 
 As fruits and berries, vegetables and melons must, 
 as a rule, be quickly sold to avoid loss, and as there is 
 no change in their form between the time of ripening 
 and the time of disposition, it is but natural that there 
 should not be many changes of ownership as they pass 
 from the grower to the consumer. The development of 
 the associations of producers, through which it is en- 
 deavored to direct the distribution according to the 
 requirements of the markets, has been the'only noteworthy 
 step in the way of centralization. 
 
 A half century ago grain was marketed in much the 
 same manner as fruits and vegetables are now. It was 
 sent by the farmers to the elevators at the larger mar- 
 kets, consigned to commission men. It was to the inter- 
 est of each railroad to provide elevators as a receptacle 
 for the grain brought from the fields over its lines, and 
 it became the custom for the railroads to lease these ele- 
 vators to men who operated them simply as storage 
 houses and derived their compensation from the charge 
 for storing grain in them. It naturally being the desire 
 of the lessees to keep their elevators filled that they might 
 be in receipt of continuous revenue from the storage 
 charge, it became their practice to buy grain. They sent 
 their representatives out in the farming lands to dicker 
 with the farmers, and sometimes erected smaller elevators 
 at various places in the country in which the neighbor- 
 ing farmers were allowed free storage. The men leasing 
 
The Distribution of Foodstuffs 35 
 
 the elevators thus became the principal intermediaries 
 between the farmer and the miller. Certificates repre- 
 senting the grain in the elevators were bought and sold 
 by brokers. With the expansion of the milling interests, 
 however, it became more and more the custom for the 
 owners of the large mills to buy grain directly from 
 the farm.^ The complexity of the export business has 
 tended to place the purchase of grain for export in the 
 hands of the great grain firms having widespread cor- 
 respondents who keep them informed of the supply of 
 grain in all producing centers, and the demand for grain 
 in all markets. These firms have the facilities for char- 
 tering vessels and negotiating with the great steamship 
 lines, and the capital requisite for purchasing and carry- 
 ing the vast quantities of grain needed in their operations. 
 The purchase of grain direct from the farmer by these 
 large milling companies and exporting interests tends to- 
 ward the elimination of the broker. In Chicago, for 
 example, instead of the dozens of brokers who once 
 prospered by buying and selling grain on commission, 
 the vast bulk of the business is now done by a very 
 few firms of large capital, whose information as to 
 crops and markets is obtained from worldwide sources. 
 In the transfer of those foodstuffs that undergo 
 various processes of manufacture before they are ready 
 for the market, the elimination of the broker is still 
 more marked. A half century ago men known as drovers 
 used to buy Hvestock from the growers and drive it on 
 foot to central markets, where it was disposed of through 
 brokers. Transportation by rail has transformed the 
 caretaker of livestock from such a man, who walked 
 or rode across the plains in the rear of a drove of cattle, 
 into a hostler who accompanies them by train to see 
 that they are properly watered and fed. The perfecting 
 of the refrigerator car that made possible the develop- 
 ment of the great packing industry has caused the pur- 
 chase of livestock used in the packing houses to be made 
 in the main by their representatives, who are located 
 throughout the cattle-raising regions, and keep continu- 
 
36 Railroad Freight Rates 
 
 ously informed as to the condition of the cattle supply. 
 The great packing houses buy the live animals from the 
 farmers who have fattened them, and send the meat 
 products to their branch houses in various cities, whence 
 they are distributed to the local butchers. 
 
 To every one of the phases of the problem presented 
 by the production and preparation for shipment of the 
 food supply, the ofificers of the Department of Agriculture 
 are giving close and continuous attention. These men, 
 each an expert in his particular field, obtained their ap- 
 pointments through fitness and, entirely removed from 
 political influences, conduct their work with the earnest 
 enthusiasm engendered by a well defined desire for a 
 definite achievement. The efficiency of the Bureaus of 
 the Department is enhanced by the work of the sixty-one 
 experiment stations under their direction. 
 
 The ascertainment and the diffusion of accurate and 
 advanced knowledge in regard to the production and 
 handling of the food supply is furthered by the State 
 colleges of agriculture endowed by the government under 
 the enactment for which Senator Morrill, of Vermont, 
 worked unceasingly for a number of years, and the re- 
 sults of which are a monument to his memory. Many 
 of the States in recent years have introduced courses 
 on agriculture in the high schools and many of them 
 have established specialized dairy schools. Under the 
 auspices of the State schools are held the farmers' in- 
 stitutes, gatherings here and there for a limited time of 
 the farmers of one or more counties, which are at- 
 tended by lecturers and demonstrators, who advise the 
 farmers as to the characteristics of the best products, as 
 to seeds, soils, fertilizers, and the best methods of plant- 
 ing; and the breeding and care of livestock and poultry. 
 
 The railroads of the country have co-operated with 
 and furthered the work of the Department of Agricul- 
 ture, and of the colleges and schools. Many of the 
 railroads, especially those in the South and West, have 
 demonstration cars stocked with samples of the best 
 
The Distribution of Foodstuffs 37 
 
 seeds and products. These cars are attended by lectur- 
 ers and demonstrators who are employed by the rail- 
 roads, and who are often accompanied by delegated mem- 
 bers of the faculties of the State institutions. They are 
 sent to the farmers' institutes and taken throughout 
 the length and breadth of the region which the lines of 
 the railroad penetrate, diffusing among the farmers the 
 information collected by the expert investigators. The 
 railroad companies render this service entirely at their 
 own expense. Increase in their traffic naturally follows 
 the development and prosperity of the country, which it 
 is to their interest, as well as that of the government, to 
 promote. 
 
 It is not always an easy matter for the railroad com- 
 panies to distribute their cars in accordance with the 
 demands of traffic. If the different commodities moved 
 at regular periods one year after another, it would be 
 difficult enough to provide just the right number of cars 
 at the right time and move them promptly ; but when, as 
 has happened, on account of strikes, unfavorable con- 
 ditions of the weather, and other causes, great crops of 
 grain, an unusual tonnage of bituminous coal and ex- 
 traordinary quantities of merchandise, all pressed for 
 shipment at the same time that fruits, delayed in ripen- 
 ing, demanded to be hauled to the markets before they 
 perished, the already badly hampered railroads were 
 simply overwhelmed. 
 
 The railroads endeavor to obtain as accurate informa- 
 tion as far in advance as possible of the demands that 
 may be made upon them from divers sources. As the 
 grain is ripening on the western fields, the station agents 
 along the various railroad lines send frequent reports of 
 its condition to the general offices, and men of experience 
 are periodically sent out from these general offices to 
 go through the grain territory. Upon the information 
 thus obtained the western railroads estimate the number 
 of cars that probably will be required and endeavor to 
 collect them in the grain districts. The movement of 
 
38 Railroad Freight Rates 
 
 meats, poultry, butter, and eggs is more nearly regular 
 and the car distribution can be made with a greater 
 degree of certainty. 
 
 The greatest diiBculty, however, in estimating and ar- 
 ranging the car supply, as has been intimated, is in 
 connection with the quickly perishable foodstuffs. In 
 the summer of 1907 the railroad company leading there- 
 from was advised that the peach crop of the Delaware 
 and Maryland Peninsula would require five hundred 
 cars. That number was fitted with the racks needed for 
 peach crates, but by the time they were ready a turn 
 in the weather had reduced the peach crop, which, at 
 best, had likely been overestimated, to but little more 
 than fifty cars. All the time that these cars had been 
 assigned for what must necessarily be a prompt move- 
 ment of the peach crop, they could have been used to 
 excellent advantage in the grain movement. 
 
 This chapter ought not to conclude without reference 
 to the heaviest handicap under which the farmers of 
 this country labor in moving their produce from the 
 farms, and that is the lack of good country roads. In 
 the Report of the Industrial Commission, Vol. VI, page 
 446, appears the following paragraph: 
 
 "It has been shown, after careful inquiry, that the average 
 haul of the American farmer in getting his produce to market, 
 or to the nearest shipping station, is 12 miles. The average 
 cost per ton for hauling over the common country roads is 25 
 cents per ton per mile, or $3 per ton for a 12-mile haul. Care- 
 ful estimates, also, place the total tons hauled at 300,000,000 per 
 year and the average haul at 12 miles, making the total cost 
 of getting the surplus products of the farm to the local market 
 or to the railroad $900,000,000. This figure is greater than the 
 operating expenses of all the railroads in the United States, 
 which for the year ending June, 1898, were only $818,000,000. 
 In other words, it cost $82,000,000 more to haul farm products 
 to the local points where they enter the distributive system than 
 it does to operate our entire railway system, comprising nearly 
 half the mileage of the world." 
 
 The vast improvements of the country roads in nearly 
 every section of the United States, and the adaptation 
 
The Distribution of Foodstuffs 39 
 
 of trolley lines to the use of the farmer during the 
 period that has elapsed since the year referred to in this 
 report have much facilitated the initial movement of 
 produce. These are but the first steps in the line of se- 
 curing the better conditions that are essential to the 
 highest economy and efficiency in the distribution of 
 farm products. 
 
CHAPTER V 
 
 THE DISTRIBUTION OF RAW MATERIAL 
 AND MERCHANDISE 
 
 In this time of the large industrial corporations the 
 purchase of raw material from the producers is very 
 generally effected without an intermediary. 
 
 It was once the universal custom for cotton to be 
 hauled by the plantation owner to the general store, 
 where it was purchased by the storekeeper, sometimes 
 for cash, but oftener taken as an offset to the supplies 
 that had been furnished during the period of growth. 
 The storekeeper disposed of the cotton to dealers in the 
 various cities, and it was bought and sold by brokers on 
 the floor of cotton exchanges. This is still largely the 
 custom, but of late years it has become more and more 
 the practice of the great cotton dealers, the owners of 
 the great cotton mills, and the great cotton exporters to 
 make purchases of the crop through their representatives 
 direct from the plantations, and there has been the en- 
 deavor, through cotton growers' associations, to give the 
 plantation owner opportunity to hold his cotton through 
 the seasons of low prices in order that he may obtain 
 the benefit of an advancing market. 
 
 Even so recently as a score of years ago the trans- 
 fers of iron ore from the mine to the furnace, of pig 
 iron from the furnace to the mill, and of the merchantable 
 iron or steel from the mill to the user, were effected 
 through the agency of brokers. At the present time 
 each of the great iron and steel companies owns beds 
 of ore ; many of them own both steamboats and railroads 
 whereby the ore is transported to their own blast fur- 
 naces, and thence to their own mills. It has likewise been 
 but a score of years or so since coal brokers flourished 
 in great numbers. Now each of the iron and steel com- 
 
 40 
 
The Distribution of Raw Material 41 
 
 panics either uses coal from its own mines or purchases 
 direct from the great coal-mining companies, as do the 
 railroads and other large coal consumers. In many places 
 the large coal companies own the retail yards through 
 which coal is sold to the consumer. 
 
 Some years ago certificates covering crude petroleum 
 were bought and sold by brokers on the floor of ex- 
 changes, the price of oil thus being fixed. Nowadays 
 the great oil companies either directly control the wells, 
 or purchase the oil directly from their owners at prices 
 adjusted by the oil interests. 
 
 There is not the same degree of concentration in the 
 distribution of lumber, owing to the wide diffusion of the 
 forests, and the comparative simplicity of the process 
 of sawing the timber into the elementary shapes, which 
 are marketed among a vast number of widely diffused 
 users. There are lumber associations, however, which 
 endeavor to harmonize the interests of different dealers. 
 
 Tobacco grown in Virginia and the Carolinas is taken 
 in wagons to the various towns where there are ware- 
 houses, through which the farmers negotiate the sale 
 directly with the buyers, who are, in the main, the repre- 
 sentatives of the great tobacco companies. In Tennessee 
 and Kentucky the tobacco is " prized " into hogsheads 
 by the farmer and shipped to primary markets, such 
 as Lexington, Louisville, Cincinnati, and St. Louis, where 
 it is sold through warehouses by commission merchants, 
 the larger portion here also being purchased by the great 
 tobacco companies. The custom is growing, however, 
 for these companies to purchase the tobacco of these 
 States directly from the farmers, their representatives 
 often times negotiating for the crop of an entire plan- 
 tation while it is still in the leaf. 
 
 The sugar cane of the United States is grown prin- 
 cipally in Louisiana. It is taken by the farmer, usually 
 by wagon, to the " central," the local and crude refinery, 
 whence it passes into possession of the buyer, who, in 
 this case, is nearly always one of the great sugar re- 
 fining companies. The beet sugar industry has obtained 
 
42 Railroad Freight Rates 
 
 its principal development in California, Colorado, and 
 Utah, where the sunshine, the semi-aridity, the suscep- 
 tibility to irrigation which permits the application of 
 water at intervals as desired, has caused the peculiar 
 adaptation of the soil to the production of beets con- 
 taining a large portion of sugar. These beets are de- 
 livered by the farmer to the factories, whence the sugar 
 is sent to the principal places of storage, such as Kansas 
 City, Omaha, and St. Louis. 
 
 The tanning industry has been concentrated into the 
 hands of two or three companies whose representatives 
 are located in the vicinity of the large packing houses, 
 and the other places throughout the country where hides 
 are obtainable, where they bargain directly for them. 
 
 The greater portion of the paper used in this country 
 is that which passes over the presses of the great news- 
 papers. It is made largely of fir and spruce obtained 
 in the Canadian forests, vast "areas of which are owned 
 by the great paper manufacturing companies. Lumber- 
 men deliver the logs at the cutting up-mills, numbers of 
 which are situated on streams down which the logs are 
 floated. From such mills the cut lumber is transported 
 to a pulp mill or, where it is necessary that the lumber 
 be transported from the forest by rail, the pulp mill is 
 generally adjacent to the cutting-up mill. The pulp is 
 taken to the paper mill whence the paper is consigned 
 directly to the newspapers, to whom it is sold by the 
 representatives of the great paper manufacturing com- 
 panies. 
 
 The copper and lead ores found in the far Western 
 States are transported from the mines to the smelters, at 
 various places between the Pacific Coast and the Mis- 
 souri River; the bullion is taken from these to other 
 smelters, or to refineries, many of which are as far East 
 as the Atlantic seaboard. The several chains of smelters 
 and refineries are under the control of the great smelting 
 and refining companies, who sell the refined copper and 
 the refined lead to the mills through which it is wrought 
 into articles of use. 
 
The Distribution of Raw Material 43 
 
 As the places of production of many of the principal 
 raw materials are comparatively few in number and fairly 
 well segregated, and as the places of manufacture in 
 each of many lines of industry are comparatively few 
 in number and fairly well segregated, the problems of 
 transportation are not so difficult and many sided as 
 these connected with the conveyance of the perishable 
 foodstuffs. As ventilated or refrigerator cars are not 
 requiied, and as delay in transit does not result in de- 
 terioration to, or total loss of, the shipments, there is 
 not the necessity for the immediate furnishing at one 
 place and at one time of a great number of cars to move 
 products that will decay if the car supply be delayed. 
 Each car may be loaded more nearly to its capacity as 
 there is not the necessity for leaving space for venti- 
 lation as in the case of some organic products, or for 
 carrying vast quantities of ice as with others. The 
 greater the proportion of the weight of a loaded car 
 which yields revenue to the railroad company, the lower 
 the rate, other things equal, at which the freight con- 
 tributing such large proportion of weight can be 
 carried. 
 
 That is, the weight which the locomotive hauls, and, 
 therefore, for the hauling of which the railroad com- 
 pany has to pay, is that of the load and of the car com- 
 bined. A car will hold a heavier load of some 
 commodities than of others. A high rate on a carload 
 of a bulky commodity may yield a lesser rate per hun- 
 dred pounds if applied to the total weight of load, of 
 car, and of ice or other non-paying adjunct, than a lower 
 rate on a carload of a heavier commodity applied to 
 the weight of load plus weight of car, especially if it 
 be not accompanied by ice or other non-paying adjunct. 
 
 Attempts have also been made to eliminate the middle 
 man in the distribution of various products from the 
 factory to the consumer, but they have met with only 
 a partial success that has affected only a limited number 
 of commodities. The wholesale dealer is acquainted with 
 the conditions of the region which he supplies and gauges 
 
44 Railroad Freight Rates 
 
 the needs and the credit of the retail dealers to whom 
 he sells. The retail dealer gauges the needs of the com- 
 munity which he serves, and the credit of his customers. 
 These functions will usually be more carefully performed 
 by a man whose business life directly depends upon his 
 success in their performance than by the agent of a 
 manufacturer. The wholesale and retail dealers, by 
 trading in a variety of commodities, distribute the cost 
 of their handling over a wider range than the exclusive 
 agent of a particular line of manufacture, the handling 
 cost per unit therefore being less. The wholesale dealer 
 also usually maintains a store of goods from which the 
 retail dealer can replenish his supply more promptly than 
 from a remote place of manufacture. The distributive 
 flow of products is, therefore, in greatest volume from 
 the factory to the wholesale merchant and from the 
 wholesale merchant to the retail merchant. Opposed to 
 the various steps from the producer of raw material to the 
 final manufacturer — that is, from the producer to the con- 
 centration point, from the concentration point to the place 
 of the first process of manufacture, and then to the place 
 of the next process of manufacture, and so on — there 
 are but three steps in the case of the distribution from 
 the manufacturer to the consumer, namely from the 
 manufacturer to the wholesaler, from the wholesaler to 
 the retailer, and the retailer to the consumer. This is 
 not without variation. The wholesale dealer will often 
 order a consignment to be shipped direct from the fac- 
 tory to the retail dealer without its passing through his 
 warehouse at all, and the retail dealer, particularly if 
 he can afiford to buy a full carload at a time, will often 
 purchase directly from the manufacturer. There are 
 a variety of different relations that may exist between 
 the manufacturer, the wholesale merchant and the re- 
 tail dealer, but they do not change the general form of 
 the distributive structure in which the wholesale dealers 
 and the retail dealers play the principal part. 
 While there are comparatively few places of production 
 
The Distribution of Raw Material 45 
 
 of many kinds of raw material, and comparatively few 
 manufacturers of each of many kinds of products, there 
 are innumerable distributing centers at which there are 
 wholesale merchants, and there are retail dealers in every 
 city, town, village and hamlet in the United States. 
 
 This cursory review of certain of the principal com- 
 modities that enter into the traffic of the United States, 
 and of the commercial mechanism through which they 
 are distributed, leads to further contemplation of their 
 movement over the railroads. In the great channels of 
 traffic "the great staple commodities move in train loads ; 
 raw material to the mills, and finished products from 
 the mills to the distributing centers; foodstuffs move 
 from the sources of supply to the distributing centers. 
 Radiating from these centers are trains composed of 
 cars, some laden with this commodity and some with 
 that, or some of the cars may be each laden with a 
 variety of commodities. This loading of various com- 
 modities in the same car is conspicuous in the case of 
 local freight trains that go from station to station, un- 
 loading at each the small shipments consigned to it. In 
 a great traffic channel of any particular commodity an 
 entire train may be run through over two or more rail- 
 roads to some point of manufacture or to some place of 
 distribution. A solid carload of a commodity may be 
 transferred at a junction point from the incoming train 
 of one to the outgoing train of another railroad. Through 
 consignments that occupy less than a car are often vm- 
 loaded at the junction point transfer depot from the car 
 of one railroad and loaded into the car of the other. 
 
 Thus a main traffic channel is broken up at a princi- 
 pal distributing point into secondary channels which, 
 through the retail dealers, are broken up into still smaller 
 channels, just as the great artery of the body breaks into 
 secondary arteries that split again into smaller arteries. 
 The flow of the blood of the body, however, is always in 
 the same direction, through the same arteries, and the 
 volume of the blood is substantially the same day after 
 
46 Railroad Freight Rates 
 
 day ; while the great traffic channels of the United States 
 extend in various directions, crossing and recrossing. 
 The volume of the commodities varies from week to 
 week, from month to month, and from year to year, as 
 there are variations in supply and demand, as there are 
 fluctuations in production and distribution due to divers 
 causes. 
 
CHAPTER VI 
 
 THE TRANSPORTATION CHARGE AND 
 PRICES 
 
 Vastly the greater proportion of the commodities 
 moved by the railroads are in the processes of commerce ; 
 that is, the conveyance from the place of consignment 
 to place of receipt in the majority of cases is sequent 
 to a transfer of ownership. The seller cannot continue 
 in business unless he obtain a market for his material, 
 or his merchandise, and the purchaser cannot continue 
 in business unless he secure the material, or the merchan- 
 dise, which he needs. The margin within which the 
 added charge for transportation may be adjusted is 
 therefore limited in one direction by the amount which 
 the seller of a commodity will accept and the purchaser 
 will pay and continue in business. If the seller or the 
 purchaser cannot make a profit at least approximately 
 as great as from other operations in which it might be 
 feasible for him to engage he will, other things equal, 
 change his business, and the railroad will no longer have 
 the trafific that flowed from his operations. A railroad, 
 therefore, must adjust its transportation charges that pro- 
 duction may continue. This includes the adjustment of 
 rates that products may be sent to markets, that the 
 products of the region tributary to one railroad may reach 
 markets in competition with similar products of other 
 regions, and in competition with other products that 
 will answer the same purpose. 
 
 The wider the markets that the producers can reach, 
 the greater is the encouragement to production. The 
 more numerous and varied the sources of supply of 
 which the purchaser has choice, the more likely that his 
 requirements will be met to his satisfaction. This is 
 the case whether the sale and purchase be of food, 
 
 47 
 
48 Railroad Freight Rates 
 
 whether it be of raw material to feed the processes of 
 mill or factory, whether it be of wares for wholesale 
 distribution, or whether the purchase be of merchandise 
 by the retail dealer, or the final consumer. 
 
 It has long been claimed by the railroads of the 
 United States that their rates of freight are lower 
 than those of any other country, and that the nation's 
 progress in industry and commerce has in large measure 
 been due to the cheapness and the efficiency of its 
 transportation service. By way of proof has been 
 instanced the proportion that the transportation charge 
 bears to the selling price of the staple commodi- 
 ties. It is said that the rate charged for the transporta- 
 tion of food products does not affect their selling price 
 in any market of the United States — that price being 
 fixed by the processes of supply and demand which the 
 amount of the freight rate does not influence. In the 
 spring of 1907 inquiry was made upon this point among 
 the produce dealers of the city of New York, who gave 
 the information contained in the following paragraphs. 
 
 The price paid by the housekeeper per dozen for eggs 
 during the season of shipment seldom exceeds by more 
 than five cents the price received by the Western farmer 
 who takes them to the country store. That is, the rail- 
 roads bring eggs a thousand miles to New York for a 
 cent or a cent and a half a dozen, and two thousand 
 miles or so for about two cents and a half a dozen, the 
 dealers taking the remainder of the five cents as pay- 
 ment for handling. The net difference between the 
 price paid per pound for butter at the creamery, whether 
 in New York City or in the Mississippi Valley, and that 
 paid by the New York retail dealer averages about one 
 and one-half cents for commission and one cent for 
 freight. 
 
 In December, January and February turkeys are 
 taken from the Texas ranches to marketing centers, the 
 transportation charge on ten birds weighing 'one hun- 
 dred and twenty pounds being about 25 cents. After 
 these ten birds have been dressed and packed they weigh 
 
Transportation Charge and Prices 49 
 
 about one hundred and two pounds, and the freight rate 
 from Texas to New York is $1.50 for 100 pounds. That 
 is, a Texas turkey that retails in the New York market 
 for 20 cents a pound will have paid one and three-fourths 
 cents per pound to the railroads that took it from the 
 ranch to the concentration point and thence to the market. 
 The farmer in Texas received about nine cents per pound, 
 leaving a trifle over nine cents to be divided between the 
 packing house, the produce' merchant and the retail 
 dealer. Chickens and other dressed poultry that come 
 from Chicago pay a freight rate of about three-fourths 
 of a cent a pound, the railroad company supplying a 
 refrigerator car, and keeping them iced while in 
 transit. 
 
 The rail rate from Chicago to New York on grain and 
 grain products for domestic consumption has been about 
 17J cents per 100 pounds ; that is, a bushel of oats or corn 
 or wheat, that may bring in New York anywhere from 
 40 cents to $1, has been brought from the western farm 
 for from eight to fifteen cents. Hay that has yielded the 
 farmer $i8 or $19 a ton and sells in New York at about 
 $24 has paid the railroads somewhere from $3 to $5 per 
 ton, according to whether it came from the meadows 
 of the Ohio or the Mississippi Valleys. 
 
 A bullock that weighs 1200 pounds will, at Chicago, 
 bring on an average $5.50 per 100 pounds, which in- 
 cludes an average of five cents per 100 pounds for 
 freight from the grazing grounds. Its total value at 
 the stockyards, therefore, is $66. When it has passed 
 through the packing house its weight will have been 
 reduced to 700 pounds. From Chicago to New York it 
 will pay 45 cents per 100 pounds freight or, 
 in other words, the 700-pound carcass, which, if retailed 
 at an average of 15 cents a pound would bring $105, 
 has paid the railroads between $3.50 and $4 from the 
 far West to the metropolis. 
 
 On potatoes the freight rate per barrel containing 
 about two and a half bushels is $1.05 from Florida, 65 
 cents from South Carolina, 45 cents from North Caro- 
 
50 Railroad Freight Rates 
 
 lina, 30 cents from Virginia, and from this 12 cents per 
 bushel the rate scales down to five or six cents per 
 bushel from near-by regions. The freight rate on 
 tomatoes from Florida is 25 cents per package of six 
 baskets, from Texas 15 cents for twelve quarts, from 
 Mississippi 76 cents per 100 pounds and from the near- 
 by farms eight cents per bushel of twenty-eight quarts. 
 The freight rate on cantaloups to New York ranges 
 from less than a cent for a melon from the Carolinas to 
 about two and a half cents for that from California. 
 Oranges from Florida to New York pay the railroads 
 from four to nine cents a dozen, and those from 
 California six to twelve cents a dozen, as they may be 
 large or small. A three pound can of tomatoes from 
 Maryland pays the railroad about one-half cent per 
 can. 
 
 The freight rates to New York on foodstuffs have 
 been selected as typical of the transportation charges 
 applying on such commodities in the main channels of 
 traffic from the West to the East ; and, in so far as fruits 
 and vegetables are concerned, from the South to the East. 
 The transportation charge per consumer's unit on these 
 foodstuffs is a trifle less to Philadelphia and adjacent 
 Delaware and New Jersey; another fraction lower to 
 the great Pittsburg district, and still lower to the cities 
 of the West and South that are nearer the places of 
 production. As prices of food products fluctuate within 
 a fairly wide range and freight rates also fluctuate, 
 though within but a very narrow range, the rates and 
 prices specified in the foregoing, as well as in the suc- 
 ceeding paragraphs of this chapter, cannot be considered 
 as of specific application at any given time in the future. 
 They were exact at the time they were collated and will 
 very closely approximate accuracy at any period. 
 
 As New York may be considered representative of the 
 places to which edible products of the West and South 
 are consigned, so also may St. Louis be considered a 
 typical center of reception of the manufactured prod- 
 ucts of the East. The information given in the im- 
 
Transportation Charge and Prices 51 
 
 mediately following paragraphs was obtained from mer- 
 chants and manufacturers of that city. 
 
 The transportation charge on the material entering 
 into a pair of shoes made in a St. Louis factory averages 
 one and one-quarter cents. The transportation charge 
 required to place that pair of shoes in the hands of a 
 consumer in any part of the United States averages be- 
 tween two and three cents. The material entering into 
 an ordinary bedstead, such as retails in St. Louis for 
 $8, will have paid the railroad about 40 cents. From ten 
 pounds of nails made in Pittsburg and retailed in St. 
 Louis the railroad will have obtained a trifle over two 
 cents, and from ten pounds of wire two and one-half 
 cents. An axe made in the Pittsburg district that retails 
 in St. Louis for $1 will have paid the railroads one and 
 one-fourth cents. At Kansas City that same axe will 
 have paid freight of a fraction over four cents and at 
 Denver, where the retail price will have advanced to 
 $1.30, it will have paid 14 cents freight. A padlock re- 
 tailing in St. Louis at 50 cents will have paid the rail- 
 roads a little more than one-half cent; at Kansas City 
 it will have paid one cent, and at Denver, where the re- 
 tail price advances to 75 cents, it will have paid two cents 
 to the railroads. An eighteen gallon galvanized iron tub 
 that retails in St. Louis at 80 cents will have paid the 
 railroad from place of manufacture two and three-tenths 
 cents ; to Kansas City the freight rate will have been 
 six and one- fourth cents and to Denver 15 cents, but 
 here the retail price of that tub is $1. A stove that 
 weighs two hundred pounds and retails in St. Louis for 
 $18 will, in carload lots, pay 44 cents to Kansas City or 
 Omaha, and retail there for $22 ; $1.48 to Denver and 
 retail there for $25 ; $2.50 to Seattle, and retail there for 
 $30. When a housewife of St. Louis buys a dozen 
 clothespins she has paid the railroad five ten thousandths 
 of a cent. If she buys a washboard at 50 cents she has 
 paid the railroad forty-two one hundredths of a cent. In 
 Denver she would pay for that washboard 60 cents, of 
 which the railroad would have received two cents. The 
 
52 Railroad Freight Rates 
 
 higher rates and prices that have been specified as apply- 
 ing in Kansas City and Denver may also be taken as 
 applicable to cities in the interior South and Southwest, 
 such as Oislahoma, Forth Worth and San Antonio. 
 
 In response to inquiries made concerning certain 
 staple articles of daily and general use in various of the 
 smaller cities and towns extending from Massachusetts 
 to Georgia and Illinois, and from Michigan to Missis- 
 sippi, it has been ascertained that throughout this region 
 the transportation charge on such articles ranges as fol- 
 lows: On a man's suit of clothes from two to eight 
 cents; on calicos and ginghams from one-fiftieth of a 
 cent to one-fifth of a cent a yard; the freight charge 
 paid on the entire apparel of a fully dressed man or 
 woman in this section would range perhaps from six or 
 seven to i6 or i8 cents. The rate on an ordinary 
 dining-room suite consisting of table, sideboard, six 
 chairs and a china closet, would average from 75 cents 
 to $5, on a parlor suite of sofa and four chairs from 
 50 cents to $4, on a bedstead and its equipment from 
 75 cents to $1.50, in each case from the factory to the 
 home. The lumber used in the ordinary eight-room 
 house will have paid the railroads from $35 to $150, and 
 the brick from $6 or $8 to $50 or $60, as the kiln may 
 be near or remote. A fifty pound sack of flour from 
 the mill, even at Minneapolis, in but a few cases has 
 paid a freight rate of over eight or nine cents to the 
 consumer. Products of the beef or the hog are carried 
 from the western packing houses throughout this terri- 
 tory at rates that vary from a fifth of a cent to not 
 exceeding a cent per pound. 
 
 It has not been difficult to secure such information as 
 applies in the main to the transportation charge borne 
 by a manufactured article from the place of making to 
 the final market, or on foodstuff from the place of 
 growth to the place of sale to the consumer. Data as to 
 the amount of transportation charge carried by the vari- 
 ous kinds of raw material entering into a manufactured 
 product has not in many cases been so easy of ascer- 
 
Transportation Charge and Prices 53 
 
 tainment. A principal reason has been that the manu- 
 facturers ■ in numbers of instances do not know what 
 it is themselves. Many kinds of material are bought 
 at a price which includes delivery at the factory, the 
 freight rate not coming under the cognizance of the 
 purchaser. The different materials used in a product 
 may have come from such diverse sources, and paid 
 such varying rates of freight, that the ascertainment of 
 the total freight charge in any given unit of manufacture 
 would be too difficult to be worth while. In numerous 
 other cases the freight charge is confessedly so small 
 an item that no attempt is made to apportion it as an 
 item of expenditure per unit of product, the total simply 
 being grouped in the aggregate of expense. 
 
 The statement that the transportation charge borne by 
 the material entering into an ordinary pair of men's 
 shoes averages one and a quarter cents is the result of 
 a definite calculation made by one of the largest shoe 
 manufacturers of the country. A leading woolen manu- 
 facturer estimates that the price of wool at Boston will 
 average perhaps 30 cents a pound " in the grease," in- 
 cluding a transportation charge that will average one 
 cent a pound. The loss in cleaning and scouring is 
 about forty-five per cent, and the price of a pound of 
 scoured wool will average about 63 cents at the mill. 
 Of this about two cents is chargeable to transportation. 
 One hundred pounds of wool will make about seventy 
 pounds of straight woolen cloth, on which the transporta- 
 tion charge has therefore been a fraction less than three 
 cents a pound. On cloth that is mixed with cotton the 
 transportation charge is less. The rates on woolen goods 
 from any of the New England mills are so low that a 
 yard of cloth which will sell from $1.50 upwards in 
 any of the western markets will not have paid the rail- 
 roads more than five cents from the sheep's back in Colo- 
 rado to Massachusetts and back again to the Mississippi 
 River. 
 
 The following information as to the extent of the 
 transportation charge borne by divers materials of vari- 
 
'54 Railroad Freight Rates 
 
 ous industries has been obtained in each instance from 
 an authority in that industry. 
 
 The transportation charge on raw cotton to the mills 
 in Massachusetts will average from one-half to two- 
 thirds of a cent a pound, not exceeding one cent per 
 pound even from plantations so remote as those of Texas. 
 Cotton loses from fifteen to twenty per cent, in the clean- 
 ing, one hundred pounds of cotton making from eighty to 
 eighty-five pounds of cotton goods. As ordinary calico 
 will run about six yards to the pound and sell for about 
 five cents, the cotton that has paid a freight rate of from 
 50 cents to $1 is woven into $24 worth of calico. 
 
 The transportation charge on a pair of rubber over- 
 shoes, including the rubber from South America, the 
 cotton stock, and the shipment to the western markets, 
 averages about two and one-half per cent, of the cost of 
 those markets. That is, a pair of rubber overshoes re- 
 tailing for 75 cents will have paid for transportation, 
 all told, less than one and nine-tenths cents. 
 
 In no one of these examples, which, perhaps, are 
 typical of the entire clothing industries in so far as the 
 use of leather, wool, and cotton are concerned, is the 
 transportation charge an appreciable factor in the price 
 either of the material to the manufacturer or of the 
 finished article to the consumer. 
 
 A barrel of flour made in Minneapolis and trans- 
 ported to Boston is sold at the time of this writing by 
 the milling company to a dealer of that city, or any other 
 place in New England, for $6. Of that $6 accrues to 
 the transportation agencies, for carrying the wheat of 
 which that flour was made from the Western farm to the 
 Minneapolis mill, and for carrying the flour from the 
 mill to Boston, an amount that averages 85 cents. The 
 proportion of the transportation charge to price at 
 different markets varies with the freight rate. At New 
 York the milling company would sell that barrel for 
 $5.95, which would include a total transportation charge 
 of 80 cents; at Philadelphia the selling price would be 
 $5.90, the transportation charge 75 cents ; at Buffalo or 
 
Transportation Charge and Prices 55 
 
 Pittsburg the selling price $5.80, and the total transpor- 
 tation charge 65 cents; at Atlanta the price $6.20, the 
 transportation charge $1.05 ; at New Orleans the price 
 $6.10, the transportation charge 95 cents. 
 
 Typical rates on leaf tobacco, averaging in value $13 
 per 100 pounds from plantation to warehouse in Vir- 
 ginia and the Carolinas, are from 15 cents to 21 cents per 
 100 pounds; on the smoking tobacco into which this 
 leaf is converted, and which sells at $48 per 100 
 pounds, from Richmond, Virginia, to New York City 
 30 cents, to Chicago 59 cents, to Kansas City $1.16. 
 Rates from the plantation to the warehouse on the leaf 
 tobacco of the Kentucky and Tennessee region, which 
 also brings an average of $13 per 100 pounds, are from 
 5 cents for short to 20 cents for longer distances. The 
 plug tobacco into which this leaf is converted is sold 
 at $28 per 100 pounds, being distributed on such rates 
 as these: St. Louis to Louisville, 25I cents, to New 
 York City 58^ cents, to Kansas City 35 cents, to Seattle 
 $2.20. Manufactured tobacco in all cases is sold at a 
 price which includes delivery from the factory to the 
 place of consignment, wherever it may be, in the United 
 States. 
 
 The freight rate on cane sugar from the " central " 
 in the Louisiana district to the final refinery ranges from 
 5 to 10 cents per 100 pounds, the refinery paying from 
 $3.50 to $4.50 for the sugar. Sugar that is sold by the 
 refinmg company at 4^ to 5^ cents a pound retails at 6 
 cents, the dealer making little or no profit. As a town 
 of five to ten thousand people at the average per capita 
 consumption of seventy-five pounds a year will consume 
 a carload of sugar in about a week, the jobbing of sugar 
 is greatly decentralized. Contrasting with this retail 
 price of $6 per hundred pounds typical distributive rates 
 are, from New York to Chicago 25 cents, to St. Paul 
 30 cents, to Kansas City 42 cents; from New Orleans 
 to Chicago 25 cents, to Atlanta 24 cents, to Kansas City 
 34 cents. 
 
 The freight charge on sugar beets raised in Colorado 
 
56 Railroad Freight Rates 
 
 and Utah from the farm to the refinery is always paid 
 by the sugar company. It averages from 30 to 40 cents 
 per ton, or for a distance of fifty miles is as much as 
 50 cents. A ton of beets contains about three hundred 
 pounds of sugar which, allowing for an average loss 
 during extraction, would produce two hundred and forty 
 pounds of refined sugar. This is sent from the factories 
 to the principal places of storage, Kansas City, Omaha 
 and St. Louis. The aggregate freight charge from the 
 farm to St. Louis on these two hundred and forty pounds 
 is about $1.70, and the aggregate revenue to the refinery 
 at five cents a pound, $12. 
 
 While the price of bananas is subject to great fluctua- 
 tion, a fair average at New York, Philadelphia, Balti- 
 more, Charleston, Mobile and New Orleans, the ports of 
 import, is $1.75 per 100 pounds. The average rail charge 
 for carload lots from port to market is from 30 to 50 
 cents per 100 pounds. About one-third of the 
 bananas consumed in this country are received at the 
 North Atlantic ports, whence they are distributed 
 throughout the Eastern and Middle States. The remain- 
 ing two-thirds, which supply the South and West, are 
 received at the Southern ports. Immediately upon re- 
 ceipt at New Orleans, for example, shipments are made 
 to the North in train loads that they may be taken out 
 of the warm climate before they spoil, and cars are re- 
 consigned en route at the instance of the company which 
 has very thoroughly organized the banana business, an 
 allied company having about sixty agencies with men 
 who devote their entire time to extending the sale of the 
 fruit. 
 
 For hides that pay a freight rate from the packing 
 houses at Chicago to New York of 30 cents per 100 
 pounds, the butcher receives, according to quality, from 
 $6 or $7 to $11 or $12 per 100 pounds. The butchers 
 remote from market have the freight rate deducted from 
 the price paid them for hides, but it is a trifle, seldom 
 exceeding five cents per 100 pounds. The hide loses from 
 twenty-five to thirty-five per cent, in the process of tan- 
 
Transportation Charge and Prices 57 
 
 ning; the price of leather is fixed by measure and not 
 by weight. The rate on tanned leather, however, be- 
 tween Chicago and Boston is 39 cents per 100 pounds. 
 
 The railroads make low rates on fertilizer to encourage 
 its use by the farmers, it being, of course, to the interest 
 of a railroad to encourage the production of larger crops 
 that its traffic may be augmented. Fertilizer of different 
 grades brings from $18 and $20 to $55 and $60 a ton. 
 Typical rail rates from the places of manufacture are 
 from Jersey City to Trenton, New Jersey, $1.10 per 
 ton, and from Boston to Portland $1.20 per ton — ^both 
 rates applying in carload lots. In the South, where fer- 
 tilizer is extensively utilized, representative rates are, 
 from Atlanta to Thomasville $2.50, from Charleston 
 to Columbia $2.00 per ton. 
 
 When allowance is made for the elimination of water 
 from pulp and the shrinkage in its manufacture into 
 paper, the average freight rate borne by the material 
 entering into paper at the northern New England mill 
 is about 13^ cents per 100 pounds. The manufacturers 
 consider 17 cents per 100 pounds to be the average 
 freight rate on the paper from the mill to places north 
 of the Ohio and east of the Mississippi Rivers. The 
 aggregate freight charge borne on the average by the 
 100 pounds of paper which sells at the factory for $2.50 
 is therefore 30 cents. 
 
 As with all things else, the rates on the ores of the far 
 western region have been adjusted under the necessity 
 of the transportation agencies to so serve the mines 
 that their products may be marketed. The rate upon 
 the ore from the mine to the smelter, upon the metal 
 from the smelter to the refinery, and upon the refined lead 
 or refined copper from Chicago to the seaboard market, 
 are all determined by this prime factor. The freight 
 charges, for example, from the Coeur d'Alene district 
 in northern Idaho on the ores from which the extra- 
 neous material has been roughly separated, to the Puget 
 Sound refineries, reach a maximum of $6 per ton for a 
 distance of four or five hundred miles, and the rate from 
 
58 Railroad Freight Rates 
 
 Puget Sound to New York is $14.50, the average trans- 
 portation charge, therefore, being about $20 per ton. 
 The value of a ton of copper at 12 cents a pound is $240, 
 and a ton of lead at four cents a pound is $80. Copper 
 passes through manifold and expensive processes and 
 its extensive consumption has followed the development 
 of electricity. Lead does not require so many or so 
 expensive workings, and it has long been a great staple 
 of general use. The mine farther from a smelter natur- 
 ally has to pay a higher rate of freight than a mine 
 nearer to it, receiving, therefore, a lesser net price for 
 its product, but the railroads are obliged to so adjust 
 rates that practically every mine can reach a market. 
 
 The rate on refined petroleum between New York and 
 Chicago is 2.j\ cents per 100 pounds, the average rate 
 paid north of the Ohio and east of the Mississippi Rivers 
 being from eight to ten cents per 100 pounds. From To- 
 ledo to Atlanta the rate is 48 cents, from Whiting 46J 
 cents, from New Orleans 35 cents. The rate from Chicago 
 to the Missouri River is 22 cents, to St. Louis ten cents ; 
 while the rate from the Kansas field to St. Louis is 17 
 cents. One hundred pounds of refined oil contain ap- 
 proximately sixteen gallons which, at an average price 
 of \2\ cents a gallon at the refinery, would aggregate $2. 
 The price per gallon to the consumer is increased one 
 cent with each increment of seven cents in the freight 
 charge. 
 
 The principal biscuit company receives from $8 to 
 $16 per 100 pounds for its crackers and cakes, averaging 
 $10 per 100 pounds for its leading brand. From its 
 New York plant to Boston the freight rates are 19 cents 
 per 100 pounds, to Atlanta 62 cents. The rate from 
 Chicago to Montgomery is 69 cents, to Houston 81 
 cents, to Denver 97 cents. From either New York or 
 Chicago to the Pacific Coast the rate is $1.60. These 
 rates apply to carload lots, all goods being sold deliv- 
 ered, the company absorbing the freight. The retail 
 price is the same all over the United States as it is 
 with shoes, cigars, soap, proprietary medicines and dozens 
 of other familiar articles. 
 
Transportation Charge and Prices 59 
 
 On cotton, the great staple product of the South, the 
 freight rate structure has been in process of develop- 
 ment even a longer time than that affecting the move- 
 ment of grain from the West. From the plantation into 
 Memphis, the largest inland cotton center of the United 
 States, a typical rate is 30 cents per 100 pounds for 
 one hundred and fifty miles. From Memphis to Boston 
 the rate is 57^ cents, and from Memphis to the Gulf 
 30 cents per 100 pounds. From Augusta, Ga., a central 
 market of the Eastern cotton growing district, the rate 
 to Charleston and Savannah is 21 cents, to Brunswick 
 23 cents and to Norfolk 26 cents per 100 pounds. A bale 
 of cotton contains five hundred pounds and is therefore 
 worth, at II cents a pound, $55. The aggregate trans- 
 portation charge on this bale from the plantation, one 
 hundred and fifty miles from Memphis, to Boston, is 
 
 $4-27-_ 
 
 Mainly because of the rapid shifting of the sources of 
 supply, there has not yet been developed a stable struc- 
 ture of rates for the movement of lumber in all parts 
 of the United States. By way of illustration, however, 
 it may be said that a fair average rate on lumber into 
 Memphis from the forests of Arkansas is six cents per 
 100 pounds, or $2.40 per 1,000 feet. Lumber going from 
 Memphis to New Orleans for export will pay $4.80 
 or a total transportation charge from the forest of $7.20 
 per 1,000 feet. A fair average rate to the markets in 
 Ohio and Indiana is $8 per 1,000 feet, a total transporta- 
 tion charge from the forest of $10.40. This is on 
 the kind of lumber that in 1905 and 1906 sold at about 
 $40. The rate on yellow pine from New Orleans to 
 Chicago is 24 cents per 100 pounds. 
 
 There is an equalization of rates on the iron ore from 
 the upper lakes in that the rates of the boat lines from 
 the ore mines are the same to each of the Lake Erie 
 ports. From thence to the furnaces they are adjusted 
 under the policy of the railroads to make the transporta- 
 tion charge on the raw material required to make a ton 
 of pig-iron approximate the same amount at each of the 
 competing furnaces of southern Ohio, Pittsburg, Wheel- 
 
6o Railroad Freight Rates 
 
 ing, in the Mahoning and Shenango Valleys, and even 
 as far as the Schuylkill Valley. How closely this equal- 
 ization is effected is shown by the fact that the trans- 
 portation charge on the ore, coke and limestone required 
 to produce one ton of pig-iron is as follows in these 
 respective districts: At the furnaces on the Mononga- 
 hela River in the Pittsburg district, $5.82 ; at the furnaces 
 of the Mahoning and Shenango Valleys, $5.57; at the 
 furnaces of the Wheeling district, $5.78. These charges 
 compare favorably with those at the furnaces on the 
 Lake Shore in the Chicago district, which aggregate 
 $5.63 per ton of pig-iron, but are higher than at the fur- 
 naces on the Lake Shore in the Cleveland district, where 
 they aggregate but $4.72. The rates on coal, which 
 gives return loads to the cars that take the ore south 
 from the Lake Erie ports, are maintained at established 
 differences between the coal fields of Ohio, Pittsburg 
 and West Virginia. The rates in effect in the spring of 
 1908 were $1 per ton from southern Ohio, 90 cents 
 from southeastern Ohio, $1 per ton from the Pittsburg 
 field and $1.15 a ton from West Virginia. 
 
 The claim of the railroads that the rates on foodstuffs 
 are not high enough to enter as a factor in fixing the 
 selling price is fully substantiated by the statements 
 of the dealers in such products. That is, the conditions 
 are, with negligible exceptions, such that if the price ob- 
 tainable in the markets be sufficient to encourage the 
 growing of livestock, grains, dairy products, fruits or 
 vegetables, the rate of freight, from whatever locality 
 to whatever market, is sufficiently low to allow the pro- 
 ducer to enter that market. His profits are, however, 
 as a matter of course, diminished by the amount of 
 freight which he pays, and, as a rule, the farther the 
 place of production from the markets the greater is the 
 freight charge. The differences in the net return to 
 the producer are almost invariably reflected in the value 
 of the land, which is lower as the distance from the mar- 
 kets is greater. Largely because of the defective sys- 
 tem of mercantile distribution the grower of produce 
 
Transportation Charge and Prices 6i 
 
 obtains a smaller proportion of the price paid by the 
 consumer than accrues to the grower of any other agri- 
 cultural product. Where, as in this country, the oppor- 
 tunity for the extension of cultivation is practically un- 
 limited, a good market one season leads the farmers of 
 any district to increase their production up to the point 
 of minimum profit and the railroads are then besought 
 for lower rates : when unfavorable weather or other con- 
 ditions reduce their output they are also disgruntled. It 
 therefore rarely happens that the grower, especially of 
 the quickly perishable foodstuffs, is entirely satisfied with 
 the freight rates. 
 
 A controversy, that it is scarcely an exaggeration to 
 designate as typical, occurred several years ago between 
 the growers of watermelons in a Southwestern State and 
 the railroads conveying the melons to the primary mar- 
 kets. In comparatively a few years that region had be- 
 come so productive that the shipments of watermelons 
 over one road alone ranged from 1,400 to 1,800 cars 
 during a watermelon season, deliveries being made all 
 over Ohio and Indiana through dealers from those States 
 who came down and bought the melons at the farms. 
 The contention for lower rates had waxed so warm that 
 a reduction in the watermelon rate became the issue upon 
 which a legislative campaign was fought. The candidate 
 pledged to secure a reduction in the rate was elected, and 
 introduced a bill, which was enacted by the legislature, 
 making the rate to the nearest primary market 7^ cents 
 per 100 pounds. The railroad companies put this rate 
 in effect and used it as a basis for the lowering of rates 
 to the territory beyond. During the year of this rate 
 reduction the trafific department of the railroad company 
 referred to sent word to the farmers that the company 
 had handled 1,500 cars of melons that season, the prompt 
 shipment of which had been highly satisfactory to the 
 growers. It furthermore said that the movement of 
 these melons from that territory was a one-way traffic 
 entirely, it being necessary to send special cars empty 
 for the crop. These were necessarily stock cars that 
 
62 Railroad Freight Rates 
 
 there might be ample ventilation, but they had to be sup- 
 plied with extra slats in order that the melons might not 
 fall out. It was necessary for them to be switched in 
 requisite number on side tracks especially built adjoining 
 the farms where the fruit was grown ; that switching en- 
 gines be kept at work, putting cars in and taking cars 
 out all night and all day. The cars of melons, moreover, 
 had to be hauled on special trains at a high rate of speed 
 to get them to the markets before they spoiled. This 
 reduced the tonnage per train fifteen or twenty per cent. 
 below the maximum that could be hauled at the normal 
 freight train speed. A car with the average allowable 
 load of i,ioo watermelons would contain but about 
 twelve tons, although its capacity would be eighteen or 
 twenty tons : the weight of the car exceeded the weight 
 of the load. The switching and other special movements 
 necessitated the employment of night telegraph oper- 
 ators and other extra help at the melon fields. 
 
 All of these conditions led the assistant to the general 
 manager of the company to make an analysis of the ex- 
 penditure as compared with the earnings. Way bills 
 were abstracted and the receipts listed. A tabulation 
 was made of the revenue tonnage, the gross tonnage, 
 the tare weight, and the expenses incurred in behalf of 
 the traffic. He found that the handling of the 1,500 cars 
 of watermelons involved a loss to the company of $12,000 
 if the expenses of operation alone were considered. 
 
 The results of this investigation were brought to the 
 attention of the traffic department and the next spring 
 it sent a circular to the farmers in the truck region urg- 
 ing that the watermelon acreage be reduced, as the rates 
 on that business were not remunerative, and stating that 
 the railroad would not undertake to handle it except in 
 the regular cars that were brought into the territory 
 in the ordinary course of traffic ; that there would be no 
 special trains, nor special service of any character. The 
 melon growers at once notified the State Railroad Com- 
 mission, which, in turn, requested the railroad company 
 and the melon growers to attend a meeting to discuss the 
 
Transportation Charge and Prices 63 
 
 whole subject. When the meeting convened the chair- 
 man called upon the railroads to say why they had 
 caused so much trouble. The railroad representative, 
 who was the aforesaid assistant to the general manager, 
 stated that as he had been invited to attend the meeting 
 it might be proper for whomsoever had instigated it to 
 open the discussion. Several shippers made statements 
 of their complaints, all admitting, however, that the 
 melon business had become very profitable, — one grower 
 saying that $300 to $500 per car was being made out of 
 a crop. The railroad representative then made reply, 
 showing the loss to the company from handling the 
 business for the previous year, and stated that unless 
 cost for the handling and something by way of profit 
 could be obtained, the company would prefer to move 
 other crops. He showed that it had been necessary to 
 park 350 to 400 especially prepared stock cars in the 
 melon territory ; that it had taken a month or six weeks 
 to gather these cars, which had to be hauled empty to the 
 melon fields. He then pointed out that the rate per melon 
 was less than a cent and a quarter, whereas it had cost 
 the farmer four or five cents per melon to bring it by 
 wagon the one or two or three miles to the railroad track. 
 The chairman objected to some of the analyses, espe- 
 cially to this contrast of four or five cents per melon 
 for the wagon haul from the farm with the cent or a cent 
 and a half per melon for the railroad haul of two hun- 
 dred miles. When the railroad man had finished, farmers 
 from all over the room began to ask questions directly 
 of him. They wanted to know how much they should 
 pay to afford the railroad some slight profit. They were 
 told 12 or 12J cents. The chairman said : " The 
 rate cannot be changed. It has been fixed by 
 law at 7^ cents and that is the rate. I am here to 
 protect the people of these counties." The railroad man 
 suggested that his company might be willing in addi- 
 tion to affix the necessary slats to the stock cars and 
 perform the switching for $5 to $6 per car. The farmers 
 were willing to accept this, but the chairman insisted that 
 
64 Railroad Freight Rates 
 
 it was contrary to law, and finally said in his wrath, " If 
 you men here are going to deal with the railroad company 
 you can do it without me. This meeting is adjourned." 
 
 With one exception the farmers remained in the hall 
 and expressed a willingness to pay a rate of 12 cents 
 per 100 pounds. 
 
 Returning to the main discussion, we have found 
 that the rates on raw materials are so adjusted as to per- 
 mit 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 appreci- 
 able 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 these 
 heavier commodities, however, is far less in propor- 
 tion to the wage of the day laborer as well as to the in- 
 comes 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 in- 
 adequate 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 rail- 
 road 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 
 
Transportation Charge and Prices 65 
 
 which the transportation is conducted. The large cars, 
 with a capacity of from thirty to fifty tons, and the pow- 
 erful 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 rev- 
 enue. 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 
 difiference 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 mar- 
 ket, raw material from reaching places of manufacture, 
 or finished products from distribution. While the differ- 
 ence of a cent or two in the rate of freight may not in 
 the least interfere with the conduct of industry or com- 
 merce 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 manufac- 
 turer 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 Michi- 
 gan 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, 
 OT where they may have come from. A difference, how- 
 
66 Railroad Freight Rates 
 
 ever, of a few cents a hundred pounds in the rate of 
 freight may have led the hardware dealer to have pur- 
 chased 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 popula- 
 tion, 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 surround- 
 ings. Producers, manufacturers, wholesalers and re- 
 tailers 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 advan- 
 tage over a competitor of another locality is therefore 
 promptly made the subject of complaint. 
 
 The pressure brought upon the railroads by such com- 
 peting 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. 
 
CHAPTER VII 
 
 THE REGIONAL RATE STRUCTURES 
 
 An examination will disclose that the freight rate 
 structure of each section of the country has been de- 
 termined by its geographical situation, its material re- 
 sources, its material needs, its physical relation to sources 
 of supply and to markets, its transportation facilities 
 both by rail and by water, and its position in the aggre- 
 gate of these relations with respect to other sections of 
 the country. The problem forced by these relations upon 
 the railroads has been to develop that adjustment of 
 rates which serves the economic needs of each section. 
 In the solution, which has in every case been through 
 long struggles and compromises between competing 
 railroads and competing communities, the distance over 
 which commodities are carried — that is, the length of 
 the haul — is always a large and often the chief factor 
 in determining the rate. Frequently, however, the 
 length of the haul is subordinated by other factors. This 
 is conspicuously the case with 
 
 (l) THE FREIGHT RATE STRUCTURE OF NEW ENGLAND 
 
 At the close of the Revolution the commerce of Boston 
 exceeded that of New York. When the merchant marine 
 of the United States was foremost on the ocean, the 
 shipping and shipbuilding interests of Boston were the 
 greatest in the country. Throughout a large part of 
 the nineteenth century the city was noted for the manu- 
 facture of iron, the smelting of copper, the making of 
 furniture and various wares from wood. 
 
 That this condition no longer exists was sharply 
 brought to the attention of the people of Massachusetts 
 by Governor Russell, who presented, in 1892, during 
 
 67 
 
68 Railroad Freight Rates 
 
 the term of his administration, a list of one hundred and 
 thirty iron mills and factories that had gone from the 
 State. Weymouth is now at the beginning of an effort 
 to resurrect the shipbuilding industry that likewise had 
 died. The smelters have migrated to the ore beds. Su- 
 premacy in the manufacture of furniture passed long 
 ago. The prestige in grain export is maintained only 
 by a continual struggle against advancing odds. The 
 gain in the total imports and exports of Boston does not 
 keep pace with that of the other Atlantic ports. It is 
 natural that with the development of the country in- 
 dustry should pass to the source of raw material; that 
 as the grain regions pursue the star of empire their prod- 
 uct for export should go by the short and level routes 
 to the outlets on the north and on the south. Yet it must 
 be remembered that while New York was forging great 
 lines of communication with Chicago, the surplus wealth 
 of Boston was not being used to establish similar channels 
 to that gateway to the West, but in building railroads from 
 the West tributary to that gateway. The eastbound 
 traffic of these western roads has been poured in increas- 
 ing measure into the channels that lead to New York, 
 Philadelphia and Baltimore. While Boston was most ac- 
 tive in financing these lines beyond Chicago, she permit- 
 ted her own direct connection with the West to consist 
 of a single track railroad which remained a single track 
 railroad for thirty years. There was once a project for 
 a great and direct through line to the West, but the 
 State laws governing investments in railroads killed it 
 in its birth. Boston still, however, maintains an indus- 
 trial and commercial eminence ; the manufacturing towns 
 of Massachusetts, southern New Hampshire, northern 
 Connecticut and Rhode Island are prosperous. This 
 entire section is in the same general traffic district as 
 Boston, sharing in its advantages and disadvantages. 
 It is pre-eminent in the manufacture of boots and shoes, 
 cotton, woolen and worsted goods, leather articles of all 
 kinds, paper, rubber goods, and other manufactures 
 that require delicate and skilled workmanship in mills 
 
The Regional Rate Structures 69 
 
 and factories of elaborate design and expensive con- 
 struction. A foremost requisite for the continuance of 
 this prosperity is therefore the perpetuation of the skilled 
 labor. That the people of these States are awake to this 
 necessity would appear from the propositions for the 
 establishment of industrial schools and from the atten- 
 tion being given to sanitation and other phases of indus- 
 trial welfare. 
 
 Only to a negligible extent does New England pro- 
 duce the raw material of any of her industries ; her popu- 
 lation furnishes a market for but a fraction of the prod- 
 uct. Therefore the transportation agencies must not 
 only furnish the facilities for bringing in raw material 
 and taking out the finished product, but the rates must 
 be so adjusted that the raw material may be profitably 
 brought in, and that the products may be advantageously 
 sold in the widest markets. This is the governing 
 consideration, because of the necessity for maintaining 
 the manufactures of New England in competition 
 with those of the principal competing region — that ter- 
 ritory which extends from New York and Brooklyn 
 through central New Jersey into southern Pennsylvania 
 and northern Delaware. 
 
 The railroad adjustment fostering this purpose is that 
 under which the rates on the raw material of manufac- 
 ture,- coming from west of a line drawn from Buffalo 
 through Pittsburg and Wheeling, are the same to every 
 point in New England, and but a trifle, from 2 to 7 
 cents per 100 pounds, higher than on that material to New 
 York. The rates on all of the manufactured products 
 going out of New England to west of a line drawn from 
 Cleveland to the Ohio River are the same as the rates 
 from New York to the region west of that line. That 
 is, for the purpose of reaching the markets of the popu- 
 lous regions that lie to the north of the Ohio and west of 
 the Mississippi River, not only is every place of pro- 
 duction in New England placed on a parity with 
 every other place of production in New England, but 
 every place of production in New England is 
 
70 Railroad Freight Rates 
 
 placed on a parity with the great metropolis of 
 the United States. The same rates spread, Hke 
 a blanket, over the entire region. It is also to be 
 remembered that to but a small extent does sterile 
 New England now produce the food required within her 
 confines. Here again there is dependence upon the rail- 
 roads which bring in foodstuffs from the West and 
 South at rates so very little higher than the rates to New 
 York that the transportation charge upon the consumer's 
 unit of meats, dairy products, grains, fruits or vegetables, 
 is practically the same as in the metropolis. 
 
 The rates governing the interior traffic of New Eng- 
 land are embodied in local tariffs which are issued by 
 each road for itself and are ordinarily on a mileage basis. 
 Along the Atlantic Coast, however, the steamboats keep 
 the rates of the railroads between Boston and the ports 
 of Maine to a somewhat lower level. The steamboat 
 rates between Boston and Portland, for example, range 
 from 20 cents on merchandise of the first class to 6 cents 
 on that of the sixth class. The railroads meet these 
 rates, observing the mileage basis, however, to inter- 
 mediate stations, even though the rates be higher than 
 to the further station having water communication. Thus 
 the rail rate from Boston to a station immediately south 
 of Portland is 2i cents on merchandise of the first class 
 and 7 cents on that of the second class. 
 
 (2) THE TRUNK LINE AND CENTRAL TRAFFIC TERRITORY 
 
 New York, Philadelphia and Baltimore, each a sea- 
 port and the metropolis of its respective State, naturally 
 became commercial rivals as their means of communica- 
 tion extended further into the interior. The Erie Canal, 
 connecting New York with the Lakes, led Pennsyl- 
 vania to devise the State Line of Public Works for the 
 purpose of giving Philadelphia direct means of com- 
 munication to the west of the Alleghany Mountains, and 
 in turn Maryland chartered the Baltimore and Ohio 
 Railroad Company to connect the City of Baltimore with 
 
The Regional Rate Structures 71 
 
 the Ohio River. The intense rivalry between the cities 
 was in evidence in 1854, when the President of the Balti- 
 more and Susquehanna Railroad, extending from cen- 
 tral Pennsylvania toward the South, vowed that freight 
 would never be carried more cheaply to Philadelphia 
 than over his line to Baltimore. 
 
 The main stems of the first lines from the East led, 
 one from New York City through the central part of 
 the State to Buffalo, and one through the southern tier 
 of counties to Salamanca ; one from Philadelphia to 
 Pittsburg; and one from Baltimore to Parkersburg. 
 These were designated as the Trunk Lines and the region 
 between the seabpard and their western termini as the 
 Trunk Line Territory. 
 
 From these western termini of the Trunk Line rail- 
 roads, lines, radiating like branches from the trunk of a 
 tree, were built across Ohio, Indiana and Illinois toward 
 the West: transverse lines were also constructed con- 
 necting the interior of these States with the Lakes on 
 the north and with the Ohio River on the south. 
 
 Even in the days prior to the railroads the water 
 communication and other advantages of location had 
 caused Chicago to become the gateway to the West and 
 Northwest, St. Louis to the West and Southwest, and 
 Cincinnati to the South. These three cities, each an 
 immediate market and a distributing center of impor- 
 tance, naturally, therefore, were the goals of the lines that 
 were stretching from the Atlantic seaboard, and each 
 of the four westward trending companies gained access 
 to these cities over the rails of directly connecting roads. 
 Each of these lines continually strove to carry augment- 
 ing quantities of merchandise to the West, and its en- 
 deavors were seconded by the merchants and manufac- 
 turers who sought to extend the markets of their respec- 
 tive cities. Eastbound the rivalry was for the shipments 
 of grain, of which the greater portion, even until the 
 close of the decade beginning with 1870, came from 
 the farming lands between the Alleghany Mountains and 
 the Mississippi River. 
 
72 Railroad Freight Rates 
 
 The competition inevitably became bitter between the 
 railways and between the termini which they served. 
 One railway would cut the tariff rates to the East, the 
 others would meet the cut and perhaps make a deeper 
 cut. The rates would be cut on traffic to the West. 
 There would be retaliation and retaliation in return. 
 The weakest and worst situated lines naturally had to 
 fight the hardest and were the first and most persistent 
 rate cutters. Throughout this period the rebate spread like 
 a fungus: a railroad company, desiring to obtain the 
 traffic of a heavy shipper, would offer him a secret rate ; 
 other railroads would offer secret rates to other ship- 
 pers, until neither railroad nor shipper knew what rates 
 were being paid other railroads by other shippers. In- 
 deed one shipper would not know what rate a compet- 
 ing shipper on the same railroad was paying. Rate wars, 
 beginning not long after the close of the Civil War, were 
 almost incessant during the following decade. They ap- 
 plied to traffic, not only between the three great west- 
 ern cities and the seaboard, but developed on traffic be- 
 tween intermediate cities. They not only afifected the 
 through eastern and western lines, but involved the 
 transverse lines leading north and south. These trans- 
 verse lines carried traffic to the Lakes, whence it was 
 sent east in competition with the railroads ; they car- 
 ried traffic to the Ohio River, whence it was sent west in 
 competition with the railroads. Any one of these north 
 and south lines found it profitable to compete in its north- 
 ern territory with the Trunk Line leading to the East 
 from that region by taking traffic to a junction in the 
 South and delivering it to the Trunk Line leading east 
 from that region, or vice versa. It could use the east- 
 bound Trunk Line at the North, or the Trunk Line at 
 the South, as a leverage wherewith to obtain return 
 traffic from these lines and induce them to make arrange- 
 ments in its interest. 
 
 Through these various causes the rates of this entire 
 territory between the seaboard and Chicago and St. 
 Louis and Cincinnati fell into chaos. The shippers of 
 
The Regional Rate Structures 73 
 
 neither Baltimore nor Philadelphia were willing to pay 
 as high a rate to the West as applied from New York, 
 nof did they regard as satisfactory the application to 
 their cities from the West of the same rate as to New 
 York. The main contention was that the shorter dis- 
 tance between their cities and the West entitled them to 
 lower rates. After long continued conflict an arrange- 
 ment was reached whereby Philadelphia was granted 
 lesser rates than to and from New York and Boston, 
 and Baltimore a lower rate than to and from Philadel- 
 phia: these are the Baltimore and Philadelphia differen- 
 tials. Although the specific rates applying on eastbound 
 traffic and on westbound traffic to and from these cities 
 under this arrangement have been changed several times, 
 the principle is still recognized and differential rates still 
 exist. Their establishment was but one step toward 
 bringing harmony out of chaos. The bitterness of the 
 rivalry was in some further degree ameliorated by the 
 fact that the growing importance of New York led the 
 lines that originally terminated in Philadelphia and Bal- 
 timore to obtain entrance to the metropolis. 
 
 The complexity of the situation to the west of the Trunk 
 Line termini led to conflict after conflict between the rail- 
 roads there that devastated their revenue : agreement 
 after agreement, entered into for the maintenance of 
 rates, was broken almost as soon as it was made, with re- 
 sulting demoralization. This region between the western 
 termini of the Trunk Lines and Chicago, St. Louis and 
 Cincinnati was designated as the Central Traffic Terri- 
 tory. As a Trunk Line Association had been formed 
 for the purpose of bringing about and maintaining har- 
 mony between the railroads in the Trunk Line Terri- 
 tory, so also was a Central Traffic Association formed to 
 the same end. There was, however, not only difficulty 
 in the way of maintaining rates, but the different rail- 
 roads had so interlaced throughout the territory that it 
 was difficult to determine what rates should be main- 
 tained. For example, freight between Columbus and the 
 seaboard could be sent by way of Cleveland and Buffalo, 
 
y4 Railroad Freight Rates 
 
 by way of Pittsburg, or by way of Wheeling or Parkers- 
 burg. How the rate from Columbus to the seaboard 
 should be made and how it should apply is but one iHus- 
 tration of the perplexities that existed over the entire 
 region, and they were aggravated by the part taken in the 
 east and west traffic by the north and south lines. 
 
 A long step toward the solution of this phase of the 
 problem was taken in 1876 by the device of the Trunk 
 Line Percentage System. The rate between Chicago 
 and New York, whatever it might be, was designated as 
 100 per cent. The rate to or from certain principal in- 
 termediate points that were common to two or more 
 railroads was made a fixed percentage of the rate to or 
 from Chicago ; that is, the rate from New York to Pitts- 
 burg became 60 per cent., to Cleveland 71 per cent., to 
 Detroit 78 per cent., to IndianapoHs 93 per cent., and to 
 Peoria no per cent, of the New York-Chicago rate. The 
 rates from the West to the East were also determined by 
 these percentages from common points. That is, the rate 
 from Indianapolis to New York was fixed at 93 per 
 cent, of the rate from Chicago, from Detroit 78 per cent., 
 from Cleveland 71 per cent, and from Pittsburg 60 
 per cent. It should be said that at first the percentages 
 applying to the East and from the West, or vice versa, 
 were not identical at every common point. The adjust- 
 ment which the system obtained throughout succeeding 
 years finally brought about this result. The percent- 
 ages fixing these rates at the common points were origi- 
 nally nearly, if not exactly, the ratio borne by the dis- 
 tance over the shortest " worked and workable route " 
 between a common point and either Chicago or New 
 York, to the short line distance between those points. 
 The rates to and from stations intermediate to the com- 
 mon, or " basing points," were made by adding the local 
 rate to or from the intermediate point to the basing point 
 rate. 
 
 This method of construction frequently led to the rate 
 at an intermediate station being higher than the rate at 
 either the basing point to the east or the basing point 
 
The Regional Rate Structures 75 
 
 to the west of that station. A north and south line 
 would still take through east or westbound traffic, for 
 example, from a station on the southern part of its line 
 at the through rate applying from that station, and de- 
 liver it to an eastern or western Trunk Line at a junc- 
 tion on the northern part of its line even although the 
 through rate from that junction were higher than the 
 through rate from the station at which the traffic origi- 
 nated. When the Interstate Commerce Law became 
 effective in 1887 the railroads of the Trunk Line and 
 Central Traffic Territory, in their zeal to comply with 
 its provisions, at once set about a general revision of their 
 tariffs in order that no rate might be lower from a far- 
 ther than from an intermediate station on the same line, 
 or, in other words, that traffic might not be hauled over 
 a longer distance at a lesser rate than for a shorter dis- 
 tance over the same line, and in the same direction. The 
 Trunk Line Percentage System was so revised that all 
 rates eft'ective thereunder were based exactly upon dis- 
 tance — due allowance being made for a loading and an 
 unloading charge — and in no case, under its most strict 
 construction, was the long and short haul clause of the 
 Interstate Commerce Law violated. This abolished the 
 method of making rates from intermediate stations in the 
 way theretofore customary, and it also minimized such 
 carrying of east and west traffic, as violated this clause, 
 over the roundabout routes formed by the north and 
 south lines. 
 
 This arrangement worked badly from the first, dis- 
 turbing industrial and commercial conditions at many 
 places. Shippers, whose business had developed under 
 the previous rate status, found themselves handicapped by 
 having to pay higher rates than competitors at other 
 places with whom their rates had theretofore been on a 
 parity: the north and south lines chafed at being de- 
 prived of a goodly share of traffic; established chan- 
 nels of trade in many instances were dislocated. In 1892 
 a further revision of the Percentage System was begun 
 that took into account these commercial and industrial 
 
76 Railroad Freight Rates 
 
 conditions, and it resulted, in 1896, in the adjustment 
 which, with a few changes, is in effect at present. Rates 
 for the eastern and western traffic are applied to groups 
 of stations, each focused more or less directly upon a 
 central basing point, but the rates as a whole bear only 
 an indirect relation to distance. The long and short haul 
 principle is still, however, rigidly observed in this terri- 
 tory; that is, on interstate traffic. 
 
 Under the present grouping, for instance, the 100 
 per cent, rate from and to Chicago applies throughout 
 a belt of Indiana, extending southward to Louisville: 
 the 87 per cent, rate applies throughout a " shoestring 
 district" extending from above Ft. Wayne on the north 
 down through Cincinnati and almost to Parkersburg 
 on the south. One cause leading to such a northerly and 
 southerly prolongation of a group has been the demand of 
 a north and south line that it be not absolutely prohibited 
 from engaging in east and west traffic in conjunction with 
 an east and west line. This has been met by the applica- 
 tion of the same rate throughout the length of the north 
 and south line, thereby permitting it to take traffic at the 
 same rate from any point of origin on its line by way 
 of any of its junctions with an east or west line. 
 
 The Percentage System has not been strictly observed 
 throughout the territory in that here and there rates are 
 made by the application of specific instead of percentage 
 differences above or below the rate from a basing point. 
 For example, as a result of many years of controversy 
 between competing iron manufacturers and conflict be- 
 tween the railroads serving the several districts, the 
 rates to the East from the Mahoning and Shenango Val- 
 leys have been made 2 cents per 100 pounds higher than 
 from Pittsburg, from the Cleveland district 3 cents 
 higher than the Pittsburg rate, and from the Johnstown 
 district i| cents less than the Pittsburg rate. 
 
 The grouping under the present percentage adjust- 
 ment, in combination with the Philadelphia and Balti- 
 more differentials, has carried the rates applying to these 
 respective cities for considerable distances back into the 
 
The Regional Rate Structures ^^ 
 
 interior, thus forming a Baltimore group, which includes 
 an area extending northward through Maryland and a 
 considerable section of southern Pennsylvania; and the 
 Philadelphia group, which includes the stations within 
 a radius of two hundred miles or so to the north and east 
 of Philadelphia. The rate, for example, from the West 
 to Altoona is the same as to Baltimore, to Wilkesbarre 
 the same as to Philadelphia. 
 
 It will be perceived that the Trunk Line Percentage 
 System determines the rate to or from a percentage point 
 only after the basic rate between Chicago and New 
 York has been established. When that rate has been 
 determined, whether upon the traffic that moves under 
 the class tariffs or that which moves under commodity 
 tariffs, the rates for all intervening stations, and sta- 
 tions as far west as the Mississippi River crossings from 
 Cairo on the south to Dubuque on the north, are auto- 
 matically adjusted by the percentage of the basic rate 
 applying to the group to which any particular station is 
 assigned. All of these rates, therefore, change auto- 
 matically as the basic rate changes. 
 
 The Trunk Line Percentage System affects in the main 
 the rates upon the commodities that flow in the main 
 traffic channels to and from the Trunk Line and Central 
 Traffic Association Terminals. It does not determine 
 the rates upon which the merchandise is carried in this 
 region from the distributing centers to the retail dealers, 
 or upon the merchandise which, originating at one, is 
 shipped to another place in its interior. Although it often 
 happens that such rates are influenced by the Trunk Line 
 Percentage rates, they are primarily and in the main 
 determined by each road for itself, subject to such over- 
 sight as may have been delegated by a State to a Public 
 Service Commission or to a State Railroad Com- 
 mission and to such modification as may be caused 
 by one or another phase of competition. In the Central 
 Traffic territory maximum local rates for the State of 
 Ohio were specifically fixed by the State Legislature many 
 years ago, and have the distinction of being lower than 
 
78 Railroad Freight Rates 
 
 any similar rates in any other portion of the United 
 States that has population and traffic of a corresponding 
 density. In 1896, when the revised Trunk Line Per- 
 centage System was made effective, a scale of minimum 
 rates governing local traffic was also adopted by the lines 
 of the Central Traffic Territory. The tariff promulgated 
 by the Ohio Legislature restricts the local charge on 
 commodities of the first class to 5 cents per 100 pounds 
 up to thirty miles, but allows a handling and a terminal 
 charge in addition, of which the railroads have not 
 availed. This Ohio scale was extended into Indiana by 
 some of the lines traversing both States, but has not been 
 generally adopted by all the railroads of that State. The 
 local rates of the railroads in Illinois are fixed by the Illi- 
 nois Railroad and Warehouse Commission. 
 
 The manner in which the Trunk Line Percentage 
 System affects the interior rates in the Central Traffic 
 Territory is instanced by the following example: The 
 distance from Chicago to Toledo by the short line is two 
 hundred and thirty-four miles, the rate being determined 
 by the Central Freight Association tariff of 1896. The 
 short line from Chicago to Detroit is two hundred and 
 seventy-two miles, but as Detroit takes the same New 
 York percentage as Toledo it is accorded the same rate 
 from Chicago in competition with Toledo. Port Huron, 
 three hundred and twenty-five miles from Chicago, takes 
 the same New York percentage as Detroit, and the lines 
 leading from Chicago to Port Huron insist that its rates 
 from that city shall be no higher than the rate to Detroit. 
 
 (3) THE TRANS-MISSISSIPPI AND TRANS-MISSOURI TER- 
 RITORY 
 
 The fan-like opening out of the channels of traffic from 
 the East at the western termini of the Trunk Lines, 
 broadens through Chicago and St. Louis into a rim that 
 extends from the boundary of Saskatchewan to the line 
 that separates New Mexico and Arizona from the Mexi- 
 can Republic. 
 
The Regional Rate Structures 79 
 
 As the lands to the west of the Mississippi River were 
 attaining a population, Chicago and St. Louis were the 
 principal sources of supply of the staple articles of use, 
 and they continued to be the main distributing centers 
 as the frontier moved beyond the Missouri River. North- 
 ern lUinois and central Iowa were naturally tributary 
 to Chicago and southern Illinois, and central and south- 
 ern Missouri to St. Louis. Throughout central Illinois, 
 southern Iowa, northern Missouri, Kansas and Nebraska 
 the merchants of the two cities and the railroads serv- 
 ing them came into competition, which waxed fully as 
 bitter as that which had earlier developed between the 
 great cities of the North Atlantic seaboard. There was 
 then no common interest between the railroads extending 
 from Chicago to the Missouri River and the railroads ex- 
 tending from St. Louis to the Missouri River. A succes- 
 sion of rate wars entailed losses of millions of dollars to 
 their revenues and led to the formation of associations 
 through which it was endeavored, as through similar 
 associations in the East and at about the same time, to 
 bring about agreement as to rates and the elimination of 
 friction. 
 
 The cutting of rates during these wars had affected 
 to an extent the revenues of the lines east of Chicago 
 and St. Louis, which frequently were obliged to partici- 
 pate in the low through rates made by their western 
 connections, but the adoption of the Trunk Line Per- 
 centage System protected them in great measure, as 
 the making of the rate between New York and St. Louis 
 116 per cent. — originally it was 129 per cent. — of the 
 rate between New York and Chicago determined the 
 relative proportions that the eastern lines would accept 
 on trafific via those cities. It devolved upon the lines 
 leading to the West from Chicago and St. Louis to fix 
 some basis for the adjustment of the respective rates 
 from those cities into the competitive territory. After 
 much contention the lines from St. Louis were accorded 
 differences under the lines from Chicago to St. Joseph, 
 Atchison, Leavenworth, and Kansas City, the lower Mis- 
 
8o Railroad Freight Rates 
 
 souri crossings and to the Southwest generally, which, 
 ranging higher at first, were reduced to the gradation 
 from 20 cents per 100 pounds on merchandise of the 
 first class to 5 cents per 100 pounds on that of the fifth 
 class. Rates from the East were then made the same to 
 Omaha and Kansas City, because of the competition of 
 these cities as Missouri River distributing centers. It 
 will be perceived that no device similar to the Trunk Line 
 Percentage System was applicable. That system was 
 made feasible by the definite base line which rested upon 
 a populous New York at the one end and a populous 
 Chicago at the other; and also by its especial adaptabil- 
 ity to a territory comparatively narrow in width through 
 which the flow of traffic was in fairly direct channels. 
 Analogous conditions did not exist in the trans-Missis- 
 sippi and trans-Missouri territory; hence the system of 
 adjustment by " fixed differences " instead of per- 
 centages. 
 
 By the time of the adjustment of the differentials be- 
 tween Chicago, St. Louis, and the Missouri River, other 
 complications had arisen through the building of lines 
 that, without passing through either Chicago or St. 
 Louis, traversed Illinois from the east, crossed the Mis- 
 sissippi River at such places as Dubuque, Davenport, 
 Buriington, and Hannibal, and thence continued west. 
 At an early stage in the development of the Trunk Line 
 Percentage System the rate from New York to certain 
 of these Mississippi River crossings was as high as 122 
 per cent, of the Chicago rate. The 116 per cent, rate to 
 St. Louis, plus the rate from there to Kansas City, made 
 the lowest rate from New York to the Missouri River. 
 The greater proportion of this through traffic under 
 such an adjustment would go by way of St. Louis to 
 the detriment of lines crossing the Mississippi River at 
 the other points. These other lines naturally would not 
 tolerate such an arrangement, but by making rates as 
 low or lower than those via the St. Louis route would 
 secure a portion of the traffic. To eliminate the ensuing 
 contentions, the proportional rates on through westbound 
 
The Regional Rate Structures 8i 
 
 traffic to all the Mississippi River crossings, as far north 
 as Dubuque, were made the same as to St. Louis; and 
 the rate via any line from the Mississippi to the Mis- 
 souri was made the same as the rate between these rivers 
 over the short line between St. Louis and Kansas City. 
 The effect of this was to make the through rate from the 
 East the same via any of the Mississippi River crossings, 
 from as far north as Dubuque, and as far south as St. 
 Louis, to any of the Missouri River points, from as far 
 north as Omaha to as far south as Kansas City; and to 
 make the rate the same from any one of these Missis- 
 sippi River points to any one of these Missouri River 
 points. It should be remembered that in the earlier days 
 it was the policy of the United States government to 
 keep the navigable rivers free, as far as possible, from 
 obstruction by bridges, and the construction of a railroad 
 bridge across a great river was relatively by far a more 
 difficult and expensive enterprise than at present. There- 
 fore many a railroad terminated at one bank of a river, 
 and if there were rail connection from the opposite bank 
 transferred its traffic by ferry. Such great rivers as 
 the Mississippi and the Missouri became the natural 
 dividing lines between different groups of railroads, and 
 also the basing lines from which rates were calculated. 
 That the Mississippi River was made a basing line, how- 
 ever, was largely caused by the necessity for making 
 the crossings from Dubuque to St. Louis common points 
 from the East. St. Louis was thus on this basing line 
 while Chicago was not. The rate from the East via 
 Chicago to Omaha, for instance, was not made by adding 
 the rate from Chicago to Omaha to the rate from the East 
 to Chicago, but by adding the rate from the East to 
 Dubuque to the rate from Dubuque to Oniaha. This is 
 a cumbersome arrangement and the railroads are grad- 
 ually so altering the tariffs that the dividing line ex- 
 tends from Chicago through Peoria to St. Louis. This 
 is an illustration of the " sloughing off " of a rate ad- 
 justment made under conditions that have become ob- 
 solete, the railroads that once started from the western 
 
82 Railroad Freight Rates 
 
 bank of the Mississippi River having been absorbed by 
 the lines that formerly terminated at the eastern bank 
 of the river. Many of the through lines thus formed 
 cross not only the Mississippi, but the Missouri River, 
 and extend to Colorado and the farther West. 
 
 The conflicts between the lines extending from Chicago 
 to the Missouri River were essentially duplicated by 
 conflicts between lines reaching from Chicago to St. 
 Paul. Here the all-rail lines from the East via Chicago 
 to St. Paul were obliged to take cognizance of the rates 
 from the East to St. Paul via the Lakes and Duluth. 
 The rates between these cities from 1870 until along in 
 the next decade underwent frequent change and were 
 finally fixed by specific agreement between the lines in 
 interest at 75 per cent, of the rate from Chicago to 
 Omaha. 
 
 There was also trouble in the adjustment of the rate 
 from St. Louis to St. Paul. Lines reaching St. Paul by 
 a St. Louis connection only, were in opposition to the 
 lines reaching St. Paul by a Chicago connection, claim- 
 ing that the St. Louis to St. Paul rate should be little if 
 any higher than the Chicago to St. Paul rate. They 
 urged the competition of the Mississippi River between 
 St. Louis and St. Paul in support of this contention. 
 This was opposed by the Chicago lines, but after a long 
 struggle the rate was made 105 per cent, of the rate from 
 Chicago to St. Paul. The development at Kansas City 
 and the growth of traffic between that center and the 
 Twin Cities — the rates to and from St. Paul and Min- 
 neapolis are always the same — introduced another ele- 
 ment into the problem which was disposed of by making 
 the rate between Kansas City and St. Paul 25 cents 
 higher on merchandise of the first class than between 
 Chicago and St. Paul. Other adjustments have been 
 made to points in the interior of this triangle ; for exam- 
 ple, the rate from St. Louis to Des Moines is a percent- 
 age of the rate from St. Louis to St. Paul ; the rate from 
 Chicago to Des Moines is a percentage of the rate from 
 St. Louis to that city ; and the rates from Chicago to in- 
 
The Regional Rate Structures 83 
 
 terior points in Iowa, sucii as Cedar Rapids, Ottumwa 
 and Marshalltown, are in fixed relation to the rates from 
 Chicago to Des Moines. The rate from Chicago to 
 Sioux Falls is 104 per cent, of the rate to Sioux City, 
 and to Mankato a fixed amount higher than St. Paul. 
 That is, while in the Trunk Line and Central Traffic 
 Territory the rates are mainly adjusted on a percentage 
 basis, fixed differences being used where the percentage 
 system is not entirely suitable, in the trans-Mississippi 
 territory the rates are mainly adjusted by fixed differ- 
 ences, percentages being applied in a minority of cases 
 where their use is preferable. In either territory a change 
 in a rate between two commercial centers results auto- 
 matically in the changing of many other rates between 
 many other centers. 
 
 As the traffic developed between the lower Mississippi 
 region and the Missouri River, the rates from Memphis 
 to Kansas City were made 2 cents less than to Omaha, 
 and from Paducah, Columbus, Cairo, and Evansville 2 
 cents less than from Memphis. 
 
 The adjustments under the system of fixed differences 
 have resulted in the grouping of stations, just as the 
 adjustment under the percentage system resulted in 
 groups in the Trunk Line and Central Traffic Territory. 
 The Burlington rate, for example, applies to Davenport, 
 Moline, and other stations in the Burlington group; the 
 St. Louis rate to Alton, and other stations in the St. 
 Louis group; in eastern Kansas and western Missouri 
 the Kansas City rate applies at many stations ; and on 
 many kinds of traffic the Omaha rate applies to Lincoln 
 and intermediate stations. 
 
 The rates from the commercial centers to the station's 
 beyond the Omaha group in Nebraska, and beyond the 
 Kansas City group in Missouri and Kansas, are in some 
 instances made by adding the local rate from the Mis- 
 souri River to these stations to the rate to the Missouri 
 River; that is, by a combination on the Missouri River. 
 In many cases, and especially to the principal towns, such 
 as Wichita and Wellington in Kansas, the rate from 
 
84 Railroad Freight Rates 
 
 St. Louis is made a percentage of the combination rate, 
 95 per cent, perhaps, or, in some cases, as low as 80 
 per cent, of the combination on Kansas City. The lower 
 percentages usually apply to points to which there is a 
 line from St. Louis that does not pass through Kansas 
 City. Rates are thus made either on the Missouri River 
 combination or a percentage of that combination as far 
 west as Colorado. 
 
 The far-reaching effect of the rivalry between Chicago 
 and St. Louis is shown by the fact that the rates are the 
 same from these cities to Butte, Helena, Anaconda, and 
 Great Falls, the Montana Common Points. That is, a 
 through rate is common to each of these cities and there- 
 fore is the basis for rates to points beyond. 
 
 Denver, Colorado Springs, Pueblo, and Trinidad are 
 the Colorado Common Points to and from which the 
 rates on through traffic are the same. This has come 
 about because one system of railroads passes through 
 each of these points from the north to the south, and 
 another passes through each of these points from the 
 south to the north, it therefore being impossible for 
 either line, in competition with the other, to charge a 
 higher rate to one of these points than to another. 
 
 Denver is the first city of importance in the direct 
 westerly trend in whose commerce the Atlantic coast- 
 wise lines are an important factor. To secure traffic in 
 competition with the direct rail lines by way of Chicago 
 and St. Louis, the coastwise steamers from New York to 
 Savannah, in connection with the railroads leading west 
 from Savannah, established differentials under all-rail 
 rates ranging from 39 cents on merchandise of the first 
 class to 10 cents on that of the fourth class. This dif- 
 ferential was met by the vessels running from the At- 
 lantic seaboard to Galveston in connection with the rail 
 lines from Galveston to Denver, and is still in effect 
 both by way of Savannah and by way of Galveston. 
 
 Rates to stations beyond the Colorado points are made 
 by adding the local rates from the common points to 
 these stations to the rates to the common points. This 
 
The Regional Rate Structures 85 
 
 method applies as far as Salt Lake City, to which the 
 rates from the East are affected by the vessel rates from 
 New York to San Francisco. The rates to stations in 
 Wyoming and Montana are so adjusted that they may 
 obtain merchandise from either Denver or Salt Lake City 
 on a parity, so far as rail rates are concerned. 
 
 The rates from the East to Santa Fe and Albuquerque 
 are determined by the vessel rates to Galveston, plus the 
 rail rates from that port. The rates to the further in- 
 terior stations of New Mexico and eastern Arizona are 
 made by adding the local rates from Albuquerque to the 
 through rates thereto. 
 
 Throughout the entire region west of the Missouri 
 the railroads have endeavored, by making " jobbers' 
 rates," which apply on merchandise distributed by whole- 
 sale merchants, to permit each distributing center to 
 reach the markets it could fairly expect to reach in rea- 
 sonable competition with another distributing center. 
 
 The rate structure outlined in this section is that ap- 
 plying in the territory to the west of Chicago and St. 
 Louis, for the greater part on through westbound traf- 
 fic; that is, on the merchandise consisting largely of 
 manufactures of the various kinds that flow from east of 
 the Mississippi River for distribution among the popu- 
 lation in the Mississippi Valley and to its west as far as 
 the Rocky Mountains. The products that flow to the 
 East from this vast territory are principally grain and 
 grain products, livestock, and meat products, wool, lum- 
 ber, and bullion. Each of these great staples of traffic 
 moves under a special freight rate structure that has 
 developed to meet the peculiar requirements arising out 
 of the conditions of its production and distribution. 
 
 (4) SOUTH OF THE OHIO AND EAST OF THE MISSISSIPPI 
 
 In the Southeast problems of rate adjustment presented 
 phases still different from those of the Trunk Line and 
 Central Traffic Territory, or of the trans-Mississippi and 
 trans-Missouri region. The flow of the traffic is neither 
 
86 Railroad Freight Rates 
 
 predominantly east and west nor north and south, and 
 the competition of water craft affects the making of rail 
 rates at more points than in any other section of the 
 country. From Virginia to Florida the lands that slope 
 from mountain to savanna are washed by the Atlantic 
 Ocean, and the westward continuation of this lowland 
 belt by the Gulf of Mexico. Before the days of the rail- 
 roads there was communication by the Ocean and the 
 Gulf between the North Atlantic cities and Norfolk, 
 Richmond, Wilmington, Charleston, Savannah, Jack- 
 sonville, Pensacola, Mobile, and New Orleans; there 
 was communication by river between the Ocean and Co- 
 lumbia, S. C, Augusta and Macon, Ga. ; between the 
 Gulf and Columbus, Ga., Montgomery and Selma, Ala. 
 
 A very large proportion of the wearing apparel of 
 the people of this section — the fabrics and the made-up 
 garments, the hats, and shoes ; and nearly all of the 
 smaller manufactures, the more delicate appliances and 
 bits of mechanism — come from the New York and the 
 New England district. The effect of the communication 
 by coastwise vessels between the northern and the south- 
 ern seaports keeps down the rates of the railroads, not 
 only to the ports, but to the interior stations which can 
 be reached by the rivers or by the rail lines extending 
 from the ports toward the interior. 
 
 The rates are the same to-day via rail and via water 
 from the North Atlantic ports to Norfolk, the rate from 
 New York on freight of the first class being 32 cents per 
 100 pounds. From New York to Brunswick the all-rail 
 rate is 85 cents, the all-water rate 65 cents ; to Savannah 
 the all-rail rate is 82 cents, all-water rate 55 cents. To 
 Augusta and Columbia the all-rail rate is $1.08, and to 
 Macon $1.14; while the water and rail rates are, to 
 Augusta and Columbia 96 cents, to Macon $1.02. The 
 all-water rate to Mobile and to New Orleans is 70 cents ; 
 the all-rail rate to Mobile 75 cents, to New Orleans 95 
 cents. To Savannah, Mobile, and New Orleans prac- 
 tically all of the traffic from the North Atlantic seaboard 
 is carried by water. 
 
The Regional Rate Structures 87 
 
 The railroads are obliged to make approximately the 
 same rates as the water routes to the points having 
 water communication if they desire to carry any of the 
 traffic. To make the same rates to the intermediate 
 stations would be to reduce the revenue from the rail 
 traffic to a water basis, which the railroads cannot by 
 any means afford to do. The rate to an intermediate 
 station is, therefore, in many cases, made by adding the 
 local rate from the water point to that station, even 
 though this make a higher rate than to a water point 
 beyond. That is, the water point is a basing point, and 
 rates to points beyond are made by combining the local 
 rate from, with the water forced rate to, the basing 
 point. 
 
 An exception to this practice lies in that adjustment 
 of rates which followed the completion of railroads 
 leading from the Central Traffic Territory to Norfolk 
 and to Newport News, harbors through which it was 
 desired to do an export business in grain and grain prod- 
 ucts, meat and meat products from the West. That 
 they might share in this traffic in competition with the 
 ports to the North, these lines made the rates from the 
 West to Newport News and to Norfolk the same as the 
 differential rates from the West accorded by the Trunk 
 Lines to Baltimore. The rates via these lines for local 
 shipment to the interior of Virginia, because of the 
 sparse population and the scant traffic, were so much 
 higher than the low differential rate to Baltimore that 
 their rates from the West to stations far back in Vir- 
 ginia exceeded that rate which they had applied on 
 traffic to their termini. When the Interstate Commerce 
 Law took effect these lines, like their neighbors in the 
 Trunk Line Territory, hastened to observe the strict 
 construction of the long and short haul clause, and, there- 
 fore, to all intermediate points to which the rates from 
 the West had exceeded the rates to their termini, they 
 reduced the rates to a level with those at the termini. 
 This has made the rates from the West the same to 
 Roanoke, Lynchburg, Richmond, Petersburg, and Nor- 
 
88 Railroad Freight Rates 
 
 folk, which, in the parlance of the traffic officers, are 
 known as the Virginia Cities. Rates from Chicago to 
 points immediately south of the Virginia Cities make by 
 combinations on those cities, while rates from Cincinnati 
 and Louisville are lower than from Chicago by fixed 
 differences; lines from the West that reach these cities 
 over the more southerly and longer routes are obliged to 
 carry traffic at the rates thus made. 
 
 Basing points also arose through the extension of the 
 early railroads. These, at first, in the Southeast, as else- 
 where, were short local roads, taking the place of the 
 stage and wagon lines in the carrying of traffic between 
 the seaports and the adjoining territory. That they 
 might serve a wider area these local roads were ex- 
 tended ; every here and there a local road extending from 
 one distributing center, would cross a local road extend- 
 ing from another distributing center. Not only the 
 roads, but the respective distributing centers, would 
 compete for the business of the point of intersection and 
 its vicinity. For instance, as the line from Augusta 
 reached Athens, the line from Macon reached Athens, 
 and lines from Richmond and Norfolk, each of these 
 cities and each of these lines would compete for the trade 
 of Athens. Competition would make the rates to Athens, 
 which would, therefore, become a basing point. The 
 rate to a point beyond would be made by combining the 
 competitive rate to Athens with the local rate from 
 Athens to that point. The rate to an intermediate point 
 was also made in this way when the back combination 
 on Athens was less than the normal rate to the inter- 
 mediary point. 
 
 Yet again, in some cases, as a railroad extended to a 
 town in the proximity of another town served by a com- 
 peting railroad, it has had to make the same rates to it 
 that its competitors have made to the other, in order that 
 its merchants may be placed on a parity with the mer- 
 chants of the other town in supplying merchandise to 
 the consumers in the intervening country. Such com- 
 petition, in many instances, has made a basing point of 
 
The Regional Rate Structures 89 
 
 such a town, although it may be served by but one rail- 
 road. 
 
 These factors in the adjustment of rates in the South- 
 east, while unlike, are entirely analogous to similar 
 factors which produce like results in many parts of the 
 North and West, and the rates to and from the basing 
 points of the South facilitate the distribution of merchan- 
 dise just as do the jobbers' rates in the West. Here, as 
 in the West, there is the continual pressure of smaller 
 towns that are not basing points for rates that will en- 
 able them to do a jobbing business. Although it has 
 been severely criticised, this system of basing points 
 could not have developed solely for the benefit of the 
 railroads. The railroads must serve the needs of com- 
 merce; no artifice of man can stem the working of 
 economic law for any considerable time throughout so 
 considerable a territory. It was once universal in the 
 South, and still is customary at many places, that the 
 wholesale dealer allow credit for a long time to the re- 
 tail dealers in his vicinity; that is, that he carry them. 
 If the basing points be abolished and a scale of rates 
 fixed that uniformly increase with distance, the source of 
 supplies will be driven back to the source of production. 
 The retail dealer will no longer be able to keep as great 
 a variety of merchandise on the same capital, and as he 
 will not be able to so promptly replenish his stock, it 
 will no longer be so fresh. 
 
 The development of the interior portion of the South, 
 the region between the Ohio and Mississippi Rivers and 
 the mountains, naturally was but in its early stages when 
 the seaboard had attained a considerable population. 
 Before railroads were built into this interior region mer- 
 chandise was brought from the East via Pittsburg and the 
 Ohio River, and distributed by means of the wagon routes 
 and the smaller rivers from Cincinnati, Louisville, and 
 other distributing centers that had grown at points of 
 natural advantage. Here, as elsewhere, the first railroads 
 were short local lines, extending from the distributing 
 centers and charging local rates. As they were con- 
 
90 Railroad Freight Rates 
 
 structed southward their rates were held down by the 
 rates of the boats on the Mississippi River, in much the 
 same manner as were the rates of the lines along the 
 Atlantic Coast by the rates of the coastwise vessels. 
 This affected the rates not only to Memphis, New Or- 
 leans, and Mobile, but to Montgomery and Selma, to 
 which there is navigation by river from the Gulf. Indeed, 
 the rates even from Louisville to Nashville were modi- 
 fied by the Cumberland River, which is navigable from 
 the Ohio to Nashville. 
 
 The rail rate on merchandise of the first class from 
 Cairo to New Orleans, determined by watef competition, 
 is 75 cents. The competition of the river is now effective 
 only upon such low class freight as coal, cement, brick, 
 and various iron articles southbound; and northbound, 
 on lumber and molasses ; but the potential competition 
 still influences the rate adjustment. The line to New 
 Orleans is paralleled by a line to Mobile, which, to protect 
 the interests of that city, and consequently its own traffic 
 in competition with New Orleans, keeps the rate to Mo- 
 bile the same as the rate to New Orleans. The river- 
 compelled rates are not used for traffic to intermediate 
 stations, but, as in the Southeast, the rates to competitive 
 water points are used as bases for rates to local points 
 beyond, notwithstanding that rates to such local points 
 may be higher than to a farther point having water com- 
 petition. For example, the rate from Cairo to Jackson, 
 Mississippi, is higher than to New Orleans, and rates to 
 intermediate points are fixed in relation thereto. 
 
 Upon the rate from Cairo to New Orleans the rates 
 from the cities to the north of Cairo are determined by 
 fixed differences, St. Louis being 15 cents higher than 
 Cairo, or 90 cents, and Chicago 20 cents -higher than 
 St. Louis, or $1.10. 
 
 As the area nearer the mountains attained some de- 
 velopment, particularly after the utilization of the iron 
 and coal deposits, the railroads extended eastward from 
 the Mississippi region and the Ohio Valley, finally 
 through Chattanooga, Knoxville, and Asheville, leading 
 
The Regional Rate Structures 91 
 
 up to connection with the railroads that penetrate the 
 Southeast. These railroads across the mountains had, 
 from the start, scant traffic, but their connection with the 
 southeastern systems permits them to carry grain and 
 grain products, meat and meat products from the West 
 and Northwest, not only into the Middle South, but into 
 the far Southeast. They also opened channels for the 
 manufactures in the production of which Chicago, St. 
 Louis, Cincinnati, and Louisville were developing. 
 Thereupon ensued complications. Grain and grain prod- 
 ucts, meat and meat products had previously reached the 
 Southeast by way of the North Atlantic seaports and 
 thence by the coastwise transportation via the southern 
 ports. The low Trunk Line rates and the coastwise ves- 
 sel rates made lower through rates to the far Southeast 
 than would be accorded on a normal rail basis across the 
 Ohio River and over the mountains. To take such 
 products to the seaboard these rail rates had to be ad- 
 justed to meet the Trunk Line and coastwise rates to 
 the far Southeast. To the interior, however, normal 
 and, therefore, higher, rates were charged. 
 
 These lines from the Ohio River were not obliged, 
 under any stress of water competition, to make as low 
 rates upon manufactured articles to this southern in- 
 terior as the coastline railroads from the Northeast were 
 compelled to make by reason of the coastwise competi- 
 tion. The manufacturers and wholesale dealers of Chi- 
 cago, St. Louis, Cincinnati, and Louisville have, however, 
 continually besought the railroads to make the same rates 
 per mile to this territory as are made to it by the lines 
 from the East. The railroads responded by making the 
 same rates in the aggregate from Louisville to Atlanta 
 as are made from Baltimore to Atlanta. The situation 
 is still the cause of bitter contention. 
 
 Atlanta being the great commercial center of the 
 interior South, is the focal point of rate adjustment from 
 every direction from which traffic reaches this southern 
 interior. The customary era of conflict ended in the 
 rates being made the same to Atlanta from Cincinnati, 
 
92 Railroad Freight Rates 
 
 Louisville, Evansville, and Cairo. St. Louis is 23 cents, 
 and Chicago 35 cents higher than Cairo, traffic from 
 these cities passing at the same rate through any of the 
 Ohio River crossings. The rate from Memphis is 4 
 cents less than Cairo, and from New Orleans the same 
 as from Memphis. The rates to and from other cities in 
 this central part of the South are adjusted in relation 
 to the rates to and from Atlanta. 
 
 (S) TEXAS 
 
 Even had the Lone Star State formed part of the 
 original Union, it is doubtful whether railroad building 
 within its borders would have proceeded along different 
 lines. The first settlements, naturally, were along the 
 Gulf; of the original ports of entry, two or three were 
 literally blown away, and because of its excellent harbor, 
 Galveston outstripped the others. Merchandise brought 
 by vessel from the East to Galveston was distributed by 
 wagon, and then there was the tendency to shorten the 
 wagon haul by sending the boats up the Bayou to a 
 landing within but a few miles of Houston. 
 
 The first railroad construction was of the familiar 
 local line leading from the seaport. It took away from 
 the Bayou the traffic in high grade merchandise and car- 
 ried it into the interior from Galveston and from Hous- 
 ton. Traffic was of small volume, and rates necessarily 
 high. For distances of forty or fifty miles the railroad 
 could not charge more than the tolls of stagecoach and 
 wagon, or rates that would preclude the farmer from 
 using the railroads in preference to his own conveyance. 
 The rates from Houston, therefore, were scaled for 
 shorter and rather sharply advanced for longer distances, 
 until was reached the limit that the traffic could pay and 
 find a market. As the railroad was extended the appli- 
 cation of this rate was extended, it thereby becoming the 
 maximum rate charged to any station beyond that to 
 which it first applied. The designation " maximum " is 
 here used in accordance with the Texan usage to indicate 
 
The Regional Rate Structures 93 
 
 the highest rate charged for a commodity for any dis- 
 tance. Ordinarily a " maximum rate " in railroad no- 
 menclature means the highest rate that can legally be 
 charged between any two places, the railroads being free 
 to charge a lesser rate at their discretion. In Texas the 
 maximum rate for intrastate rate traffic is fixed by the 
 State Railroad Commission as the specific rate that must 
 be charged. 
 
 As St. Louis progressed as a distributing center, rail- 
 roads were built from that city toward the Southwest. 
 The government decreed that one railroad might be 
 built across Indian Territory from the east to the west 
 and another from north to south. There was a race; 
 the first line to cross the Territory from the north con- 
 nected at Denison with the line that had been extended 
 from Houston, but soon continued its own rails to the 
 southern and southwestern part of the State. Other 
 railroads from St. Louis passed through Missouri and 
 Arkansas into Texas. The merchants of St. Louis de- 
 sired to distribute and these railroads to carry merchan- 
 dise into Texas. The merchandise sold by the St. Louis 
 jobbers, as well as that obtained via the Gulf, came al- 
 most entirely from the East. To enable her merchants 
 to reach the Texan territory it was necessary that the 
 southwestern railroads make rates which, in conjunction 
 with those applying over the Trunk Line from the East, 
 at least approximated the through transportation charge 
 to the Texas interior made by the vessel rate to and the 
 rail rate from the Gulf. Rates from St. Louis to the 
 northeastern corner of Texas were also held down by 
 the sum of the water rates from St. Louis to New Or- 
 gans via the Mississippi, from thence via the Gulf and 
 the Red River, along which steamboats then ran to 
 Shreveport and beyond. In other words, a line from St. 
 Louis could not compete in central or southern Texas at 
 a higher aggregate rate than applied via the Gulf, and 
 a railroad from the Gulf could not compete in central 
 and northern Texas at a higher aggregate rate than 
 applied over the route by way of St. Louis. There was 
 
94 Railroad Freight Rates 
 
 a period of struggling between the diflferent interests, 
 of rebates, stealthy cutting of rates, and open fighting. 
 The result was, that the lines from St. Louis made the 
 same rate to all stations south of the Texas border. This, 
 of course, was in competitive relation with the maximum 
 rate applying over much of the line leading from the 
 south. 
 
 As railroads were built and extended, one line would 
 reach station A by passing through station B, and an- 
 other line would reach station B by passing through 
 station A, and so on throughout a ramifying network. 
 The result was the application of the same rates to the 
 stations in the entire area covered by the network of the 
 lines that extended from St. Louis. These various 
 causes worked together to produce what is known as the 
 Texas Common Point Territory, the very considerable 
 area to all stations in which the rate from St. Louis is 
 the same ; to all stations in which the rates from Kansas 
 City, Memphis, Chicago, and other cities in the central 
 territory and in the East are respectively the same, and 
 to all stations in which the intrastate rates of Texas are 
 the same after they have attained the maximum. 
 
 This situation was found in existence by the Texas 
 State Railway Commission at the time of its inauguration 
 in 1890, and has been developed and modified by that 
 body in a way especially to conserve what it considers 
 to be the interests of the citizens of the State. It was 
 the idea of Judge Reagan, in his time the dominant 
 statesman of Texas, that it would be inimical to the 
 welfare of the State to have its merchandise distrib- 
 uted from one or two great distributing centers. He 
 believed that, as it is by nature an agricultural State and, 
 therefore, of a diflfused population, the needs of that 
 population could be better supplied from a considerable 
 number of small commercial centers so distributed that 
 there would be no large area without such a center within 
 its limits. 
 
 The adjustment of rates under the Texas Common 
 Point System is eminently adapted to the furtherance of 
 
The Regional Rate Structures 95 
 
 Judge Reagan's desire. Long distance traffic from any 
 place outside of the State pays the same rate to any 
 place in the Common Point Territory and, therefore, in 
 so far as railroad rates are a factor, any town in this 
 territory is as well qualified to be a jobbing point as any 
 other. As a matter of fact, jobbing centers have arisen 
 every forty or fifty miles, the controlling cause that has 
 led to one town instead of another attaining this dignity 
 frequently being the conjuncture of two or more rail- 
 roads. The point of juncture being both able to obtain 
 and to distribute merchandise over a variety of routes 
 has developed a greater number of mercantile establish- 
 ments which have attracted an increasing population. 
 Such centers are Ft. Worth and Dallas in the northern 
 part of the State, Waco in the center, and San Antonio 
 in the south. A principal mercantile city in the State, 
 however, is Houston, which began to outstrip Galveston 
 as a commercial center when freight was first carried 
 from Galveston via the Bayou. Its use made Houston 
 the city, Galveston the seaport. Houston became the 
 market of concentration for the products of the State, 
 whence they were taken in barge-loads to outside the 
 bar at Galveston and loaded into vessels. The railroads 
 cut the cotton rate in competition with the Bayou, but a 
 charge in all cases was made for the carriage from 
 Houston, in competition with the Bayou, in addition to 
 the rate from the plantation to Houston. Although this 
 rate from Houston has fallen from $3.00 or more per 
 bale to but 30 cents, the tariffs are still constructed on 
 the basis of a separate charge between Galveston and 
 Houston. It is at Houston, therefore, that the gradation 
 that leads to the intrastate maximum rate to the interior 
 begins and where the application of the maximum rate 
 from the interior ends. The building of a railroad from 
 Galveston to the Southwest complicated the situation by 
 the application of the Houston differential to the rates 
 from Galveston along this road. The State court has 
 held, however, that if such traffic does not pass through 
 Houston the differential does not apply. 
 
96 Railroad Freight Rates 
 
 Not only does the common point rate system put all 
 distributing centers on a parity, in so far as the procuring 
 of merchandise over long distances is concerned, but, 
 through the scaling up of the intrastate rates to a maxi- 
 mum, it practically puts every distributing center, in so 
 far as the distributive rates are concerned, on a parity 
 with every other distributing center. It gives each center 
 the advantage of distribution in the radius of the gradu- 
 ated rates, but in the region beyond, that is, in the region 
 to which the maximum rate applies, each distributing cen- 
 ter is on a parity with every other distributing center. 
 To illustrate. Ft. Worth and San Antonio obtain mer- 
 chandise at the same rate from St. Louis, and San An- 
 tonio and Ft. Worth obtain merchandise at the same 
 rate from Houston. Assuming that the radius of the 
 scaling rates averages two hundred miles, the mer- 
 chants at Ft. Worth naturally command the trade within 
 a radius of two hundred miles of that city, and the mer- 
 chants at San Antonio the trade within a radius of two 
 hundred miles of that city. But at any point farther 
 than two hundred miles from either city, no matter in 
 what part of the common point area it may be, the mer- 
 chants of Ft. Worth and San Antonio compete on a 
 parity, in so far as the freight rate is concerned. 
 
 It will be perceived that the competitive factors af- 
 fecting the rates on through traffic from the Atlantic 
 seaboard to Texas are very much the same as those af- 
 fecting the rates on through traffic from the Atlantic 
 seaboard throughout the Southeast. In the latter case 
 the railroads extending through Virginia, the Carolinas, 
 and the farther South are not remote from the ocean 
 which they parallel: their rates are held down not only 
 to such distant points as Mobile and New Orleans, but 
 to intermediate points along the coast and in the interior 
 to which there is direct water or rail communication 
 from the coast. This condition accounts for the generally 
 low level of rates and the numerous basing points through 
 which the distribution of merchandise is highly decen- 
 tralized. In the former case it is the rail lines far to the 
 
The Regional Rate Structures 97 
 
 inland, those by way of Pittsburg or Buffalo or Wheel- 
 ing and St. Louis, that compete for the traffic of Texas 
 with the water lines that ply around the Floridian penin- 
 sula. The high level of rates that originally existed in 
 Texas led to the formation of the Texas common point 
 system, which has also led to the numerous jobbing cen- 
 ters through which the distribution of merchandise is 
 highly decentralized. One point of resemblance to the 
 situation in the Southeast exists in the fact that the rates 
 from the North to Houston and Galveston are lower than 
 to the intermediate Texas points. This exception to the 
 common point system was originally made because of 
 the water rates down the Mississippi River and via the 
 Gulf of Mexico. 
 
 The original high level of the intrastate rates has been 
 modified, in some cases radically, by the Texas State 
 Commission, which has absolute power over all rates 
 within the State. It has reduced maximum rates on both 
 classes and commodities, and has, in many cases, modified 
 the distance throughout which the rate is scaled before 
 reaching the maximum. This distance, with certain ex- 
 ceptions, is two hundred and forty-five miles on mer- 
 chandise taking the class rates ; one hundred and sixty 
 miles on cotton ; one hundred and forty miles on flour, 
 grain and hay; seven hundred and ninety miles on coal; 
 one hundred and eighty miles on fruits, melons, and 
 vegetables; and so on, through the list of commodities 
 that move in any considerable volume. Where it is 
 necessary that a shipment pass over the lines of two or 
 more railroads a small additional charge is allowed, 
 except that when the common point distance is reached 
 the rates are the same over a single as over two or more 
 lines. 
 
 The area embraced in the common point territory 
 has changed from time to time, the desire of the rail- 
 roads being to contract it, the pressure of commercial 
 conditions to enlarge it. At present it extends from the 
 Gulf to a line drawn from Amarillo in the Pan Handle 
 of Texas, through Big Springs, San Angelo, Brady, 
 
98 Railroad Freight Rates 
 
 Llano, San Antonio, Laredo, and Corpus Christi. It in- 
 cludes the population that represents about eighty-five 
 per cent, of the consuming capacity of the State. The 
 maximum rates apply from all points within to the boun- 
 daries of this area. To points in the narrow belt lying 
 beyond these boundaries the rates are made by adding 
 rates that increase with distance, to the maximum rates. 
 
 Of recent years the growth of the cities in the Missis- 
 sippi and Ohio Valleys and their progress in various lines 
 of manufacture has led to their supplying Texas with 
 an increasing proportion of its manufactured articles. 
 The rates from the various cities have been placed at 
 certain fixed differences above or below the rates from 
 St. Louis. The rate from Kansas City is the same as 
 from St. Louis; from Louisville 11 cents higher; from 
 Cincinnati and Chicago 20 cents higher; from Detroit 
 and Cleveland 40 cents higher, and from Pittsburg 50 
 cents higher : the rates from Memphis and New Orleans 
 are each 10 cents lower than from St. Louis. 
 
 It will be perceived that the application of the same 
 rates on interstate traffic to and from all places in the 
 Texas common point area creates a situation resembling 
 that under which the railroads serving New England 
 make the same rates on raw material to all places, and 
 the same rates on manufactured products from all places 
 in that section. In this case the railroads are forced 
 to the sacrifice entailed by extending the application of 
 a low rate over a considerable area by the necessity for 
 supporting the New England industries. There is no 
 corresponding pressure upon the railroads of Texas and 
 their traffic, as yet, is but scant in comparison with 
 that of New England. Moreover, the local rates of 
 New England bear no analogy to the intrastate rates 
 of Texas, which are no longer at the level which led to 
 the adoption of the intrastate maximum rates. 
 
 The increase in the traffic into the State from the 
 North is leading to doubt whether the railroads are 
 justified in the continuance of the common point sys- 
 tem. It is argued that the equalization of a distant dis- 
 
The Regional Rate Structures 99 
 
 tributing point with a nearer distributing point in the 
 rates on inbound traffic works an injustice both to the 
 railroads and to the nearer distributing point; that the 
 equahzation at the distributing points, in any event, is 
 obtained at the expense of the railroads, which are no 
 longer forced, by economic stress, to maintain such 
 equalization. It is argued that the development of the 
 industries and commerce of the Middle West, and the 
 increasing population of Texas, justifies the railroads in 
 making lower rates to the cities at the northern border 
 than to those in the interior of the State, and lower rates 
 to the interior points than to those in the south, and that, 
 therefore, there should be some arrangement that will 
 permit the roads from Chicago and St. Louis to have 
 the traffic destined to the northern part of the State 
 and the roads from the Gulf to have that destined to the 
 southern part of the State. A tendency in this direction 
 is already manifest by the establishment of rates on 
 grain that apply in fifteen groups throughout the State. 
 The difference in the rate from Kansas City is so slight 
 that San Antonio, three hundred miles further south, 
 pays but three cents per 100 pounds more for flour or 
 grain than Ft. Worth. Grain, however, comes into the 
 State only from the North, The lumber rates are also 
 adjusted to apply to groups that range from the East 
 to the West, the Texas lumber largely coming from 
 Louisiana mills. 
 
 The breaking up of the common point system would 
 doubtless be vigorously resisted by the distributing cen- 
 ters which are farthest from the sources of supply, and 
 doubtless, also, by the Texas Railroad Commission, in 
 that, by causing a redistribution of the wholesale trade 
 of the State, the various distributing centers would no 
 longer be on an equality. 
 
 That excessive degree of decentralization of distribu- 
 tion, however, which prevents any distributing center 
 from attaining marked growth, rather restricts such small 
 distributing centers as exist to dealing in the more staple 
 merchandise. This tendency is conspicuously manifest in 
 
loo Railroad Freight Rates 
 
 Texas, no one of the towns being a market adequate to 
 carrying the finer manufactures and higher grades of 
 miscellaneous products. 
 
 The Texas Railroad Commission vigorously upholds 
 the interests of the Texas jobbers and uses its power over 
 the freight rates of the State to that end. For exaijiple, 
 because of the restricted markets, neither dry goods, hats 
 and caps, boots and shoes, nor carpets are purchased in 
 carload lots by any wholesale merchant of Texas, ex- 
 cept, perhaps, by a firm or two in the very largest cities. 
 The jobbers, however, persuaded the Commission to make 
 a carload rate of 49 cents, which was 38 cents lower than 
 the less than carload rate. By combining their shipments 
 at New York the jobbers use this carload rate from 
 Galveston, thereby obtaining a through rate 38 cents 
 lower than by paying the 87-cent rate, which properly 
 applies to what, in reality, are their less than carload 
 shipments. Another example is offered by an occurrence 
 of a year or two ago, when the railroads in the Central 
 West found that because of the exceptionally low rates 
 prevailing from the eastern seaboard by water to Gal- 
 veston on wire and nails, the manufacturers of the 
 eastern cities had an advantage over the manufacturers 
 of the Central West. The rail lines from Ohio, Indiana, 
 and Illinois and St. Louis, to retain a portion of this 
 traffic, reduced the wire-nail rates from 55 cents to 43 
 cents — that is, 12 cents — per 100 pounds. The Texas 
 Commission thereupon immediately reduced the intrastate 
 rates 12 cents per 100 pounds. The railroads were, there- 
 upon, confronted with the identical situation that had 
 faced them before. They pointed out the situation to 
 the steamship lines, who agreed to make an advance in 
 the rates from the East to Galveston that would permit 
 the restoration of the rail rates previously in effect. 
 This was done, and the Commission requested to restore 
 the intrastate rates to the former basis. The Commission, 
 however, said that the rate as reduced gave the rail- 
 roads sufficient compensation for handling the wire and 
 nail traffic, and refused to make the restoration, the re- 
 
The Regional Rate Structures loi 
 
 suit being that the especially reduced rates on wire and 
 nails continue in effect. 
 
 Some years ago, prior to the passage of the Elkins 
 Law, the steamship lines were asked for a lower rate 
 on canned goods by canneries of the East, who produced 
 the greater portion of that merchandise used in Texas. 
 Upon being refused a concession in the rates, these 
 Eastern canneries chartered schooners to handle the 
 canned-goods traffic, the rates via schooner to Galveston, 
 and from Galveston by rail, aggregating less than the 
 rates from the canneries of Illinois, Indiana, and Ohio. 
 The railroads engaged in the traffic from this region im- 
 mediately reduced their rates to permit these establish- 
 ments to continue to market their goods in Texas, When 
 the attention of the Commission was called by Texas 
 local shippers to the reductions from the Central West, it 
 established an intrastate rate of 3 cents per 100 pounds 
 as a maximum on canned goods. This aggregated a 
 revenue of $6 per car of 20,000 pounds on canned goods 
 between any two points in the State, even although 
 the movement be over two or three, or more railroads, 
 and for a distance of from 400 to 600 miles. 
 
 These reductions were made under an Emergency Act 
 whereby the Texas Railroad Commission is empowered 
 to set aside any local rates in the State, and to substitute 
 emergency rates at its discretion, without giving the 
 railroads a hearing or any reasons for their action. The 
 result is that the railroads often do not make temporary 
 concessions for the benefit of particular movements of 
 traffic, in the fear that the temporary basis will be used 
 by the Commission as a standard for the permanent ad- 
 justment of local rates. That is, if an interstate rate 
 should be so reduced as to give the shipper of another 
 State an advantage in reaching the Texas markets, the 
 Commission would reduce the intrastate rate to a point 
 that would offset that advantage and restore it to the 
 dealer in Texas. When various increases in the inter- 
 state rates from the Middle States were made effective 
 August 10, 1908, the Commission considered offsetting 
 
102 Railroad Freight Rates 
 
 them by reductions in intrastate rates. One commissioner 
 favored such action, but the other two, restrained only 
 by the fear of a federal injunction, voted against it. 
 In other words, it is the avowed policy of the Railroad 
 Commission of Texas to so adjust the freight rates of the 
 State that the citizens of the State to the greatest possible 
 extent shall be the beneficiaries of its commerce. In 
 short, it uses the intrastate rates of Texas as a protective 
 tariff in the interest of its shippers, and it has so used 
 them at times in apparent disregard of the effect upon 
 the revenue of the railroads. It states that the local 
 graduated rates are so high that the railroads can afford 
 to apply the maximum rate to the innumerable stations 
 in the thousands of square miles included in the common 
 point area. 
 
 The Texas Railroad Commission, when it holds a hear- 
 ing, sits as a court before which witnesses appear for 
 and against the railroads. Unlike a court, however, their 
 testimony is not taken or made a matter of record by the 
 Commission, that body rendering its decision as the 
 evidence or other considerations may have affected their 
 minds at the time of hearing. 
 
 (6) THE PACIFIC COAST AND THE TRANS-CONTINENTAL 
 TRAFFIC 
 
 That portion of the United States which lies between 
 the Rocky Mountains and the Pacific Ocean, in its cen- 
 tral and southern reaches produces both citrus and de- 
 ciduous fruits, nuts and raisins, prunes and figs, melons 
 and vegetables. Deciduous fruits are also grown in the 
 northern sections of California, in Oregon and Wash- 
 ington, as are wheat and other grains in large quantities. 
 Formerly wheat from California was exported to Europe, 
 sometimes to the extent of one miUion tons in one year. 
 Lately, however, the production of wheat in this State 
 has only exceeded its increasing consumption by a sur- 
 plus which is exported to Central and South America, 
 and to the Orient. Oregon and Washington produce not 
 
The Regional Rate Structures 103 
 
 only large quantities of fine deciduous fruits, but wheat, 
 which is principally converted into flour and exported to 
 the Orient, although more or less of the 'grain is for- 
 warded direct from North Pacific Coast ports to Europe. 
 The timber of California, Oregon, Washington, Idaho, 
 and even western Montana, is unexcelled in quality and 
 would seem to be almost inexhaustible. Large deposits 
 of petroleum oil have been found in California, com- 
 pensating in large measure for the lack of coal. This 
 oil is used for fuel, and a considerable quantity is re- 
 fined, which, in part, is exported to the Orient. Hops, 
 wool, hides, and leather are all produced in these States 
 for market in the Eastern States and in Europe. Cali- 
 fornia was one of the first, if not the first State, to suc- 
 cessfully produce sugar from the beet, and there are now 
 large beet-sugar refineries in the southern and central 
 parts of the State, whence hundreds of thousands of tons 
 are annually shipped to the territory east of the Rocky 
 Mountains. California also refines and ships to the east 
 cane sugar from the Hawaiian Islands. The wine-mak- 
 ing industry of this State produces large tonnage, the 
 wines being marketed throughout the United States and 
 even in Europe. 
 
 Aside from these products, the Pacific States do not 
 produce very many of the things needed to satisfy the ma- 
 terial wants of its population. Of the articles usually in- 
 cluded in the terms " general merchandise " and " manu- 
 factures," such as clothing, furniture, tools, and mechani- 
 cal appliances in general, machinery and implements, per- 
 haps 75 per cent, or more are supplied by the States lying 
 east of the Missouri River. Before the completion of the 
 Pacific railroads these supplies were received almost 
 wholly from the territory lying east of Pittsburg and 
 Buffalo, but since then the sources of supplies have been 
 drifting westward, and to-day perhaps 75 per cent, of the 
 goods that used to be supplied by the territory east of 
 the Alleghany Mountains is now supplied from the terri- 
 tory lying between that range of mountains and the Mis- 
 souri River. Dressed meats and some grains are obtained 
 
104 Railroad Freight Rates 
 
 from the Missouri Valley, as well as a very large propor- 
 tion of the dressed poultry-and of the butter, eggs, and 
 cheese. 
 
 The problem of the railroads serving the Pacific Coast 
 is, therefore, to provide that adjustment of outbound 
 rates which will stimulate the consumption of her prod- 
 ucts, and of inbound rates that will bring to her people 
 the commodities which they require without undue en- 
 hancement of the price. To the former end the rates 
 of the railroads on the products of the soil are kept at 
 a low level by the fact that they are in competition in 
 every market at one time or another with products of the 
 soil of other sections, and by the fact that at no time in 
 any market can a price be obtained for them that will 
 enable the railroads to charge a high rate and yet yield 
 sufficient return for the growers to encourage them to 
 continue in production. To the latter end the railroads 
 have been forced to make low rates because of the com- 
 petition of the vessel lines from the Atlantic seaboard. 
 
 The water competition, which forces low rates on the 
 merchandise brought from the East, had its roots in the 
 service of the clipper ships which supplied the wants 
 of the straggling settlers before there were railroads on 
 the Pacific slope. These ships sailed from New York 
 around Cape Horn to San Francisco, — the pioneers 
 taking their cloth, bacon, axes, and saws by the water- 
 ways as far as possible, thence by wagon to the far 
 interior. Thus the fact that Sacramento, on the Sacra- 
 mento River, was the nearest, or otherwise most favor- 
 able point of distribution to the mining regions which, at 
 that time, constituted the most populous section of the 
 State, accounts for the first railroad in California being 
 built toward the interior from that city, instead of from 
 a seaport. This first railroad, completed in 1856, ran 
 from Sacramento to Folsom, in the direction of the 
 gold fields. The next railroad, which was opened early 
 in 1869, extended from the port of San Pedro to what 
 was then the adobe village of Los Angeles. Long before 
 the road from San Pedro was constructed, however, men 
 
The Regional Rate Structures 105 
 
 of enterprise had pondered over an all-rail route to con- 
 nect California with the East. The first through trans- 
 continental line was completed on May 10, 1869, and 
 immediately entered into competition with the vessel 
 routes for the traffic between the Atlantic and the Pacific 
 Coasts. 
 
 The rate per 100 pounds on first class merchandise 
 from New York to San Francisco was, at first, $8.00, 
 but was very soon reduced to $6.00. In entering the 
 field of transportation these so-called transcontinental 
 lines and their connections encountered the competition 
 of sailing vessels following the route via Cape Horn, 
 and of the long-established steamship and rail line by way 
 of the Isthmus of Panama, the former consuming an 
 average of 120 days, and the latter from 26 to 45 days 
 in performing the service from New York to San Fran- 
 cisco. The means of transportation available previous 
 to the completion of the Pacific roads concentrated the 
 merchandise business into the hands of a few firms with 
 large capital, because it was necessary that large stocks 
 be carried to San Francisco and large stocks kept on the 
 sea. The California jobbers who bought their goods 
 in the East were termed importers. The completion 
 of the Pacific Coast roads thus found the business of the 
 importer in few and very strong hands. It did not take 
 long to demonstrate that whatever rates were made for 
 the transportation by the all-rail routes, the rates by sea, 
 owing to the much lower cost of the service, could 
 be and were made very much less. It naturally became 
 the practice of the importing merchant to divide his bus- 
 iness*between the three available routes — via Cape Horn, 
 via Panama, and all-rail. He was relieved, to an extent, 
 from the necessity of carrying large stocks. That relief 
 was not welcomed, because of the opportunity afforded 
 the small merchant, who, by the use of the railroad, 
 could carry adequate stocks on smaller capital. In di- 
 viding his business, the importing merchant would obtain 
 the goods peculiarly needed for a particular season, and 
 such goods as were necessary to promptly replenish his 
 
io6 Railroad Freight Rates 
 
 stocks, by rail. These, however, did not amount to more 
 than 20 per cent, or 25 per cent, of his total importation. 
 Another 25 per cent, he would obtain by the next shortest 
 route, that via Panama, but his staple goods, his large 
 tonnage, aggregating at least 50 per cent, of his total 
 receipts, he continued to obtain via Cape Horn. 
 
 The rail carriers could not overcome this practice by 
 open tariffs. Whenever the railroads reduced their rates 
 the steamship lines and the clipper ships reduced theirs, 
 so that there still remained the inducement of the im- 
 porter to divide his tonnage, obtaining the largest share 
 by sailing vessel. He believed that his interests com- 
 pelled him to continue this practice, because the railroad 
 rates were the same to all shippers, while there was 
 considerable discrimination in the rates by sea. To over- 
 come these conditions the Pacific railroads finally hit 
 upon what is known as the Contract Plan. They solic- 
 ited the total business of these large importing merchants 
 at San Francisco, and, in consideration of a contract 
 whereunder they agreed to obtain their goods exclusively 
 by rail, guaranteed rates which were supposed to ap- 
 proximate the merchant's average transportation charge 
 by using all three routes. This arrangement was the be- 
 ginning of a large movement by rail. It was found to 
 be objectionable in many respects and did not continue 
 very long, but it did furnish the foundation for all of 
 the tariffs which have since been constructed to apply 
 to the transportation by rail of freight from New York 
 to San Francisco and other Pacific Coast terminals. 
 
 Competition of the clipper ships around the Horn 
 ceased some years ago, but competition of the- steam- 
 ship lines by way of Panama, and by Tehuantepec, is 
 still active and potent. Vessels of this service not only 
 carry merchandise from the Atlantic Coast, but solicit 
 shipments from the interior, making through rates low 
 enough to favor the use of these vessel-routes as against 
 the all-rail lines, after allowing for the cost of carriage 
 from the interior point to the ship's side at the Atlantic 
 port. 
 
The Regional Rate Structures 107 
 
 The railroads at one time discussed making the all-rail 
 rates from the stations interior to the Atlantic seaboard, 
 and in the Middle States to the Pacific Coast, by adding 
 the local rate from such a station to the Atlantic port 
 to the vessel rate from that port. Under this plan the 
 rates to the Pacific Coast would have gradually risen 
 from the Atlantic seaboard to that point in the interior 
 from which the normal rail-rate to the Pacific Coast 
 would be equal to the rail-rate to the Atlantic, plus the 
 vessel-rate thence to the Pacific Coast. The interior 
 points thus paying higher rates than the Atlantic ports 
 would have been handicapped in competition with those 
 ports for the trade of the Pacific Coast; the rate, for 
 example, from Chicago to San Francisco, would have 
 been higher than the rate from New York. These in- 
 terior cities and the railroads taking Western traffic 
 therefrom would not tolerate such an adjustment. The 
 vessel-forced rates from the Atlantic Coast were there- 
 fore " blanketed back " to those points, whence the rates 
 under the normal rail adjustment were no higher. Un- 
 der this arrangement, which is now in effect, the rate 
 from New York, speaking generally, applies from every 
 point between that city and Chicago. That is, on trans- 
 continental traffic there is between these limits a rate 
 plateau which descends from Chicago westward. To 
 the foodstuffs from the Missouri Valley rates are applied 
 that permit them to be sold in the markets of the 
 Pacific slope. 
 
 As different railroads have reached from the East via 
 different routes to the various harbors on the Pacific 
 Coast, the competition of one railroad with another and 
 of one harbor with another has compelled the making 
 of the same rates to the different terminals that have 
 water communication. Therefore, in so far as the trans- 
 portation charge on merchandise from the East is con- 
 cerned, San Diego, Los Angeles, San Francisco, Port- 
 land, Seattle and Vancouver are on a parity. In no 
 case is the ratio of the transportation charge to the price 
 of the consumer's unit materially greater than it is at 
 
io8 Railroad Freight Rates 
 
 the Missouri River. That is, for example, although the 
 rate on merchandise of the first class from Boston and 
 New York is more than twice as much to San Francisco 
 as to Kansas City — being $3 in the one case and $1.48 
 in the other — the difference in the case of drygoods 
 amounts to but a fraction of a cent a yard. On the 
 heavier commodities, such as machinery and wooden- 
 ware, which largely come from the Ohio and Missis- 
 sippi valleys, the transportation charge bears a somewhat 
 higher ratio, but it very seldom, if ever, will justify more 
 than an insignificant addition to the retail price of any 
 commodity. 
 
 These terminal rates, in the days prior to the time 
 when the railroads had attained their present efiSciency, 
 were also made applicable to, and still apply to, the 
 cities having direct water communication with the 
 coast, such as San Jose, Stockton, Sacramento and 
 Marysville. Such cities had become centers of dis- 
 tribution for the surrounding territory, before the 
 Pacific Railroads were constructed, receiving their sup- 
 plies by water. 
 
 The local rates upon which merchandise is dis- 
 tributed throughout the interior of California are also 
 affected by the waterways. The rail rates from the 
 coast to Stockton, to Sacramento, and to Marysville are 
 less than the rail rates made on the basis that applies 
 throughout the State in general, because of the boat 
 lines on the rivers that are navigable to these points ; 
 while the rates to stations beyond are made by adding 
 the local rates from these stations to the competitive 
 rates thereto, or sometimes upon a lower scale. 
 
 Rates for the north and southbound traffic along the 
 Pacific Coast are made in like manner. The steamboats 
 between Portland and San Francisco, between San Fran- 
 cisco, Santa Barbara, San Pedro and San Diego, keep 
 down the rail rates between those cities, while the rates 
 to intermediate stations are the lowest that can be ob- 
 tained by adding the local rate from one or from another 
 point. That is, rates between the Pacific Coast ports, 
 
The Regional Rate Structures 109 
 
 and throughout the valley that lies between the mountains 
 and the Pacific Ocean, are made in the same manner 
 as the rates from the cities of the North Atlantic sea- 
 board to the ports and to the river towns in the South- 
 east that are upon or adjacent to the Atlantic Coast 
 and the Gulf of Mexico ; and in the same way that 
 rates are made over the railroads that lead, in com- 
 petition with the Mississippi River, from Chicago, St. 
 Louis and Louisville into the South. 
 
 Were it not for the products of the soil the railroads 
 connecting California with the East would have little 
 eastbound traffic. Were it not for the general consump- 
 tion of those who grow, and in one way or another are 
 dependent on, this produce, these railroads would not 
 carry much traffic from the East. It is therefore to 
 the interest of the railroads to co-operate with the 
 farmers in extending the cultivation of the farms, the 
 orchards and the groves, and, consequently, in extend- 
 ing their markets. To do this it is necessary that the 
 railroads leading from California obtain the partici- 
 pation of practically all the railroads of the United States 
 in the through rates that are necessary to market the 
 Californian products. Their traffic managers are in 
 continual communication with the traffic managers of 
 the other railroads to this end. This is, of course, in 
 order that their lines may secure an increasing traffic, but 
 it is also an inestimable benefit to the Californian pro- 
 ducers. The result is that their oranges, lemons, peaches, 
 pears, plums, grapes, apples, celery, cabbage, cauliflower, 
 potatoes, raisins, prunes, figs, English walnuts, dried 
 fruits and canned fruits, olives and wines, find markets 
 from Denver to Boston and Montreal, and from St. 
 Paul to New Orleans. 
 
 The rate on oranges is $1.15 per 100 pounds from the 
 Californian packing houses to every place east of Denver, 
 as far as the remotest corner of New England. The rate 
 on lemons has been made 15 cents per 100 pounds lower 
 than on oranges to aid the industry in its rivalry with the 
 lemons of Sicily. During about one half of the season 
 
no Railroad Freight Rates 
 
 refrigeration is necessary, which adds from $50 to $110 
 a car to the transportation charge. To be more ex- 
 pHcit, the unit of transportation is the box, which weighs 
 72 pounds and contains on toe average twelve dozen 
 oranges. During a period of normal production and 
 prices the average cost delivered in New York was $2.72 
 per box, the freight and the refrigeration costing about 
 95 cents, or 8 cents a dozen. The other expenses of mar- 
 keting and the picking and packing in California ran 
 from 50 cents to 60 cents a box, leaving about 10 cents a 
 dozen to the grower. This is approximate and there- 
 fore but an indication. The prices in the East and the 
 return to the grower fluctuate within a considerable 
 range, and the number of oranges in a box varies. 
 
 The vegetables of California move by the carload, 
 with a minimum of 20,000 pounds, at a rate of $1 per 
 100 pounds to Chicago, $1.15 to Buffalo and Pittsburg, 
 and $1.25 to New York. There is also an icing charge 
 of $55 a car to the Missouri River, which approximates 
 23 cents per 100 pounds ; and $67.50 to New York, which 
 approximates 25 cents per 100 pounds. 
 
 On deciduous fruits, which come mostly from the 
 central and the northern parts of California, and from 
 Oregon and Washington, the rate to all points between 
 Colorado and Chicago by the carload, with a minimum 
 load of 24,000 pounds, is $1.25 per loo pounds. The 
 rate to Cincinnati and Pittsburg is $1.40 and to New 
 York and Boston $1.45. There is, in addition, a re- 
 frigeration charge. This is $70 per car from Sacra- 
 mento; and from Portland, Oregon, where ice is more 
 readily obtained, but $45 per car to Chicago, and in 
 proportion to other markets. 
 
 The wide fluctuation in the prices obtained for fruits 
 of the various kinds and grades at different times and 
 places precludes any definite statement as to the return 
 to the grower. The current statements as to the enor- 
 mous profits per acre would indicate that the transporta- 
 tion charge is a negligible factor either with the con- 
 sumer or the producer. 
 
The Regional Rate Structures iii 
 
 In 1908 grapes that paid the railroads, all told, about 
 $400 a car, brought from $1,200 to $1,900 a car in the 
 Eastern markets; the grower of cherries received an 
 average of perhaps 8 cents a pound. In this year, 
 however, because of the abundant crops elsewhere, 
 peaches brought only $20 a ton at the orchard, although 
 they had brought $70 a ton during the previous year. 
 
 A box of pears, selling in New York for $3.20 for the 
 42 pounds, yielded the grower about $2.20, out of which 
 he had to pay for the picking and the packing. Apples 
 net $500, strawberries $800, vegetables $300 and up- 
 wards an acre. 
 
 The extent of California is comparable to a reach from 
 Savannah to within a few miles of Boston, and its soil 
 produces as varied products. On Mt. Whitney is eternal 
 snow, while oranges and lemons are ripening in the 
 Riverside region, strawberries and raspberries in the low- 
 lands, and vegetables and deciduous fruits farther north. 
 
 The production of deciduous fruits in Oregon and 
 Washington is not as large as that of California, with the 
 exception, perhaps, of apples, which are firmer in texture 
 and juicier. Owners of apple orchards in these States 
 have refused $1,200 and even $1,600 an acre for their 
 fruit bearing lands. 
 
 The halibut and salmon fisheries are also a source 
 of great revenue to these States. The rate on canned 
 salmon and halibut is the same as the rate on canned 
 fruits and vegetables, 85 cents per 100 pounds from 
 the Pacific Coast to any place in the United States east 
 of the Missouri River. 
 
 This rate, although nominally lower, is really more 
 remunerative to the railroads than the rate on the ripe 
 fruits. A car can be filled with canned goods from top 
 to bottom and from one end to the other, the load aggre- 
 gating more than 40,000 pounds. A car cannot be thus 
 filled with citrus fruits, the heaviest load not exceeding 
 26,700 pounds with safety, and, in addition, during the 
 period of refrigeration, it carries 8,000 pounds of ice, 
 for the transportation of which the railroad makes no 
 
112 Railroad Freight Rates 
 
 charge. Moreover, the refrigerator car needed for 
 the fruit weighs 8,000 pounds or so more than the 
 box car which is adequate for canned goods ; and canned 
 goods can be moved on regular trains under a normal 
 schedule, while citrus fruits are forwarded on special 
 trains at accelerated speed. 
 
 That commodity which at this time is of the greatest 
 importance to the far Northwest is the output of the 
 forests, about two-thirds of the total value of the prod- 
 ucts of the State of Washington being composed of 
 lumber in one or another of its forms. When the 
 newly built railroads into this region were seeking re- 
 turn loads for the cars bringing rherchandise from the 
 East, they made a rate of 40 cents per 100 pounds on 
 lumber from the Northwestern forests to St. Paul. 
 Under the stimulus of this low rate markets for the 
 lumber were found in the Missouri Valley, even in the 
 farther East for the choicer woods, and the industry 
 developed until in 1907 it employed, in the State of 
 Washington, 101,000 men, who received $70,000,000 in 
 wages. In the dozen or more of years following the 
 inauguration of the low rates, the development of the 
 fisheries and the orchards and of other traffic in general 
 made it not so imperative for the railroads to secure 
 return loads of lumber. The markets had been estab- 
 lished and lumber had so greatly advanced in price that 
 it seemed to them justifiable that the rate should be 
 advanced. It was endeavored to increase the rate to 
 St. Paul from 40 to 50 cents, and to Omaha from 50 
 to 62^ cents. This was vigorously resisted by the lumber- 
 men, who brought action before the Interstate Commerce 
 Commission, which practically restored the old rates. 
 The matter was then taken to the courts by the railroads, 
 who claim that they are entitled to adequate com- 
 pensation for transporting the lumber, especially in view 
 of the fact that the advance in lumber prices is rapidly 
 enhancing the fortunes of the lumbermen. These 
 gentlemen held that while there is a secure market for 
 their finer grades, the knotty interiors of the logs, which 
 
The Regional Rate Structures 113 
 
 could be used for various staple purposes, had to be 
 thrown away, as they cannot be marketed in competition 
 with similar lumber from the South, which has an 
 advantage of 40 cents or more a thousand feet in the 
 cost of production, and an advantage of about $9 a 
 thousand in the freight rate. The lumbermen state 
 that because of this inability to market the inferior 
 grades, over 53,000 carloads, to the value of over 
 $15,000,000, were destroyed in one year. The railroads 
 reiterate that they are entitled to fair remuneration for 
 the lumber haul, and intimate that if the lumbermen 
 were not so zealous in pushing their finer grades at 
 this time they would, in but a few years, as the country 
 places more and more reliance upon the Northwestern 
 forests, be enabled to market not only the superior but 
 the inferior grades at prices still further enhanced. This 
 contention not only affects the carriage of lumber from 
 the far Northwest to the Missouri and Mississippi Val- 
 leys, but its transportation from the Willamette Valley 
 of Oregon to the markets of California. Here the rail- 
 roads increased a long standing rate of $3.10 a ton to 
 $5, which was reduced by the Interstate Commerce 
 Commission to $3.40, whereupon the railroads took the 
 matter into the courts. 
 
 INTER-REGIONAL TRAFFIC 
 
 The boundaries of the regions, for which the rate 
 structures described in the foregoing pages were de- 
 veloped, are indicated by no artificial lines. The cities 
 that are the leading industrial and commercial centers of 
 the United States to-day, with but two or three ex- 
 ceptions, were the chief commercial centers before the 
 days of the railroads, principally because of their water 
 comrnunication. It was for the benefit of the railroads 
 to seek to share in the rnovement of the commerce of 
 these cities, and for the benefit of these cities that they 
 should have railroad communication. Therefore, as we 
 have learned. New York, Philadelphia and Baltimore 
 
114 Railroad Freight Rates 
 
 on the east, and Buffalo and Pittsburg on the west, 
 became the termini of the Trunk Lines. Merchandise 
 changed ownership at these termini. When the 
 Trunk Lines gained access to Chicago and St. Louis 
 the merchandise brought from the East changed owner- 
 ship therein before distribution in the territory beyond, 
 and commodities from the West almost invariably 
 changed ownership here before further consignment to 
 the East. The line of division between the Trunk Line 
 — Central Traffic Territory — and the trans-Mississippi- 
 trans-Missouri region was therefore due to the location 
 of Chicago and St. Louis, which in turn was due to 
 their advantageous sites, which naturally made them the 
 first and the most important gateways between the two 
 regions. The trans-Missouri region, representing the 
 broad end of the fan, was naturally limited by the Rocky 
 Mountains. The Pacific slope, by reason of its natural 
 boundaries and peculiar characteristics, became a well- 
 defined region. 
 
 For reasons similar to those which made Chicago and 
 St. Louis gateways between the East and the West, 
 Cincinnati, Louisville, Memphis and New Orleans be- 
 came gateways between the Southeast and the Central 
 Traffic Territory on the north and the trans-Mississippi 
 territory on the west. The railroads of the respective 
 regions terminated at these gateways, and nearly all of 
 the merchandise consigned from or to the Southeast 
 changed ownership therein. 
 
 It was therefore entirely logical that a freight rate 
 structure should develop within the limits of each region, 
 and be moulded by the characteristics of its commerce. 
 As with the growth of commerce shipments were 
 forwarded from a point in one to a point in another 
 region, the rate for the through shipment was made by 
 adding the rate from the place of consignment to the 
 regional gateway, to the rate from that gateway to the 
 place of destination. The next step was the making of 
 inter-regional rates from a competitive point in one 
 region, the same via different gateways to a competitive 
 point in another region. 
 
The Regional Rate Structures 115 
 
 The rates for the distributive flow of the merchandise 
 of the higher classes from the East and from the Cen- 
 tral Traffic Territory into the Southeast, and into the 
 trans-Mississippi and trans-Missouri regions, are still 
 largely made by combinations on the regional gate- 
 ways, although the ownership of the merchandise does 
 not in these days change in nearly so large a proportion at 
 those gateways. Kansas City and Denver, for example, 
 as well as Atlanta and Birmingham, buy directly from 
 either Chicago or New York. 
 
 In the reverse channels of traffic, those in which the 
 grains and grain products, meats and meat products of 
 the West, and the fruits and vegetables of the South, 
 flow from one into another region, the rates are also still 
 frequently made by combinations on the regional gate- 
 ways. To an increasing degree, however, inter-regional 
 shipments of such commodities do not change owner- 
 ship between the place of concentration in one region 
 and the place of destination in another. The tendency 
 in the adjustment of such rates is, therefore, to take less 
 account of the regional boundaries and to be governed 
 in greater degree by the conditions existing at various 
 markets throughout the country, or throughout the 
 world, the competitive relations between those markets, 
 and the transportation agencies leading thereto. This 
 tendency has been enhanced by the increasing number 
 of railroad companies that have established through 
 lines, either under direct ownership or immediate con- 
 trol, between one region and another, and the multipli- 
 cation in the number of gateways as these through 
 lines have crossed the regional boundaries at different 
 points. 
 
 Inter-regional rates, in common with long distance 
 rates in general, are, as a rule, lower than the sums of the 
 separate rates applying between intermediate points 
 along the through line formed by the various railroads. 
 The division of such a rate between the different lines, 
 therefore, gives to each line less than it obtains on a 
 shipment originating at the point at which it receives 
 the long distance shipment and consigned to the point 
 
ii6 Railroad Freight Rates 
 
 at which the long distance shipment leaves its line. That 
 is, the " proportion " accruing to a railroad on a long 
 distance through rate is, as a rule, less than its regular 
 rate between the receiving and the delivering point. To 
 facilitate the making of such through rates many rail- 
 road companies publish from their junctional points 
 " proportional " rates, which are simply the pro- 
 portions they receive on through traffic. For ex- 
 ample, the lines leading east from St. Paul and 
 Minneapolis publish a proportional rate from those 
 cities on bullion, although no bullion originates at 
 either of them. This proportional rate is used 
 by the lines west of St. Paul and Minneapolis in making 
 through rates on bullion to the East in competition with 
 the Eastern routes via Omaha or Kansas City. 
 
 The most conspicuous example of an inter-regional 
 rate adjustment is that arising out of the needs of the 
 transcontinental traffic in either direction between 
 California and the East; this has been sufficiently de- 
 scribed. Other inter- regional adjustments are those 
 affecting the staple foodstuffs and the staple raw ma- 
 terials of manufacture. These will now be briefly 
 considered. 
 
CHAPTER VIII 
 COMMODITY RATE STRUCTURES 
 
 A COMMODITY rate is applicable to a particular com- 
 modity, thereby being distinguished from a class rate 
 which is applicable to any of the many articles that are 
 grouped in the same class. Commodity rates are usually 
 specified for each of the great staple materials, which 
 move in large quantities under conditions peculiar to 
 themselves. There are many of these commodities. In 
 this chapter will be indicated the conditions that have 
 affected the rates applying on a few of the more im- 
 portant. 
 
 (l) GRAIN AND GRAIN PRODUCTS 
 
 Wheat is the accepted type of the grains, and flour of 
 the grain products. The rate structure which has de- 
 veloped to meet their needs is similar to that which char- 
 acterizes corn and cornmeal, oats and oatmeal, and the 
 other grains and their products. 
 
 As the population east of the Alleghany Mountains 
 began to draw upon the Ohio Valley for part of its grain 
 supply, Detroit, Toledo, and Cleveland became places 
 of concentration for that which was sent east by way of 
 Lake Erie and the Erie Canal. The competition between 
 this water route and the various rail routes was stead- 
 ied by the adoption of the Trunk Line Percentage Sys- 
 tem. With the increase in the production of grain to 
 the west of Chicago, radical competition broke out be- 
 tween the boats running from the Lake Michigan ports 
 to Buffalo, and the all-rail lines. The rates of the lake 
 vessels were subject to wild fluctuation, the necessity for 
 a boat to obtain a cargo determining its charge for carry- 
 ing such grain as was ready for shipment. To meet 
 this competition the rates of the railroads also underwent 
 rapid and radical changes during the season of naviga- 
 
 117 
 
ii8 Railroad Freight Rates 
 
 tion, causing losses which they tried to recoup by ad- 
 vances during the winter when the waterways were 
 closed. 
 
 Although this rivalry between the water route and 
 the rail routes for the carriage of grain to the East has 
 continued to this time, there has been such a progressive 
 decrease in the margin between the rates of the boats 
 and those of the railroads that there is no longer such 
 violent oscillation. \ The establishment of fast trains to 
 move flour in train loads from the great mills of the 
 Northwest to the seaboard is relieving the mills of the 
 necessity for keeping vast quantities of flour in storage 
 at Chicago for future shipment to the great eastern 
 markets. These trains are run on quick time to a cen- 
 tral point, such as Bufifalo, whence the cars radiate to their 
 destinations. The millers prefer to pay 2 cents per 100 
 pounds higher than the lake charge for this special 
 service, and they are also led to give their traffic to these 
 fast trains in summer in order that the service may be 
 continuous, thus assuring a supply of cars in the winter. 
 
 When the grain from the western fields so exceeded 
 the requirements of the United States that it was feas- 
 ible to dispose of the surplus in Europe, another factor 
 entered into the old time rivalry between the ports of 
 Boston, New York, Philadelphia and Baltimore, and the 
 respective lines serving them. Each city strove to handle 
 and each railroad to carry an increasing proportion of the 
 export grain. This was a foremost element in the rate 
 wars that began in the early seventies. After various 
 attempts at settlement, adjustment under the auspices 
 of the Trunk Line Association decreed in 1877 that the 
 rate on grain from the West should be the same to Bos- 
 ton and New York, 2 cents less than New York to 
 Philadelphia, and 3 cents less than New York to Balti- 
 more. The shorter distance from Boston to Liverpool 
 was held to offset the longer rail haul, and therefore to 
 justify Boston being placed on a parity with New York; 
 the lower rates were accorded to Philadelphia and Bal- 
 timore because of their shorter distance by rail from 
 
Commodity Rate Structures 119 
 
 the West and their irregular and less efficient vessel 
 service. The general intention was that the through rate 
 via rail and steamship should be the same from the in- 
 terior to Liverpool through either of the competing ports. 
 The basis on which the differentials were awarded hav- 
 ing been questioned the matter was referred in 1882 to 
 a Board constituted of Allen G. Thurman, Elihu B. 
 Washburn and Thomas M. Cooley, who decided that 
 the competitive relations between the cities were justly 
 to be regarded as the principal factors in determining 
 the differentials, and that the differentials then in effect 
 were fair under the conditions then existing. These 
 differentials, fixed in 1877, never satisfactory to Bos- 
 ton and not entirely so to the other cities, were reduced 
 one-half in 1899. At a later date the matter was brought 
 before the Interstate Commerce Commission and that 
 body, in the capacity of an arbitrator, finally decreed in 
 1905 that this adjustment should stand; that is, that the 
 rate to Philadelphia should be one cent and to Baltimore 
 one and one-half cents less than to New York. This 
 applies to grain moving entirely by rail. On that which 
 has come by lake to Buffalo the export rate to Baltimore 
 and Philadelphia is six-tenths of a cent less than to New 
 York and Boston. This decision is still unsatisfactory 
 to Boston. That city holds that while the basis of the 
 original award was to secure an equal through rate from 
 the western primary markets through each of the various 
 ports to Liverpool, the lowering in recent years of the 
 ocean rates from Philadelphia and Baltimore practically 
 establishes a lesser rate to Liverpool through these ports, 
 and that, therefore, the exports of grain and grain prod- 
 ucts through Boston are decreasing, notwithstanding her 
 better steamship facilities, while the exports through 
 Baltimore are increasing. 
 
 The all-rail rate upon wheat from Chicago to New 
 York per 100 pounds, that had fluctuated between 50 
 cents and $1.60 from 1864 to 1867, was 25 cents in 
 1882, and has ranged around 16 cents in recent years. 
 At this writing it is 13 cents. 
 
120 Railroad Freight Rates 
 
 The extension of the grain culture from the upper 
 Mississippi Valley throughout the West naturally gave 
 rise to rate problems in that region that had to be 
 fought to a solution. The railroads leading into Mil- 
 waukee and into Chicago brought grain into those cities 
 at local rates. As the first railroads from upper Wis- 
 consin led through Milwaukee into Chicago, the rate 
 was naturally lower to Milwaukee than to Chicago, and 
 Milwaukee became the first great primary grain market 
 of the West. The development of Chicago as a railroad 
 center attracted a greater number of boats, because of 
 the opportunity for the exchange of traffic with the rail 
 lines, and pressure was brought to bear upon the rail- 
 roads to make the grain rate the same to Chicago as to 
 Milwaukee. This Milwaukee resisted, but as railroads 
 were built from the grain fields to Chicago without pass- 
 ing through Milwaukee, it became imperative that the 
 rate via these lines to Chicago be no higher than that 
 to Milwaukee; for, otherwise, the lines reaching Mil- 
 waukee at a lesser rate would have a vital advantage. 
 
 As the growing of grain pursued its way through 
 Wisconsin into Minnesota, Duluth became the nearest 
 lake port to a portion of the grain region. The en- 
 deavor of the railroads leading toward that city to in- 
 crease their traffic created competition between them and 
 the lines serving the ports on Lake Michigan. Wheat 
 was handled through Duluth at 2^ cents less per loo 
 pounds than through Chicago: this made the Zenith 
 City the great grain port of the Lakes. In those days 
 there was not enough business from the West to fill 
 the cars that had taken merchandise from the East. 
 Competition focused upon the grain and especially upon 
 wheat, the great staple. There were attempts to ap- 
 portion the traffic between the diflferent lines, but each 
 of these pools had only a short existence. A difference 
 of opinion between the lines leading from MinneapoUs 
 to Chicago as to the division of the wheat traffic led to 
 the great rate war which began November 19 and con- 
 tinued until December 14, 1882, and incidentally resulted 
 
Commodity Rate Structures 121 
 
 in the company owning one of the Chicago Hnes obtain- 
 ing a majority of the stock of one of the Duluth Hnes. 
 
 At about this time the milling interests in Minne- 
 apolis, at the Falls of the Mississippi, that were on their 
 way to pre-eminence, began to intercept a great part 
 of the grain shipments that formerly would have gone 
 East by way of Duluth. Indeed, the capacity of these 
 mills soon outstripped the supply of wheat from the tribu- 
 tary farming land then under cultivation, and this led 
 to more extended cultivation. Under the ensuing rate 
 adjustments, while the rate on wheat is still lower to 
 Duluth than to the Lake Michigan ports, the rate on 
 grain products from Duluth is one-half cent per one 
 hundred pounds higher than from the Lake Michigan 
 ports to the seaboard territory. Duluth, therefore, has 
 not maintained pre-eminence as a port of grain 
 shipment, its greatness now depending upon the com- 
 merce in the ore, for which it is a concentration point for 
 shipment down the Lakes, and in the coal which comes 
 up the Lakes for distribution throughout the Northwest. 
 (See Milling in Transit.) 
 
 When the first elevator was built at Chicago — not 
 long before the Civil War — it was thought that sufficient 
 grain to fill it would never come to the city. A typi- 
 cal rate on wheat at that time was 28 cents per 100 
 pounds from Champaign, Illinois ; it is now 5 or 6 
 cents. At the time of the great grain rate wars between 
 the lines in the Northwest there were at least one or 
 more elevators at the terminus of every line entering 
 Chicago from the West. They received grain not only 
 from Wisconsin, Minnesota, and the Northwest, but 
 from Iowa, Kansas and Nebraska. As grain was grown 
 in Missouri and Arkansas, elevators were erected in St. 
 Louis, and, as the production west of the Missouri River 
 became extensive, at Omaha and Kansas City, which 
 became primary markets that have increased in impor- 
 tance. (See Elevation.) The competition that arose be- 
 tween the various markets and the railroads serving them 
 led gradually through the years to a general equalization 
 
122 Railroad Freight Rates 
 
 of rates to the East. That is, broadly speaking, the 
 rates are so adjusted on grain from an initial shipping 
 point of the West that the local rate to Kansas City, 
 plus the through rate from Kansas City to the East; 
 the local rate to Omaha, plus the through rate from 
 Omaha to the East; the local rate to Chicago, plus the 
 through rate from Chicago to the East; and the local 
 rate to St. Louis, plus the through rate from St. Louis 
 to the East, shall aggregate the same total rate. This 
 equalization of the grain rates, so that the total shall be 
 the same or approximately the same from any place of 
 production via any primary market to the same Eastern 
 market, is general through the grain regions. The re- 
 sult is that the grain freight rates form a delicate struc- 
 ture which may easily be disturbed by this cause or 
 that. 
 
 A disturbing factor of the first magnitude arose 
 through the revival in recent years by the railroads 
 leading to ports on the Gulf, of the carrying of grain 
 for export to those ports. Many years ago attempts 
 ■were made to take grain to New Orleans by boat down 
 the Mississippi River, but in the warm climate it be- 
 came saturated with moisture in the vessels' holds. The 
 endeavor of the railroads extending to the Gulf to build 
 up their traffic in grain began anew with the large crops 
 of 1900, and made considerable progress during the two 
 or three subsequent years. At first these railroads made 
 rates far below those in effect to the Atlantic seaports. 
 The railroads serving the Atlantic seaports retaliated, 
 and in natural course there were rate wars, disastrous 
 to the revenues of the railroads and unsettling to the 
 grain business. After a test of strength by the fight- 
 ing railroads the subject of an equitable differential be- 
 tween the ports of the Atlantic and those of the Gulf 
 was taken up for mutual serious consideration and dis- 
 cussion. The Gulf railroads claimed that because of the 
 shorter distance to their ports from the grain fields, 
 their low grade lines upon which the expense of handling 
 was not so great ; because of the moisture that accumu- 
 
Commodity Rate Structures 123 
 
 lated in the grain, impairing its quality so that it brought 
 lower prices in the European markets ; small elevator 
 facilities; the longer water route to Europe and higher 
 vessel rates; irregular and less efficient vessel ser- 
 vice, and higher marine insurance, they should 
 have a differential of from 6 to 8 cents per 100 
 pounds under the Atlantic rates. The Atlantic 
 railroads replied that by means of recent inventions 
 the Gulf grain can be thoroughly dried at little ex- 
 pense; they produced certificates -from European deal- 
 ers that grain from the Gulf ports averages as high 
 in quality as that from the Atlantic ports ; claimed that 
 the difference in time between a trans-Atlantic voyage 
 from the Gulf ports and from the Atlantic ports was not 
 of great importance; that while the regular steamship 
 sailings are not so frequent the Gulf ports are well 
 supplied with tramp vessels ; and on account of these 
 and other considerations urged that the differential 
 should not exceed 3 cents under Baltimore, which would 
 be equivalent to 4 cents under Philadelphia and 4^ cents 
 under New York. There was finally a compromise. 
 At this writing the rate on wheat per 100 pounds from 
 Kansas City to Baltimore is 26^ cents; to the Gulf 22^. 
 cents. The proportional rates for export are, from Kan- 
 sas City to Baltimore 23^ cents, to Galveston 18^ cents. 
 Before the development of the grain traffic between 
 Kansas City and the Gulf the rates on grain for ship- 
 ment through Kansas City were made by the combina- 
 tion of the local rate from the grain fields of Kansas 
 and Nebraska to Kansas City with the through rate from 
 Kansas City to the East or Southeast or to the Gulf. 
 The increase in the grain traffic by the direct lines from 
 Kansas City to the Gulf led to lines not so direct enter- 
 ing into competition for this traffic. The rate on grain 
 for export from Wichita and the surrounding territory, 
 that had been made by adding the local rate from Wichita 
 to Kansas City to the rate from Kansas City to the Gulf, 
 thus came to apply from Kansas City to the Gulf by way 
 of Wichita. That is, a lower charge was being made for 
 
124 Railroad Freight Rates 
 
 the longer haul from Kansas City through Wichita than 
 for the shorter haul from Wichita to the Gulf. This 
 naturally awakened the antagonism of the growers and 
 dealers in grain of Wichita and thereabouts, who sought 
 larger reductions than the railroads were willing to make. 
 The matter was finally taken to the Interstate Commerce 
 Commission, which so reduced the rates from Wichita 
 to the Gulf that the rates from a considerable area of 
 the grain region to its north and west make on Wichita 
 instead of Kansas City. Grain from this region is nat- 
 urally seeking the gulf ports without going through 
 Kansas City, and the importance of that city as a primary 
 grain market is consequently impaired. 
 
 The development of the transportation lines of Canada 
 has brought another factor into the export grain traffic. 
 In the summer of 1908 the Canadian steamers and rail- 
 roads took grain from Port Arthur and placed it along- 
 side steamer at Montreal or St. Johns for 3^ cents per 
 bushel. The rate of the American railroads on wheat 
 from the vessel at Buffalo was s| cents per bushel to 
 New York and Boston, and the grain merchants of those 
 cities complained that the American lines were depriv- 
 ing them of traffic because they would not lower their 
 rates to meet those via the Canadian route. These lines 
 stated that if they were to reduce the rate by way of 
 Buffalo I or 2 cents they would still get none of the 
 Canadian wheat, but would ruinously sacrifice their rev- 
 enue on such wheat as came to them. They suggested 
 to the New York and Boston shippers that inasmuch 
 as the Canadian government supports the Welland and 
 Lachine Canals it might .not be improper for them to 
 secure lower rates by bringing their wheat East by the 
 Erie Canal. 
 
 That the mills near the farms and those near the places 
 of consumption may be upon an approximate parity in 
 so far as the transportation charge is concerned, it has 
 been the general policy of the American railroads to 
 make the rates upon wheat the same or very nearly the 
 same as upon flour. This is not always easy of accom- 
 
Commodity Rate Structures 125 
 
 plishment even in the domestic trade. It is still more 
 difficult to maintain such a close relation between the 
 rates for export traffic as will protect the American 
 miller. At the time of the introduction of the roller 
 ground patent flour, about 1880, the profits of the mills 
 were from $1 to $3 a barrel. These have now fallen to 5 
 or 6 cents a barrel, the millers regarding a margin of 
 from 2 to 3 cents per 100 pounds of flour as a good 
 profit. If the rate on wheat for export is lower than the 
 rate on flour for export by greater than this amount, there 
 is consequently a tendency to export wheat, which is 
 ground into flour in the countries where it is consumed. 
 Wheat rates, however, have undergone wider fluctua- 
 tions than those on flour, to the frequent grievance of the 
 American millers. The railroads have claimed that the 
 rates on wheat have been subject to more intense com- 
 petition than those on flour; that wheat can be carried 
 in bulk in heavier loads per car, at a lower cost for 
 loading and unloading, and that a sudden demand will 
 bring forth far more wheat for shipment than flour ; the 
 former flowing out of elevators in bulk, while the latter 
 can only be produced from day to day in such quantities 
 as the capacity of the mills will permit. The Interstate 
 Commerce Commission has decreed that the rate to the 
 seaports on flour for export must not exceed the rate 
 on wheat by more than 2 cents per loo pound's. 
 
 The general effect of the grain rate structure of the 
 railroads of the United States is summed up in volume 
 VI of the Report of the Industrial Commission, pub- 
 lished by the Government Printing Office in 1901. It 
 states that while it is a fallacy to assume that grain rates 
 all over the country have fallen anything like the rate on 
 grain from Chicago to New York, there has been " great 
 gain in the past fifteen years to the consumer by the 
 elimination of numerous charges at the central markets 
 by concentrating the trade, and to the producer by the 
 competition of these central markets themselves, whereby 
 the price tends to be kept up to a higher level than other- 
 wise." It further says that " the competition of car- 
 
126 Railroad Freight Rates 
 
 riers and the rivalry of markets, in their constant efforts 
 to control freight movement from grain territories, suc- 
 ceed in steadily lowering railway rates." The diagram 
 accompanying this statement shows that the prices of 
 wheat oscillated between 135 per cent, in 1867 to 68 
 per cent, in 1896; of corn, between 116 per cent, and 45 
 per cent. ; while railroad rates steadily declined from 105 
 per cent, to 45 per cent. This report gives table after 
 table showing the declines in grain rates which, on cer- 
 tain roads, have ranged as much as 74 per cent., and 
 states that " the American product meets the world's 
 competition in foreign markets on favorable terms and 
 usually with great success, with the result that, because 
 of the cheapness of transportation and the acumen of the 
 grain merchant, the American producer gets very much 
 more for his labor than the inhabitant of any other 
 country on earth." 
 
 In brief, competition of the primary markets — St. Paul, 
 Omaha, Kansas City, Chicago, St. Louis, etc. — keeps 
 up the price to the producer: the competition of car- 
 riers and markets keeps down the price to the consumer : 
 both forces tend to reduce the cost of distribution, in- 
 cluding the rate of transportation and the charge for 
 handling. 
 
 (2) LIVESTOCK AND DRESSED MEATS 
 
 As the lands to the west of Chicago were brought under 
 tillage the prairies that intervened and stretched to the 
 farther West were used for grazing. Hundreds of thou- 
 sands of cattle feed on the ranches that spread from the 
 Dakotas to Texas. As the railroads desired to increase 
 their traffic by carrying cattle they met a kind of compe- 
 tition other than that of one railroad with another and 
 different from the struggles with the wagon or the water- 
 way, a kind of competition the motive power of which 
 was furnished by the animals 'themselves. They could 
 be and were driven from the plains of Texas to the feed- 
 ing grounds of the North, they could be and were driven 
 from the far West to the stockyards at primary markets. 
 
Commodity Rate Structures 127 
 
 It was necessary for the railroads, therefore, to make the 
 rates for the carriage of livestock not greatly to exceed 
 the cost of transportation " on the hoof." The general 
 freight agent of the first railroad to cross the Texas 
 border obtained from the stock drovers themselves a 
 statement of the cost of transportation by the drove. They 
 admitted that they would rather pay a trifle more by rail, 
 and the rates were accordingly fixed a little in excess 
 of the cost of driving. That phase of competition which 
 makes it requisite for a railroad to make the rate from 
 a station on its line the same as that from a correspond- 
 ing station on another railroad in order that it may share 
 in the traffic of the intervening territory was particularly 
 effective in the case of cattle which could readily be 
 ranged over the two or three hundred miles that sep- 
 arated the railroads of the frontier. Upon these founda- 
 tions developed the tariffs on livestock. 
 
 The first channels of this traffic were from the Middle 
 States to the stockyards and thence to the slaughter 
 houses of the large eastern cities. During the first 
 years of grazing in the farther West, the greater quan- 
 tities of livestock were also shipped through to the East, 
 but the development of transportation under refrigera- 
 tion led to their being killed nearer the sources of sup- 
 ply. Chicago was the first of the great packing centers 
 where cattle are turned into dressed beef. As grazing 
 grounds still farther to the West were extensively util- 
 ized, packing houses were erected at Omaha, Kansas 
 City, and, in recent years, at Denver and Ft. Worth, not 
 to mention Oklahoma City, which is on the way to real- 
 izing its ambition to become a packing center. This 
 does not mean, however, that slaughtering is not still 
 conducted in cities along the Lakes and in the Ohio Val- 
 ley, any more than that the enormous development of mill- 
 ing in the West and Northwest has destroyed the flour- 
 ing industry in these cities. Cincinnati, which was the 
 first conspicuous pork packing center, is still the seat of 
 a large packing house industry and there are large pack- 
 ing houses at Buffalo, Cleveland and Indianapolis, 
 
128 Railroad Freight Rates 
 
 which draw their supplies of livestocii principally from 
 Ohio, Indiana, Illinois, Kentucky and Tennessee. 
 
 When the slaughter of cattle and hogs on an extensive 
 scale began in the West everybody assumed that the 
 rate on dressed beef and dressed pork should be higher 
 than that on cattle and hogs, manufactured products al- 
 ways commanding a better price in the markets than the 
 raw material out of which they are made, and therefore 
 paying a higher rate of freight. Moreover, the cars in 
 which livestock was shipped were not of expensive con- 
 struction and frequently secured return loading from the 
 East. Refrigerator cars, on the contrary, are costly. They 
 have to be provided with facilities for carrying and must 
 carry ice at the same time as the beef, and they do not al- 
 ways find loads for the return to the West. Competition 
 engendered by the packing houses, after a long and bitter 
 contest between the interests involved, forced the west- 
 ern railroad companies to make the rate on dressed beef 
 and dressed pork the same as on cattle and hogs. In- 
 cidentally it was necessary to decide such questions as to 
 whether slaughtered hogs that were not salted until 
 placed in the cars should be considered as salt meat or 
 a packing house product, the latter taking a lower rate. 
 
 This status in the West continued for several years. 
 It was overthrown through the action of a railroad 
 company whose lines, extending between Kansas City, 
 Omaha and Chicago, had been unable to obtain an 
 appreciable share of the traffic in packing house prod- 
 ucts. The president of this company invited the heads 
 of the packing house companies to a conference in 
 which he agreed to cut the rate on their output 
 from the Missouri River centers to Chicago from 
 23J to 18^ cents per 100 pounds, if the packers would 
 guarantee to his company a certain percentage of the 
 traffic. The packers accepted the offer and entered into 
 the contract, with the result that the other lines were 
 obliged to meet the cut rate, and the packers have 
 given them the bulk of the traffic, preferring to make up 
 to the road that brought about the reduction, by a cash 
 
Commodity Rate Structures 129 
 
 forfeit, the amount of revenue due under their guarantee. 
 A demand of the Livestock Association that an equivalent 
 reduction be made in the rate on Hve cattle and live hogs 
 w^as contested by the railroads and made the subject of 
 litigation. The lower court decided that as the compe- 
 tition did' not apply to cattle and hogs the railroads were 
 not obliged to lessen the rates to the level of those on 
 dressed meat. The case was appealed to the Supreme Court 
 of the United States which sustained the lower court. 
 The natural result has been to give the packing houses 
 a tremendous advantage over the livestock shippers. 
 
 As the shipments of cattle from the West to the pack- 
 ing centers have increased, as the railroads have had to 
 provide better and larger loading pens, improved water- 
 ing facilities, and to move livestock from the ranges or 
 the fattening grounds in quicker time, — that is, as their 
 advanced methods have brought about the movement of 
 livestock not only more speedily, but with far less de- 
 terioration to the animal than would be possible under 
 the old time transportation on the hoof, — they have from 
 time to time advanced the rates above the level upon 
 which they were first fixed to meet that competition. 
 Although they claim that the original rates were ab- 
 normally low, and that even under the highest level which 
 they have sought to establish, the carriage of livestock 
 yields less revenue per ton per mile than that of almost 
 any other commodity, certain of the livestock associations 
 have contested the advances before the Interstate Com- 
 merce Commission and in the courts. The railroads also 
 call attention to the fact that improved feeding condi- 
 tions on the ranges make it less necessary than dur- 
 ing previous years to transport cattle to fattening 
 grounds, and that as the prices for both cattle and hogs 
 have radically increased the livestock dealers in all fair- 
 ness should pay higher rates for the superior transporta- 
 tion service. 
 
 The Report of the Industrial Commission presented to 
 Congress January 15, 1901, shows that horses, marketed 
 in St. Louis at from $75 to $100 each, had paid freight 
 
130 Railroad Freight Rates 
 
 from the breeding farms of from $3 to $6 each. The 
 deduction of this and other expenses of distribution left 
 the producer from $67 to $93. Cattle weighing from 
 1,200 to 1,500 pounds, for which the consumer paid on 
 an average $5.35 per 100 pounds, paid freight that 
 ranged from 19 to 36 cents. The deduction of this and 
 other expenses of distribution, yielded the producer from 
 $4.88 to $5.15. As the advance in the price of livestock 
 has greatly exceeded the advance in the rates of freight, 
 the ratio of the transportation charge at this writing is 
 still lower. 
 
 The struggles between the western railroads as to 
 the relative rates on live animals and on meat and meat 
 products did not extend in the same degree to the eastern 
 lines, which have preserved a higher rate on the manu- 
 factured product than on the raw material, the rate for 
 many years from Chicago to New York on dressed meat 
 having been 45 cents, the rate on hogs 30 cents and on 
 cattle 28 cents per 100 pounds. The difference between 
 the dressed beef and the livestock rates is thus preserved 
 substantially in accordance with the report of Elihu B. 
 Washburn, to whom the matter was referred for arbi- 
 tration. After a thorough investigation and analysis 
 he rendered an opinion that in fairness the dressed beef 
 rate should be 170 per cent, of the livestock rate. 
 
 (3) COTTON 
 
 As grain was a prime cause of conflict between the 
 seaports of the North Atlantic and the railroads serv- 
 ing them, so also was cotton the bone of contention be- 
 tween the seaports of the South Atlantic and the Gulf 
 and the railroads respectively serving them. As with the 
 grain traffic, there was the giving of secret rates, the 
 open cutting of rates, and rate wars that continued with 
 but short intervals until an adjustment of rates that fairly 
 satisfied the export dealers of the rival ports and the 
 competing railroads was brought about in the early sev- 
 enties through the Southern Railway and Steamship 
 
Commodity Rate Structures 131 
 
 Association. The damage to their harbors during the 
 Civil War took away much of the cotton trade from 
 Charleston and Mobile, the cities of Wilmington, Savan- 
 nah and New Orleans each profiting thereby. The rates 
 are now delicately and by almost unanimous consent so 
 equitably adjusted that each port draws cotton from 
 the territory tributary to it; and in the competitive ter- 
 ritory farther in the interior each port can compete on 
 a fair basis with its rival. The development of the cot- 
 ton milling industry in the Carolinas, together with the 
 censorship of the State Commissions, has resulted in an 
 adjustment of rates to the milling points that is elimi- 
 nating the old time criticism of excessive local rates. 
 When the producer east of the Mississippi River re- 
 ceives 10 cents a pound for his cotton it is computed 
 that the freight charge averages 2.5 per cent, of his 
 receipts. 
 
 In Texas the State Railroad Commission has graded 
 the rates on cotton for 160 miles from Houston and estab- 
 lished a maximum rate of 49 cents for any greater dis- 
 tance. The rate to Galveston is 6 cents per hundred 
 pounds more, which has the effect of making a rate of 55 
 cents per hundred pounds for all distances 210 miles or 
 more from Galveston. About 25 per cent, of the cotton 
 which moves through Galveston is grown within 210 
 miles of Galveston, so that this basis means that 75 per 
 cent, of the cotton produced in the State is carried to 
 the Gulf at the same rate — the rate to New Orleans, for 
 export, being 56^ cents, which is the Galveston rate 
 plus i^ cents, the amount of the wharf charge at Galves- 
 ton. The plantation owner several hundred miles in the 
 interior therefore receives as much for his cotton as the 
 grower within 210 miles of the Gulf. This policy tends 
 to give the grower the benefit of the competition engen- 
 dered by the primary markets, Houston, Galveston and 
 New Orleans. He can ship his cotton to Houston on 
 the basis of 49 cents, and when it is sampled and pre- 
 pared for market the purchaser at Houston pays the 
 rate of 6 cents from Houston to Galveston. If the pro- 
 
132 Railroad Freight Rates 
 
 ducer would sell to a Galveston merchant he would pay 
 55 cents for the initial movement ; the present basis there- 
 fore provides that a bale of cotton shipped to Houston, 
 thence reshipped to Galveston, pays exactly the same 
 freight rate as a bale of cotton shipped direct to Galves- 
 ton. The rule of the Texas Railroad Commission re- 
 quires that railroads shall compress all cotton, if desired 
 by owner, at the nearest compress in line of movement, 
 and pay for this compression the amount of 10 cents 
 per one hundred pounds. The railroad company, there- 
 fore, receives 39 cents per hundred as net revenue for 
 hauling a bale of cotton from the initial point to the 
 compress, thence to Houston; and 45 cents from the 
 initial point to a compress, thence to Galveston. This 
 regulation of the Commission has had the effect of 
 stimulating the construction of compresses in the inte- 
 rior so that the compresses at Houston and Galveston are 
 used only to a small extent and by small shippers who 
 forward their cotton to factors at Houston and Galveston 
 to be compressed there and placed on the market when 
 market conditions are favorable. Of the entire average 
 crop of Texas of over 3,000,000 bales, only about 10 per 
 cent, is thus handled. 
 
 In other parts of the South the railroads likewise 
 pay the compress fee because the compress reduces the 
 baled cotton by about 75 per cent, in bulk, thereby en- 
 abling a far greater tonnage of compressed than uncom- 
 pressed cotton to be loaded in a car. The fee, however, 
 ranges as low as seven cents, in but few places being as 
 high as the ten cents stipulated by the Texas Commission. 
 
 The rate from Oklahoma to the Atlantic seaports on 
 cotton going to Europe is naturally higher than from the 
 other cotton producing sections. By way of compensa- 
 tion the rate to the Pacific Coast for export to the mills 
 of China and Japan is lower than from any other cotton 
 raising district of the United States, except Texas. Cot- 
 ton from Oklahoma, therefore, seeks the Pacific and the 
 Oriental markets. 
 
 Probably no other agricultural product of the United 
 
Commodity Rate Structures 133 
 
 States is so slovenly handled as cotton. The farmers 
 often leave it exposed to be damaged by rain and infil- 
 trated with mud; it is loosely baled and inadequately 
 marked. That which is sold to Japan, however, must 
 meet the requirements of the Japanese, who insist that 
 it be carefully packed, that it be clean, and bound in 
 white cloth, which must be marked in indelible ink. 
 
 (4) LUMBER 
 
 The shifting of the source of the lumber supply has 
 prevented the lumber rate structure from ever attain- 
 ing a condition even approaching stable equilibrium. 
 Sixty years ago the lumber used by nearly every town 
 and city in the country was obtained from adjacent for- 
 ests, and shaped in near-by mills. Timber is still cut 
 in New England, New York and Pennsylvania, but in 
 quantities that are no longer adequate to supply local 
 needs. As the vast forests of these States were destroyed 
 by the woodman's axe, and by fire and freshet, and the 
 ravages of insects and fungi, Buffalo became a great 
 headquarters of dealers who brought lumber down from 
 the Lakes and across the border from Canada. Then 
 the main source of supply shifted to the West and to 
 the South, and finally to the Southwest and the far 
 Northwest. The lumber dealers whose business was once 
 almost entirely done through Buffalo, in common with 
 lumber dealers who have headquarters in other cities," 
 have established offices at Memphis, through which they 
 direct shipments from the Southwestern forests. Lum- 
 ber, and especially shingles, also come in great quantities 
 from Oregon and Washington to the far East. For 
 instance, the coal companies of Pittsburg that send coal 
 down the Ohio and Mississippi Rivers in the light wooden 
 shells known as coal boats, once obtained the hemlock 
 of which these boats are made from the banks of the 
 Allegheny River. Now it comes in large quantities from 
 the forests along the Columbia, Oregon, and Willamette 
 Rivers and their tributaries. 
 
134 Railroad Freight Rates 
 
 The shifting status of the lumber rates is shown by 
 the changes that followed the depletion of the North- 
 western forests. Logs from the timber land along the 
 lake shore were once taken by water to Buffalo and 
 Chicago, where they were milled for further use. Even 
 the lumber used in Omaha and eastern Nebraska came 
 from the Lake forests by water to Chicago and by rail 
 from the Chicago mills to Omaha. As the forests were 
 cut away from the lake shore sawmills were built in 
 the interior, it being more economical, in the absence of 
 immediate water transportation, to saw the timber at the 
 forest edge. Competition arose between these interior 
 mills and those at Chicago for the trade of Omaha. The 
 matter was referred to arbitrators who established the 
 rate adjustment, based on fixed differences as from the 
 respective milling districts, that is in effect to-day. At 
 this time, however, the requirements of the Omaha sec- 
 tion are met principally with pine from the South and 
 from the States of Idaho, Oregon, Washington and Cal- 
 ifornia, the Wisconsin mills finding a more profitable 
 market in Ohio and Indiana. These white pine forests 
 of Wisconsin and Minnesota have been so depleted that 
 large distribution of lumber no longer takes place through 
 the ports on Lake Michigan, Lake Superior and Lake 
 Erie. When lumber was forwarded by water the various 
 sizes were loaded in the boats as they came from the 
 mill, and were assorted and prepared for specific mar- 
 kets as they were rehandled from the boats to the rail- 
 road cars at the lower ports. At present the lumbermen 
 find it more profitable to fill specific orders directly at 
 the mill by loading the sizes and shapes desired on cars 
 that go through to destination. 
 
 In the proceedings of the traffic associations whose 
 formation was brought about by the excessive railroad 
 competition of the Northwest the lumber rates were a 
 source of unending complications. Adjustments were 
 required between the rates on hardwood logs and hard- 
 wood lumber, on softwood logs and softwood lumber, 
 and between the rates on lumber and those on its various 
 
Commodity Rate Structures 135 
 
 products, such as telegraph poles, beams, shingles and 
 girders. 
 
 The railroads of the interior Northwestern States en- 
 deavored to protect the trade of their lumbermen as long 
 as the white pine forests provided abundant traffic. They 
 thus facilitated the conversion of the timber districts into 
 farming lands, and the lumber afforded return loads for 
 the cars that brought the supplies to the lumber camps. 
 It was their fixed policy, therefore, to make lower rates 
 on this white pine than on the yellow pine from 
 the South which was then seeking a market, the dis- 
 crimination being furthered by the fact that there 
 were no return loads to the South for the cars 
 that brought up the yellow pine. As the Northern 
 forests have been denuded, the rates on the Southern 
 pine have been reduced. The following example is but 
 one of the very many that might be cited to illustrate the 
 complications arising from such a change in the source 
 of supply. 
 
 During the availability of the Wisconsin forests ex- 
 tensive and expensive plants were established in Osh- 
 kosh for the manufacture of sash, doors and blinds, 
 which supplied large markets in Chicago, Cincinnati, 
 Toledo, Indianapolis, and other cities of the interior. 
 As the lumber supply moved toward the South similar 
 plants were erected at Muscatine, Iowa. Both cities are 
 now forced to bring lumber from the Southwest, the 
 haul to Oshkosh being considerably longer than to Mus- 
 catine. The Oshkosh plants are under a further handi- 
 cap in reaching the markets at Indianapolis, Columbus and 
 Cincinnati by the fact that the rates from Muscatine, a 
 Mississippi River point to the south of Dubuque, are 
 largely controlled by the rates from St. Louis, and the 
 direct route is to the south of Chicago, whereas Osh- 
 kosh is almost due north of that city. A similar illus- 
 tration is furnished by the vehicle factories that were 
 located at Pontiac, Wayne, Jackson, South Bend, and 
 Franklin, because of contiguity to the Michigan lumber 
 supply, which has also been exhausted. They must now 
 
136 Railroad Freight Rates 
 
 obtain lumber from the South and Southwest, and they 
 likewise complain because of the rates on vehicles to the 
 West and Southwest. That is, these industries, which in 
 previous decades paid remunerative rates to the railroads, 
 now seek unremunerative rates to enable them to con- 
 tinue in competition with rival industries that, situated 
 nearer the present sources of lumber supply, not only 
 secure their raw material more cheaply, but have lower 
 rates on their products to the region to which they are a 
 long step nearer than the earlier located factories to their 
 north. South Bend, for example, clamors for the same 
 rates to the West as from Chicago, although she is 86 
 miles to the east of that city. This and the foregoing 
 example are reciprocal in that to sustain the sash, door 
 and blind factories of Oshkosh the roads to the west of 
 Chicago are obliged to ask concessions of the railroads 
 leading from that city through the Central Traffic Ter- 
 ritory ; while to protect the vehicle industry of northern 
 Indiana and southern Michigan the railroads leading 
 therefrom to Chicago are obliged to seek concessions 
 from the lines leading to the West from that city. 
 
 While the railroads of the Northwest were making 
 low rates on white pine to give the lumbermen of that 
 section an advantage in the markets, the railroads that 
 had been constructed into the South, and especially into 
 Arkansas, Louisiana and the Southwest, were attempting 
 to increase their traffic and develop the territory which 
 they served by encouraging the cutting of and helping 
 to market the yellow pine and the other woods of the 
 South. They made low rates and still lower rates, and 
 finally began to obtain traffic from the lumber which at 
 last was gaining a foothold in the northern and west- 
 ern markets. As the northern forests were exhausted 
 the lumber from the South and Southwest came more and 
 more into demand at higher and higher prices ; stumpage 
 that had sold as low as from 10 to 20 cents an acre had 
 risen to $5.00 and upwards, and the land itself, for which 
 there was not a purchaser at $5.00, easily brought from 
 $25.00 to $50.00 an acre. The railroads endeavored to 
 
Commodity Rate Structures 137 
 
 advance in their rates, claiming a right to share in the 
 increased prosperity of the region; the lumbermen con- 
 tested these advances before the Interstate Commerce 
 Commission and through the courts, which upheld the 
 Commission in nullifying an advance of two cents per 
 100 pounds. 
 
 The prosperity of the lumber industry to the westward 
 of the lower Mississippi has extended to the remote 
 Southwest, timber that a score of years ago could not 
 find a market now being the basis of profitable operation. 
 When its timber in Michigan was nearing exhaustion, 
 a lumber company of that State, about the year 1891, 
 invested in white pine timber in New Mexico, erected 
 a sawmill and built a logging railroad. It struggled 
 for several years to find a market, but almost entirely 
 without success. The lumber was full of knots and pitch, 
 and could not be sold in competition with that of the 
 Pacific Coast, or even that of Colorado. The railroad on 
 which the enterprise was located made very low rates 
 to aid in the disposition of lumber in Colorado and 
 Kansas, but the lumber company ultimately abandoned 
 the project, dismantling the sawmill and taking up the 
 logging railroad. The property laid idle until about 1904, 
 when another company purchased the timber rights, 
 and built a mill at a point where there was better water 
 supply. This company cut the trunks in short lengths 
 for the market, into material for sash, doors, boxes, bar- 
 rel heads, and into lath. It is now shipping the material 
 to the sash and door factories at Muscatine, Oshkosh, and 
 Chicago, and even sends doors to Scotland, making a fair 
 return on a very large capital. These results have fol- 
 lowed the great advance in the prices of lumber, coupled 
 with the intelligence of the operators. 
 
 The rates on lumber from the South and Southwest 
 that is destined to the markets north of the Ohio River 
 are adjusted under fixed differences. The rate by way 
 of St. Louis is 2 cents higher than by way of Cairo ; to 
 many points in Indiana it is but i cent higher 
 
 Reference has been made to the freight rates as af- 
 
138 Railroad Freight Rates 
 
 fecting the lumber industry of the Pacific Coast in that 
 part of the previous chapter devoted to the freight rate 
 structure of that region. As the traffic problems of the 
 Pacific Coast are in large measure peculiar thereto, it 
 has seemed advisable to include mention of the commodi- 
 ties constituting that traffic in the outline of those prob- 
 lems. 
 
 (5) THE DIFFERENT TYPES OF COMMODITY RATE 
 STRUCTURES 
 
 On the great staple commodities it is necessary to so 
 adjust rates as to maintain equilibrium between the places 
 of production and the various markets. In the case of 
 grain and grain products flowing in the great channels 
 of traffic from one region to another this is accom- 
 plished, as we have seen, by an equalization through dif- 
 ferent gateways. The solution of the problem is similar 
 in the case of livestock and dressed meats. These com- 
 modities are all produced throughout a widely extended 
 area, and are marketed in an area that is also widely 
 extended. 
 
 In the case of such commodities as wool and bullion, 
 while the production is over a widely extended area, 
 their flow is along converging lines to places of final 
 manufacture comparatively few in number and in an 
 area limited in extent. The rate adjustment, therefore, 
 is more especially concerned with the establishment of 
 an equilibrium between the places of production. 
 
 The adjustment in the case of cotton is in a measure 
 akin to that on grain and grain products, although the 
 cotton mills are not nearly so widely distributed as the 
 flour mills. In the case of lumber, of which the sources 
 of supply are no longer so numerous as in former years, 
 the crux of the adjustment lies in the contest between 
 the railroads and the lumbermen as to whether the rate 
 shall be higher or lower within the margin that the 
 traffic will readily bear. 
 
 In the case of fruits and vegetables is approached 
 another type of structure — that which has to take into 
 
Commodity Rate Structures 139 
 
 account the necessity for such an adjustment as will 
 maintain an equilibrium in common markets between 
 products from widely divergent sources of supply. In 
 Chicago and the cities of the Atlantic seaboard, and in 
 the intervening cities, for example, the vegetables of 
 Florida compete with those of MissiS'Sippi, and the 
 oranges of Florida with those from the Pacific Coast. 
 
 The maintenance of the equilibrium in common mar- 
 kets on a product that comes from widely divergent 
 sources of supply is, perhaps, the more difficult in the 
 case of coal than of any other commodity. Practically 
 the entire supply of anthracite coal comes from north- 
 eastern Pennsylvania, whence it is distributed for con- 
 sumption throughout the North Atlantic States, and, to 
 a lesser degree, in the West and the Northwest. Bitu- 
 minous coal fields, supplying the North Atlantic States, 
 extend from the Clearfield region in Pennsylvania down 
 through Maryland and the Virginias. The competition 
 between these fields and the lines serving them for the 
 seaboard trade was so continuous and unrelentingly 
 bitter through a long series of years that it was a 
 principal factor which led to the " community of inter- 
 est " between the lines extending from these coal fields 
 to the East. 
 
 The coal fields of western Pennsylvania, eastern and 
 southern Ohio, of West Virginia, and to a limited ex- 
 tent, of Virginia, are in competition for the lake trade, 
 that which is carried by rail to the lower ports of Lake 
 Erie and thence by vessel to the ports of the upper 
 lakes, as far as Duluth, where it is distributed through- 
 out the Northwest. The adjustment of rates to maintain 
 equilibrium between these competitors has been a per- 
 plexing problem, the quality of the coal, as well as the 
 conditions of transportation, needing to be taken into con- 
 sideration. Coal from these fields also competes through- 
 out Ohio, Indiana, Michigan, and Illinois, also con- 
 testing these markets with the coal of southern Ohio, 
 northern Kentucky, central Michigan, central and 
 southern Indiana, and of central and southern Illinois, 
 
140 Railroad Freight Rates 
 
 this multiplying competition leading to further compli- 
 cations that make the rate adjustment all the more 
 difficult. At different places along the Mississippi Val- 
 ley there is competition between the coal that comes 
 from Illinois, Arkansas, Missouri, and Iowa, and to a 
 degree the coal from these fields is in rivalry in the 
 Northwest with that which has come up via the Lakes. 
 In the trans-Missouri territory the coal from Iowa, Mis- 
 souri, Arkansas, and southeastern Kansas competes, 
 certain markets also being entered by coal from Okla- 
 homa and Colorado. In the Rocky Mountain region 
 there is competition between the mines of New Mexico 
 on the south, and those of Colorado, Wyoming, and the 
 Crow's Nest field of Canada to the north. The Southeast 
 is supplied with coal from the Virginias, Kentucky, Ten- 
 nessee, and Alabama. The fact that the operators of 
 each field continuously desire to increase their output 
 and extend their markets leads to constant pressure upon 
 the railroads for reductions and readjustments of rates, 
 the freight rate on coal always being a considerable 
 element in its price. 
 
 The competition between manufacturers of brick and 
 cement in nearly all respects is similar, except that or- 
 dinarily it does not apply over such extended areas. 
 For example, in the Clearfield district of Pennsylvania 
 vast quantities of fine fire clay underlie the coal seams. 
 Not many years ago the practicability of manufacturing 
 fire brick from this clay in this district was investigated, 
 but on account of the locality not being in the main 
 channels of traffic, the rates then in effect would not 
 let the brick enter the markets in competition with the 
 fire brick from the Pittsburg and Johnstown districts, 
 or compete in wider markets with the brick manufac- 
 tured in southern Ohio or New Jersey. A fire brick plant 
 at Pittsburg, of course, had the Pittsburg district market 
 at hand throughout which its delivery cost was low; 
 this gave it an advantage over the plant 150 miles away 
 in the Clearfield district, which, however, was favored 
 
Commodity Rate Structures 141 
 
 by being nearer the source of raw material. In adjust- 
 ing the transportation charge on the fire brick from the 
 Clearfield district and on the raw material from the Pitts- 
 burg district, there was the endeavor to place the 
 competing districts as nearly as possible on a parity so far 
 as their cost of manufacture is concerned. 
 
 Deposits of glass sand that are abundant in the center 
 of the State of Pennsylvania have been developed by 
 the adjustment of rates so that it may be shipped to 
 plants near a fuel supply, where the manufacture of 
 glass is practicable. For instance, the enormous glass 
 plants along the Allegheny River and in the Pittsburg 
 district must compete with those at Kane and there- 
 abouts, where there is both sand and fuel-gas, and also 
 with the glass plants of Indiana. To these various 
 places the railroads must so fix their tariffs on the various 
 materials that the plants may continue in operation. 
 
 Cement is produced in various locahties in this eastern 
 portion of the United States, the plants in each locality 
 being designated as the Pennsylvania group, the New 
 Jersey group, the Hudson River group, the Virginia 
 group, and the Ohio group. To protect the cement 
 industries on its lines, each railroad company has been 
 obliged to make such adjustment of rates on coal to 
 the cement plants as will permit a cost of manufacture 
 enabling their product to be sold in as extended a market 
 as can be maintained. The Lehigh district of Pennsyl- 
 vania is so abundantly supplied with cement rock that it 
 would seem to be the natural place for the manufacture 
 of cement, but the railroad company has been obliged 
 time and again to adjust its rates to the needs of the 
 industry, and the situation will be the more complicated 
 as the manufacture of cement from furnace slag is still 
 further developed. Cement from this region was once 
 extensively shipped to the Middle West, but these mar- 
 kets have been absorbed by plants erected in recent years 
 in the Mississippi Valley. 
 
 It goes without saying that the adjustment of rates 
 
1421 Railroad Freight Rates 
 
 between competing districts is not always effected with- 
 out friction between the producers of one district and 
 those of another, or between one and another producer 
 of the same district. Every producer is at nearly all 
 times trying to extend his market, and he besieges the 
 railroad company for rates that will make possible that 
 extension, even although the concession which he seeks 
 will work to the injury of a competitor or of a com- 
 peting region entitled to as much consideration. A pro- 
 ducer is prone to regard the market in his vicinity as 
 belonging to him by natural right, and to regard sales 
 in a distant market as so much extra gain. This ten- 
 dency is especially manifest in times of great pros- 
 perity, when there is on every hand the stimulus to 
 exertion. 
 
 Other kinds of complications that beset the railroads 
 are indicated by the following examples. In northern 
 Indiana a great many roads are building for which 
 can be used either crushed stone from various quarries 
 that are respectively in the vicinity of Chicago, Toledo, 
 and Milwaukee, or gravel from gravel pits within a few 
 miles of the roads. To enable the quarry owners to com- 
 pete with the gravel pits, it has been necessary for the 
 railroads to make a very low rate on crushed stone for 
 use in the country roads, and they have been forced to 
 apply the low rates made because of this contingency 
 as the basis for rates on crushed stone employed for other 
 purposes throughout a considerable section. 
 
 Along the south shore of Lake Michigan are sand 
 dunes hundreds of feet high bordering the tracks of the 
 railroads for thirty-five miles or more. The railroad 
 company naturally desired to rid its track of this menace, 
 and when demand arose for sand for use in the embank- 
 ments made by the railroads upon which to elevate their 
 tracks in Chicago and its vicinity, this company made 
 rates of $4.00 and $5.00 per car on fifteen-ton cars, and 
 $7.00 and $8.00 per car on fifty-ton cars for distances 
 of thirty and forty miles into Chicago. This rate was 
 profitable enough for cars that ran with full loads in 
 
Commodity Rate Structures 143 
 
 long trains at frequent intervals. Other sand shippers 
 insisted, however, that correspondingly low rates be made 
 on sand sold by them for various uses, although moved 
 in but one or two carloads at a time and from sand 
 banks as remote as St. Joseph and Michigan City. 
 
 Lime of fine quality is made at Mitchell, Indiana, on 
 a railroad leading into Chicago, and also at Marble- 
 head, near Burlington, Iowa, which is much nearer than 
 Mitchell but on another railroad leading into Chicago. 
 It has been necessary for protection of the lime kilns of 
 Mitchell that the railroad therefrom make the same rate 
 into Chicago as applies from the nearer kilns at Marble- 
 head. 
 
 Iowa is a competitive market for salt from Kansas, 
 from Manistee and Ludington, Michigan, and from De- 
 troit, Toledo, and Cleveland. The conflict between these 
 divergent sources of supply and the railroads serving 
 them finally resulted in rates on salt that are practically 
 the same from these various points to the Iowa mar- 
 kets. In like manner the rates on ice from Michigan 
 to Chicago are influenced by the rates from Wisconsin. 
 This rivalry is especially marked in the case of such a 
 large market as Chicago, the population of which is 
 approximately the same as that of the entire State of 
 Wisconsin. 
 
 When there is but one source of production of a com- 
 modity that commodity is in competition with substitute 
 commodities only ; the price, including the transportation 
 charge, is limited by the point at which there will be 
 the substitution of another for that commodity. When 
 there are numerous sources of production there is a 
 greater number of markets which are interwoven by the 
 working of competition. There must be maintained a 
 certain equilibrium for the interest of everyone con- 
 cerned, and the burden of its maintenance often falls 
 upon the transportation lines. Their traffic officers be- 
 come the umpires between contending interests, and not 
 infrequently receive the buffeting that is the umpire's 
 usual fate. 
 
144 Railroad Freight Rates 
 
 IMPORT AND EXPORT TRAFFIC 
 
 Through the various ports of the United States are 
 imported in large quantities the materials and products 
 of other countries, and are exported the materials and 
 products of this. The through route formed by a ves- 
 sel line from a foreign country, through a particular 
 port, in connection with a railroad line from that port to 
 a city in the interior is in competition with a through 
 route formed by a vessel line through another port, in 
 connection with a railroad line leading from that port 
 to the same or to a rival interior city. For example, 
 traffic from Liverpool to Denver may go through either 
 Montreal, Boston, New York, Philadelphia, Baltimore, 
 or Norfolk, and thence by rail to Denver; or it may 
 go through New Orleans or Galveston and thence by 
 rail to Denver. 
 
 In the case of export traffic the same conditions exist 
 in reverse direction. As stated on a previous page, the 
 differentials on export grain via the different North 
 Atlantic ports to Liverpool were originally established 
 with the intent of making the through rate from the grain 
 fields to Liverpool the same via any of these ports. The 
 adjustment of the grain export rates via the Gulf also 
 had to take into account the through rate to Liverpool 
 via the Atlantic ports. 
 
 The endeavors of different ports and of the railroads 
 serving them to secure either import or export traffic, 
 or both, have obliged the railroads at times, indeed, at 
 nearly all times, to make inland rates on certain traffic 
 far lower than those accorded on similar traffic 
 between the same points that is entirely do- 
 mestic. This practice has been held to be justi- 
 fiable by the Supreme Court of the United States. 
 The railroads have also claimed that they have been 
 compelled to rapidly change their rates in accordance 
 with the fluctuations of steamship rates, which often go 
 up and down from day to day as the offering of loads 
 i for cargoes are heavy or light. Indeed, the vessel rates 
 
Import and Export Traffic 145 
 
 have been known to vary from hour to hour. For ex- 
 ample, a ship with two-thirds of a cargo may make a 
 substantial reduction to stimulate the shipment of ad- 
 ditional merchandise sufficient to make a complete cargo. 
 This condition has frequently obtained at the southern 
 ports with steamships seeking full cargoes of cotton and 
 naval stores. 
 
 It is also evident that a port through which exports 
 naturally flow desires to offer rates to the interior on 
 imports that will attract vessels with inbound cargoes in 
 order that there may be adequate facilities for the out- 
 bound traffic. Conversely, it is desirable that a port 
 naturally attracting imports should have favorable rates 
 on export traffic in order that it may have full cargoes 
 for the vessels outbound. 
 
 The Interstate Commerce Commission has ruled that 
 the inland rates for both export and import traffic shall 
 not be lowered or advanced, except upon due notice, as 
 provided in the Interstate Commerce Law, and it has 
 also ruled that either the through import or export 
 rates, or else the inland proportions thereof received 
 by the rail lines, shall be published and posted the same 
 as rates on domestic traffic. That is, the Commission 
 states that while it has no jurisdiction over the vessel 
 rates or over the through rates made by the railroads 
 in combination with the vessels, it has jurisdiction over 
 the rates of the railroads between the interior and the 
 ports, and decrees that these rates shall be filed and pub- 
 lished the same as other rates applying on interstate 
 commerce. 
 
 The lines engaged in transcontinental traffic state that 
 this ruling is especially burdensome to them. For ex- 
 ample, to participate in traffic from the Orient to New 
 York they are obliged to accept the agreed percentages 
 of such rates as the steamboats are obliged to make 
 from the Oriental ports. The traffic from Australia and 
 China, for instance, may come to New York either via 
 the vessel routes by way of the Suez Canal, or by way 
 of the vessel and rail routes through San Francisco, or 
 
146 Railroad Freight Rates 
 
 other of the Pacific ports. The vessels that sail from 
 these lands eastwardly around the globe to the Pacific 
 ports, and the vessels that sail half way around the 
 globe to the west on their way to the American me-' 
 tropolis are in vigorous competition for this traffic. 
 Those that sail toward the East are obliged to rely upon 
 the transcontinental railroads to accept the stipulated 
 percentages from the Pacific ports to various destinations 
 in the United States of such rates as they are obliged to 
 make to secure traffic that otherwise would move in the 
 opposite direction through the Suez Canal and through 
 the ports of the Atlantic to these destinations. 
 
 Likewise, the traffic from New York or the interior 
 may go either from the Atlantic ports by way of the 
 Suez Canal, or by rail to the Pacific ports and thence 
 by vessel. The vessel lines from New York via the 
 Suez are under no obligation to publish their rates and 
 are not under any jurisdiction of the Interstate Com- 
 merce Commission compelling them to maintain rates. 
 On the contrary, the transcontinental lines which, in 
 connection with the Pacific vessel lines, compete for this 
 traffic to the Orient, are obliged to publish and to adhere 
 to the published proportions that accrue to the rail lines 
 on this traffic. These proportions, in any event, are so 
 much less than they receive on domestic shipments that 
 the railroads fear their publication will lead to demand 
 for a reduction of their domestic rates, and, at the time 
 the Commission made its ruling, stated that they could 
 better afford to withdraw from this traffic, which, al- 
 though large in the aggregate, is of small consequence in 
 comparison with the aggregate of other shipments, rather 
 than take the risk of having the rates on the domestic 
 traffic reduced. In consideration of these peculiar con- 
 ditions affecting the transcontinental traffic of the Pa- 
 cific ports the Commission has reduced the time within 
 which notice of a change of rate may be given to ten 
 days in the case of advances and three days in the case 
 of reductions. 
 
 The decision of the Supreme Court permitting the 
 
Import and Export Traffic 147 
 
 railroads to charge on import and export traffic lower 
 rates than apply on domestic traffic between the same 
 places is in entire accord with the practice of the state- 
 owned railroads of Germany, which are obliged by the 
 government to encourage the German manufacturers to 
 seek foreign markets by making lower rates on export 
 than on domestic traffic ; and that of the National Rail- 
 road of Mexico, which contains a stipulation in the con- 
 cession that it must, in the interests of the Mexican 
 producers, make one-half rates on export traffic. While 
 the American producers are entirely content with the 
 application of this principle on export traffic, they resent 
 its application to import traffic, claiming that thereby 
 the intent of the custom duties is subverted. 
 
CHAPTER IX 
 
 EARLY TARIFFS AND CLASSIFICATIONS 
 
 No one of the factors entering into the formation of 
 the existing rate structures has been constant. As the 
 railroads have extended, as traffic has developed, as the 
 localization of industries and the currents of commerce 
 have changed, as State and Federal legislation has im- 
 posed its decrees, these varying influences have acted 
 and reacted upon the rate adjustments. 
 
 When railroads were first projected in the United 
 States, there was no definite basis upon which to estab- 
 lish their tarififs. Costs of maintenance and operation 
 were of uncertain estimate and the economic relations 
 of the transportation function were simple. Certain 
 of the State legislatures, at the time of granting charters, 
 assumed, as a matter of course, that a railroad could 
 furnish transportation at a lesser price than the wagons 
 along the turnpike, and, therefore, arbitrarily decreed 
 that the freight charge should be a greater or less pro- 
 portion of that customary by wagon. In some parts of 
 the country the wagon toll was 20 cents per cubic foot 
 for articles light in weight, and $1.00 per 100 pounds 
 for articles heavy in weight, per 100 miles. The mini- 
 mum charge was for twenty miles, because twenty miles 
 was a day's work, and a lesser haul spoiled the day. A 
 wagon of the kind in general use had a capacity of 200 
 cubic feet, and four horses could haul 4,000 pounds, or 2 
 tons. As the charge for 200 cubic feet at 20 cents 
 amounts to $40.00, and the charge for 4,000 pounds at 
 $1.00 per hundred weight amounts to $40.00, the mini- 
 mum charge for the wagon load was fixed at $40.00 
 per hundred miles. 
 
 The charter granted by South Carolina, in 1827, to the 
 South Carolina Railroad provided that the freight charge 
 
 148 
 
Early Tariffs and Classifications 149 
 
 should not exceed 10 cents per cubic foot for articles 
 light in weight, and 50 cents per 100 pounds for articles 
 heavy in weight, per 100 miles, thus arbitrarily making 
 the railroad tolls one-half the wagon tolls. The rail- 
 road accepted this to mean that the usual railroad charge 
 should be one-half the wagon charge : it divided its extent 
 into lengths of ten miles, one-half of the distance for 
 which wagons made a minimum charge, and adjusted its 
 rates at 100 pounds per ten miles. In a charter granted 
 by Georgia, in 1837, it is " Provided, That the charge 
 of transportation or conveyance shall not exceed 25 cents 
 per 100 pounds on heavy articles, and 10 cents per cubic 
 foot on articles of measurement for every 100 miles." 
 The provision as to the rates that generally appeared in 
 the early State charters, however, specifies that there 
 may be charged " such rates per mile as may be agreed 
 upon and established from time to time by the directors 
 of said corporation." Under this discretion various 
 tariffs in divers parts of the country were adjusted to 
 different proportions of the tolls that had been charged 
 by wagon, or by stagecoach, or by canal or other water- 
 way. 
 
 A's the first railroads were built from one or another 
 seaport for but short distances into the interior, there 
 was nothing to prevent the charge for any given distance 
 being the amount obtained by multiplying the rate per 
 mile . by the number of miles. That is, a " distance 
 tariff " prevailed. As the railroads extended, however, 
 it quickly became the practice to accord relatively lower 
 rates for long than for short distances, that is, to make 
 " tapering rates." 
 
 The practice of the wagoners to charge by the cubic 
 foot for articles light in weight, and by the 100 pounds 
 for articles heavy in weight was continued by the rail- 
 roads; but it quickly developed that it was not easy to 
 assign certain articles to one or another of these broad 
 classes. This difficulty was enhanced by the fact that 
 the railroads brought about an increase not only in 
 the volume but in the diversity of commodities offered 
 
1^0 Railroad Freight Rates 
 
 for transportation ; things differed, not only in bulk and 
 weight, but in value, and the way in which they were 
 packed, while many articles were not packed or wrapped 
 at all. A more elaborate grouping — such as had been 
 used by canals both in Great Britain and the United 
 States before there were railroads — was obviously neces- 
 sary. The initial steps of this development, as it pertains 
 to the railroads of the United States, are lost to record, 
 but that much progress was made within thirty years is 
 manifest from a document issued by the South Carolina 
 Railroad in 1855, copies of which are extant. At the top 
 four classes of articles are specified, the first including 
 " hats, bonnets, saddles, furniture, pianos, tea, and other 
 light articles," for which the charge was made per cubic 
 foot, ranging from 4 cents for 7 miles to 10 cents for 
 136 miles. As furniture and pianos are not exactly light 
 in weight, they were probably placed in the first class 
 because of their high value. 
 
 The second class included " dry goods, shoes, glass, 
 paint, glassware, drugs, gensing, pinkroot, confectionery, 
 raisins, figs, dates, camphine, spirits, turpentine, feathers, 
 stoves, hollow ware, bows and shafts, pepper, spice, gin- 
 ger." For these articles the charge applied per 100 
 pounds, ranging from 25 cents for 25 miles, to 50 cents 
 for 136 miles. Here, again, the inclusion of feathers and 
 stoves in the same class implies that commercial as 
 well as transportation conditions received consideration. 
 
 The third class embraced " butter, peas, lard, rope, to- 
 bacco, leather, dry hides, tin, copper, cast steel, hoop and 
 sheet iron, machinery in boxes, coils of wire, carriage 
 springs and axles, rice, soap, candles, hardware, guns, 
 bagging, tallow, beeswax, oil, white lead, wool, dressed 
 marble, mahogany bedsteads, old furniture, crockery, 
 doors, sashes and blinds, hubs, spokes, chair stuff, mel- 
 ons." The charge applied per 100 pounds, ranging from 
 18 cents for 25 miles to 40 cents for 136 miles. 
 
 The fourth class comprised " bacon, coffee, sugar, 
 nails, spikes, mill gearing, ice, steel — other than cast — pig 
 and bar iron, bundle iron, grind and mill stones, coal, 
 
Early Tariffs and Classifications i^i 
 
 green hides, hair and rags, potash, soda ash, german clay, 
 iron railings, shot and lead, mineral paint, undressed 
 marble, stone, hay, moss, tar, pitch, crude turpentine, 
 cotton yarn and domestics, down, paper down, tanbark, 
 stoneware, cottonseed, dried fruit, railroad wheels and 
 axles, car springs, copper ore." The charge applied 
 per 100 pounds, ranging from 15 cents for 25 miles to 30 
 cents for 136 miles. The inclusion of cast steel, hoop 
 and sheet iron in class third, while other kinds of 
 steel and pig and bar iron were placed in class fourth 
 shows a variance in the tariff on similar articles intended 
 for different purposes. 
 
 In addition to the articles ranged in these classes espe- 
 cial listing is made of agricultural implements, molasses, 
 liquor, barrels, lime, flour, cotton, grain, salt, chairs, 
 carriages and livestock. Under these headings the charge 
 is so much for each agricultural implement, vehicle, bar- 
 rel, cask, hogshead, pipe, tierce, kit, sack, bale, as the 
 case may be of fish, beef, pork, bread, crackers, fruit, 
 oysters, shoe pegs, beets, potatoes, onions, apples, ce- 
 ment, plaster, lime. Flour was charged so much per 
 barrel or so much per sack; cotton so much per bale, 
 not exceeding 400 pounds; grain so much per bushel; 
 chairs so much per dozen; horses, mules, cows, or oxen 
 so much for one, so much for two or three, so much 
 for four, for five, for ten ; sheep, deer, lambs, goats, pigs, 
 calves, dogs, were carried for so much apiece; turkeys, 
 geese, ducks, and fowls, for so much per dozen. Pro- 
 vision was made for a rate by the carload of any one 
 kind of livestock with one passenger in charge, the load 
 not to exceed 16,000 pounds. 
 
 A list of special rates specified the transportation 
 charge for wood by the cord, lumber and bricks by the 
 thousand, the rate being 20 per cent, or more higher in 
 the winter than in the summer; and for resin, tar, and 
 crude turpentine, staple products of the region, a rate 
 per barrel much lower than for other articles packed in 
 barrels. 
 
 This document was both a tariff and a classification. 
 
1^2 Railroad Freight Rates 
 
 Various articles taking the same rate were grouped in 
 a class and the rate applying to the class was specified 
 on the same sheet. For articles which, because of volume 
 or value or peculiar conditions, such as vitriol, gunpow- 
 der, eggs, and spice, could not well be grouped in any 
 of the classes, " miscellaneous rates " were specified. 
 This sheet named, all told, fewer than 300 things as 
 taking the rate specified for any one of the four classes, 
 or special or miscellaneous rates. Before many years a 
 more varied agriculture, and particularly a more varied 
 manufacture, caused a vast increase in the number of the 
 articles of traiiSc. It therefore was no longer feasible 
 for the classification and the tarifiF to be issued in one 
 document. The articles were listed alphabetically, with 
 indication of their respective classification in one docu- 
 ment, and the rates as they applied for the different 
 classes in another. By 1880 the number of articles 
 necessary for inclusion in the various groups exceeded 
 one thousand. At the present time each of the principal 
 classifications contains nearly 6,000 items, and there are 
 numerous articles moving at commodity rates which are 
 embodied in special tariffs. It is noteworthy that, while 
 this early Southern classification contained four classes, 
 the classifications used in New England indicated rates 
 for a " first class," for " special commodities belonging to 
 the first class," and for various other " special " articles. 
 The original tariff of the Louisville and Nashville Rail- 
 road included but three classes, the first being rated by 
 bulk, the second by weight, and the third containing 
 livestock. As late as 1873 this railroad rated poultry by 
 the dozen, charging more for Muscovy than for ordi- 
 nary ducks. 
 
 The principle primarily underlying classification is the 
 endeavor to apply — without listing a separate rate for 
 each article — to each of the articles of commerce that 
 rate which it should equitably pay, and which will cause 
 the revenue derived from the aggregate quantity of that 
 article transported to be in proper proportion to the 
 total revenue derived from the conveyance of all articles. 
 
Early Tariffs and Classifications 153 
 
 The original simple distinction between articles light in 
 weight and those heavy in weight has been complicated 
 by such considerations as, to quote from the Eleventh 
 Annual Report of the Interstate Commerce Commission, 
 " Whether commodities are crude, rough, or finished ; 
 liquid or dry ; knocked down or set up ; loose or in bulk ; 
 nested or in boxes; or otherwise packed; if vegetables, 
 whether green or dry, desiccated or evaporated ; the mar- 
 ket value and the shipper's representation as to their 
 character; the cost of service, length and duration of 
 haul ; the season and manner of shipment ; the space oc- 
 cupied and weight; whether in carload or less than car- 
 load lots; the volume of annual shipments to be calcu- 
 lated on ; the sort of car required , whether flat, gondola, 
 box, tank, or special ; whether ice or heat must be fur- 
 nished; the speed of trains necessary for perishable or 
 otherwise rush goods ; the risk of handling, either to the 
 goods themselves or other property; the weights, actual 
 and estimated ; the carriers' risk or owners' release from 
 damage or loss." 
 
 The classification of commodities according to such 
 varied considerations made possible the abandonment of 
 the charges based upon such heterogeneous units as a 
 cubic foot, an agricultural implement, a vehicle, a dozen, 
 a barrel, a cask, a hogshead, or a cord. The assign- 
 ment of divers commodities to different classes, in each 
 of which the especial characteristics of one commodity 
 were weighed against those of another, permitted the 
 adoption of 100 pounds as the basis for the transportation 
 charge on all, except the heaviest commodities, for which 
 the ton is the unit. That is, the 100 pounds became the 
 common denominator of all commodities, and the class 
 rate the numerator of the commodities included in the 
 class. 
 
 Certain exceptions to this basis endured for several 
 years. Foremost of these was the charge per carload 
 — that is, upon the carload as a unit — for livestock. 
 This was because the early cars in which this could be 
 shipped were of about the same size, the load of any 
 
154 Railroad Freight Rates 
 
 particular kind of livestock averaging about the same 
 in number and weight, and it not being practicable to 
 establish scales adequate for the weighing of such heavy 
 shipments at all places where livestock was loaded. 
 For somewhat similar considerations rates for lumber 
 by the carload endured for many years. 
 
 It became customary to accord what were designated 
 as carload rates — based upon the hundredweight as the 
 unit — on many other commodities when shipped in car- 
 load lots, the prime distinction between carload and less 
 than carload shipments being that the former are loaded 
 by the shipper and unloaded by the consignee, while the 
 latter, as a rule, are delivered at the freight house by 
 the shipper, unloaded and placed in the cars by the em- 
 ployees of the railroad: at the place of consignment 
 they are likewise unloaded from the cars and placed 
 in the wagons by the employees of the railroad. The 
 lower cost of handling freight that moved thus in car- 
 loads, together with the assurance of a full load per 
 car, led to the making of a lower relative rate for a car- 
 load than a less than carload shipment. The carload 
 rate upon such commodities was not only specified as so 
 much per loo pounds, but to insure that it would not 
 apply upon less than a reasonably full load, the minimum 
 load for which that rate would apply was also specified. 
 Such carload rates were at first granted upon cordwood, 
 coal, lime, cement, and such other commodities as could 
 be loaded by a shipper in an empty car placed for his 
 exclusive use upon a " team " track. Later, as spur 
 tracks were built from the railroad tracks to mines, mills, 
 and warehouses, it became customary to make lower 
 relative rates for carload than for less than carload ship- 
 ments on the commodities loaded into the empty cars 
 placed upon such spur tracks. Thus it came about that 
 tariffs contain two columns, in one of which is listed the 
 LCL, or less than carload rate per lOO pounds, and in 
 the other the CL, or carload rate per loo pounds, with the 
 minimum carload weight. 
 
 To find the freight charge on an article offered for 
 
Early Tariffs and Classifications 155 
 
 shipment, a freight agent, therefore, looks first at the 
 classification, where he finds in what class it is grouped ; 
 then from the tariff he ascertains the rate applying on 
 commodities of that class, and if the offering be of a 
 carload, finds out whether or not a rate by the carload is 
 designated. 
 
 The development of the classifications and rate ad- 
 justments outlined in this chapter is that which took 
 place, speaking broadly and generally, between the build- 
 ing of the first railroads and the development of through 
 traffic succeeding the Civil War. During the initial 
 steps of this development, the practices of one railroad 
 had no immediate and direct effect upon those of an- 
 other; competition was remote; each railroad developed 
 its classifications and rates for itself. 
 
CHAPTER X 
 
 EARLY RIVALRIES AND THE BEGINNING 
 OF THROUGH SERVICE 
 
 By about 1850 many of the railroads extending into 
 the interior had penetrated territory whence traffic could 
 move via either one or another railroad to the coast, and, 
 indeed, at many places railroads reaching from different 
 and naturally rival seaports had met at junction points 
 in the interior. The rivalry of the seaports necessarily 
 implicated their respective railroads and thus arose 
 
 kJaUctloa 
 
 competition between them. Contiguous stations, on rival 
 railroads, through either of which traffic to and from 
 the intervening region could flow without physical in- 
 convenience to shippers or consignees, in many cases 
 were given the same rates to and from the seaboard. 
 Between the seaboard and an interior junction it was 
 necessary that rates by competing lines be the same. 
 
 156 
 
Beginning of Through Service 157 
 
 Thus arose modifications of the " distance tariff," 
 similar to those that doubtless had previously been ef- 
 fected by competition between a railroad and a river or 
 canal. If the longer line between the seaboard and the 
 junction did not make the same rate as the shorter line 
 it would carry none of the traffic. To make the rate 
 equal to that by the shorter line meant to abandon the 
 distance basis of multiplying the rate for one mile by the 
 number of miles. In making the same rate from its sea- 
 port to the junction point as applied by the shorter line 
 from its seaport, the longer line was compelled, in many 
 
 Jnactioji 
 
 JkEeonedlate 
 ^ Point ' 
 
 cases, to make a lower rate to the junction point than it 
 had theretofore made to stations not so far away. 
 Therefore, if it continued to charge the former rate to 
 an intermediate station, it would carry traffic for a longer 
 distance at a lower rate than for a shorter distance. If 
 it reduced the rate to the intermediate station the revenue 
 secured on traffic to and from that station would be 
 diminished, even if the traffic to a,nd from that station 
 was not directly affected by the competition of the shorter 
 line. The managers of the longer railroad could not but 
 reflect that inasmuch as the rates to the intermediate 
 
158 
 
 Railroad Freight Rates 
 
 stations were those that had normally been charged 
 theretofore, there was no reason that their revenue, al- 
 ready diminished by the reduction forced in the rates 
 between the junction point and the seaport, should be 
 the further lessened by a reduction which they were not 
 obliged to make in the rates to and from the intermediate 
 stations. The residents, and particularly the merchants, 
 at the intermediate stations naturally reasoned that if the 
 railroad company could afford to reduce the rate on 
 traffic between the seaport and the farther point, it 
 could afford to make at least the same rate to the inter- 
 mediate stations to and from which the haul was not so 
 
 ■ — = 
 
 JnnctionS 
 
 
 
 Inleisnediate* 
 Station 
 
 Seapor^^^ 
 
 ^ 
 
 Seaport^^^^^^^^ 
 
 ^^P 
 
 % 
 
 ==!^^^^^^5S^ 
 
 ■<y^:^^^^^:^^^^^0^^ 
 
 -<-</ 
 
 long. It appealed to them that by being compelled to 
 pay a higher rate than the farther station, they were 
 discriminated against and unjustly so. "The railroad 
 company, while admitting the discrimination, would not 
 admit its injustice, stating that if it kept up its rates to 
 the former level between the seaport and the junction 
 point it would carry none of the traffic, and its total 
 revenue would be diminished by the amount derivable 
 from such traffic as it might obtain at the lower rate, 
 while the residents of the intermediate stations would 
 continue to pay the same rate as formerly. It would be 
 
iBeginning of Through Service 159 
 
 their contention that the discrimination against an in- 
 termediate station would not be unjust so long as the 
 rate charged from the seaport to that station was not 
 greater than the rate forced by the short Hne from the 
 seaport to the junction station, plus the rate from the 
 junction back to the intermediate station. In reinforce- 
 ment of this, they would point out that if there were no 
 railroad between the seaport on the longer line and the 
 intermediate station, but between the junction point and 
 the intermediate station only, the rate which that inter- 
 mediate station would pay from the seaport on the shorter 
 line would be the rate therefrom to the junction point, 
 plus the rate from the junction point to the station; 
 that inasmuch as this was the rate charged by the longer 
 line to the intermediate station under the rate adjustment 
 forced upon it, the discrimination against the intermediate 
 station was not unfair and that station had no real 
 grievance. 
 
 The residents, and particularly the merchants, of the 
 junction point, however, undoubtedly benefited by the 
 difference. The tillers of the soil or the producers of 
 other commodities at the junction point had the advan- 
 tage of two routes of transportation to rival seaports, 
 thereby having the benefit of rival markets to which to 
 consign their products. The merchants had the benefit 
 of rival sources of supply whence to obtain their wares, 
 and they had service of rival railroads in transportation. 
 These merchants, moreover, had the advantage of two 
 routes over which they could ship their wares to con- 
 sumers in the adjoining territory, or, if the rival rail- 
 roads not only extended to but through the junction 
 point, these merchants had practically the benefit of four 
 routes over which they could ship their wares. These 
 wider avenues of disposition permitted larger sales and, 
 consequently, the purchase of stocks in greater quantities, 
 — often in full carloads, the advantage of the carload 
 rate still further stimulating sales. The consequent 
 enlargement of the business of the junction would cause 
 merchants to open establishments there, farmers to bring 
 
i6o 
 
 Railroad Freight Rates 
 
 their produce there. Artisans would open shops, the in- 
 creasing population would attract doctors and lawyers, 
 schools would be built, real estate enhance in value. The 
 junction point would far outstrip in importance not only 
 the intervening stations on the longer line from the sea- 
 board, but the intermediate stations on the shorter route. 
 Inasmuch as the longer line from the seaboard, by 
 reason of the competition of the shorter line, was forced 
 to abandon the distance tariff from its seaport to the 
 junction, it follows that it could not apply the distance 
 tariff from the seaport to points beyond the junction. 
 
 Were it to do so, merchandise could be shipped from the 
 seaport to the junction at the competitive-less-than-dis- 
 tance-tariff rate, and from the junction to a point beyond 
 at the distance rate applying from the junction, the sum 
 of the two rates being less than a regular distance tariff 
 rate from the seaport to the station beyond the junction. 
 The railroad, therefore, in making rates from the sea- 
 port to a point beyond the junction would be obliged to 
 add to the competitive rate to the junction the distance 
 tariff rate therefrom to the point beyond. That is, the 
 junction point would be a " basing point," this designa- 
 
Beginning of Through Service i6i 
 
 tion in its original significance simply meaning a point 
 whereon rates are based; that is, wherefrom a tariff 
 takes a fresh start. The fact that a basing point is a 
 place to which the rates from some important point or 
 some important area of shipment have for some com- 
 petitive or other commercial reason been made lower 
 than if calculated upon the distance, necessarily gives it 
 an advantage in obtaining merchandise from that point 
 or area of shipment over intermediate stations, to which 
 higher rates may be maintained. In the vast majority of 
 cases, however, a basing point owes its status to economic 
 conditions which force the railroads to accord it that 
 recognition. 
 
 II 
 
 In the decade preceding the Civil War, as competing 
 railroads were extended through competitive territory, 
 their rivalry increased. Each railroad sought traffic for 
 its own rails. The through billing of freight was un- 
 heard of. When it was necessary that a commodity be 
 transported over the lines of two or more railroads, the 
 conveyance by each road was a separate act of trans- 
 portation for which an individual bill of lading was 
 issued. To allow freight cars to be moved from the 
 tracks of one over the tracks of another railroad was 
 beyond consideration. For a railroad company to permit 
 its cars to go away from its own tracks would have 
 seemed equivalent to making the other company a pres- 
 ent of them. Indeed, the prevention of such shifting 
 was a factor in causing the tracks of different railroads 
 to be of different gauges ; that is, of different widths be- 
 tween the rails. The managers of a railroad company 
 regarded its operation in pretty much the same light 
 as a merchant viewed the conduct of his own business, 
 as an instrumentality through which to make money 
 and incidentally to fight its competitors. 
 
 During the Civil War the military necessities of the 
 government compelled the forwarding of troops from 
 one part of the country to another with the utmost 
 
1 62 Railroad Freight Rates 
 
 despatch, and, therefore, without change of cars. This 
 often led to the coaches of one railroad being transferred 
 for conveyance over the rails of another. The extending 
 mail service rendered it increasingly inconvenient to 
 transfer mails at a rail terminus from the mail car on 
 one to a mail car on the tracks of another railroad. The 
 possibilities of through car movement awakened the peo- 
 ple in general to a sense of the inconvenience caused by 
 the transfer of freight from the cars of one to the cars 
 of another railroad. 
 
 The railroads, working under charters granted by in- 
 dividual States, could claim with entire accuracy that 
 not only were they not under compulsion, but that they 
 were not even authorized to allow their cars to go from 
 their own rails. Indeed, to make sure that none of the 
 trade of the southern part of New York should go to 
 other than New York City, the Erie was prohibited, 
 under penalty of forfeiture of its charter, from making 
 connections with any other road. Similar restrictions 
 were imposed by other States and by municipalities upon 
 other railroads. The sentiment of the country, how- 
 ever, became overwhelmingly in favor of the through 
 billing and through carrying of traffic that had to pass 
 over the tracks of two or more railroads. This led the 
 Congress in 1866 to enact that " Every railroad com- 
 pany of the United States ... is hereby authorized 
 to carry ... all passengers, . . . freight and 
 property on their way from any State to another State 
 . . . and to connect with roads of other States, so as 
 to form continuous lines for the transportation of the 
 same to the place of destination." The Supreme Court 
 stated that the intent of this act was to remove the re- 
 strictions upon through transportation and to declare in 
 favor of the formation of continuous through lines. The 
 terms of the act, however, do not compel, but merely 
 authorize the formation of such through lines. 
 
 One of the first conspicuous effects of this statute 
 was the organization of the through freight lines, a 
 natural development of the forwarding companies, of 
 
^Beginning of Through Service ^63 
 
 which several were in existence. The forwarding com- 
 pany had its origin at the time when a large proportion 
 of business houses were not equipped with their own 
 drays, trucks, and horses for the conveyance of merchan- 
 dise to and from the railroad stations. The forwarding 
 company performed this service as it is performed by 
 local transfer companies to-day. From this it was but a 
 step for the forwarding company at the place of ship- 
 ment to notify its own agents or another forwarding 
 company at the place of destination to deliver the mer- 
 chandise from the station to the consignee. It was a 
 further natural step for the forwarding company, not 
 only to perform the transportation between the stations 
 and the storehouse for its patrons, but to make especial 
 arrangements with the railroad company, which led to 
 having cars for the exclusive accommodation of wares 
 shipped by it. That is, the forwarding company came 
 to perform for heavy freight on the line of one railroad 
 the Fame offices that the express companies do for the 
 lighter and more valuable freight at this time. 
 
 With the passage of the Act of 1866, authorizing 
 through routes, it was but another step for the for- 
 warding company to hire a car, not only for trans- 
 portation over one railroad, but to go through over the 
 lines of connecting railroads. In this way originated 
 the Merchants' Despatch, one of the through freight 
 lines operating over the New York Central System; 
 and the Union Line operating over the Pennsylvania 
 System. Such through freight lines as these were cor- 
 porate organizations, distinct from those owning the 
 railroads, but the officers of the railroads were often 
 large stockholders in them. Through freight lines were 
 also formed by the immediate co-operation of railroad 
 companies. The company owning each railroad that was 
 a link in a through route between two great commercial 
 centers would assign a certain number of freight cars to 
 be used in carrying through traffic over the several links 
 between those centers. Such cars were usually marked, 
 in addition to the name of the proprietary company, with 
 
164 Railroad Freight Rates 
 
 an emblem to indicate their dedication to the through 
 service : as, for example, a blue cross, a green ball, a red 
 star. The first of these through freight organizations 
 was the Blue Line, established in the late sixties, and 
 rendering service over what were then separate and 
 distinct railroads between Chicago and Boston. The 
 through movement of a car over the various tracks nat- 
 urally afforded quicker through service than was pos- 
 sible by the transfer of freight from one car to another 
 at the junctions. These through freight lines were, 
 therefore, generally designated as fast freight lines, and 
 many of them came into existence. Competitive move- 
 ment over other lines was usually retarded by the lack 
 of provision for through traffic, being at places handi- 
 capped by the necessity of lifting a car at a junction from 
 the trucks with wheels adjusted to the gauge of one 
 railroad over on to trucks with wheels adjusted to the 
 gauge of the other. 
 
 Fast freight lines still exist, but their corporate iden- 
 tity has, in nearly, if not in all cases, been merged in 
 that of the railroad companies owning the lines over 
 which they operate. They remain as instrumentalities 
 for facilitating the movement of through freight, but their 
 organizations are now bureaus of the freight traffic de- 
 partments of the respective lines. 
 
CHAPTER XI 
 RATE WARS AND TRAFFIC AGREEMENTS 
 
 The rapid extension of the railroads that was a fore- 
 most characteristic of the great activity that succeeded 
 the Civil War, developed many conditions that modified 
 the distance tariffs of the early short and local lines. 
 The intersection of two or more railroads at a junction 
 point frequently led them to adopt the same rate between 
 that point and rival termini, as described in the pre- 
 vious chapter. When, from one and the same seaport, 
 two or more railroads stretched to the same interior 
 commercial center — the marked example being the vari- 
 ous lines connecting New York and Chicago — it was 
 necessary for the divers lines to establish the same rate 
 between these termini common to each of them. This 
 also led to a lower charge by the longer lines between 
 these termini than to and from the intermediate stations 
 to which the ordinary distance rate was higher. Rail- 
 roads between cities that were also connected either by 
 coastwise vessels or boats, by lake, river, or canal, were 
 obliged to reduce their rates between these places hav- 
 ing water communication to a level that would attract 
 at least a portion of the traffic to their rails. As such 
 water-forced rates were usually far less than those made 
 on the distance tariff, the application of a higher rate 
 for the shorter haul to and from intermediate stations 
 than for the longer haul between the competitive points 
 became conspicuous. 
 
 As the railroads grew more numerous, extending both 
 in length and through lateral branches, the greater be- 
 came the number of the points between which there was 
 competition by two or more railroads, or by one or more 
 railroads and water lines. 
 
 The rapidly extending and frequently crossing rall- 
 ies 
 
i66 Railroad Freight Rates 
 
 roads caused such a multiplicity of junctions that the 
 establishment of a tariff applicable over the various lines 
 between competitive points was difficult in any event, 
 and impossible, unless there were agreement between 
 the competing lines as to what the rate should be. 
 
 The Act of Congress of 1866 authorizing the through 
 billing of traffic and the formation of continuous lines 
 naturally brought the traffic officers of the railroads into 
 communication to a greater degree than theretofore. 
 The officers of the early railroads were not prone to 
 exchange information and ideas as to organization, 
 methods of operation, practice and procedure, although 
 there were occasional instances of such interchange. It 
 is noteworthy that the presidents of the trunk lines 
 united in New York in September, 1858, " in a confer- 
 ence to effect a restoration of harmonious relations, just 
 principles of action, and a remunerative tariff." The 
 formation of through lines, necessitating the establish- 
 ment of conditions under which cars would be moved 
 and bills of lading issued over different lines, and the 
 necessity for agreement as to the proportions of through 
 rates that would be accepted by each of the railroads over 
 which they applied, brought the officers of the various 
 lines into a more definite intercourse. Although there 
 was a marked tendency to restrict through car service 
 and through billing to lines that were affiliated, through 
 ownership or agreement, for the interchange of traffic, 
 there was an increasing communication, both by mail and 
 telegraph and through personal conferences, between of- 
 ficers even of the rival systems. These conferences had 
 largely to do with the fixing of rates to and from com- 
 petitive points. 
 
 The building of railroads, however, was in advance of 
 the progress of other lines of activity and led to the 
 provision of transportation facilities in excess of the 
 traffic. Competition frequently resulted, therefore, not 
 only in a longer line charging the same rate between 
 competitive points as a shorter line, but in its charging 
 a lower rate than the shorter line which, other things 
 
Rate Wars and Traffic Agreements 167 
 
 equal, could give quicker service. This cutting of a 
 rate by a longer line would force the shorter line to re- 
 duce its rate in self-protection, and an alternate cutting 
 of rates between the rival lines not infrequently ensued. 
 This procedure, which, however, did not invariably orig- 
 inate with a longer line, was known as a rate war, and 
 often continued until one or more of the competing lines 
 had lost so much revenue that a treaty of peace was 
 willingly discussed. The officers of the rival lines would 
 meet, specify the rates that should apply between the 
 competitive points and agree to maintain them. Each 
 railroad, however, needed traffic, and in those days there 
 was never enough of it to satisfy all of them. When ex- 
 actly the same rate was observed the short and direct, 
 which ordinarily was the best managed line, would natur- 
 ally secure the greater share of the traffic. A longer 
 and weaker line would find it necessary to resort to 
 stealthy cuts, which almost invariably led to open wars. 
 Important shippers were never slow to take advantage of 
 the railroads. The traffic officer of one line would be 
 advised by a man with a large shipment that his rival 
 had quietly offered a cut rate. This may or may not 
 have been true, but the traffic officer, to make sure of 
 the shipment, would meet the reported rate, or possibly 
 make a further reduction. Concessions were not only ac- 
 corded directly to the shippers, but commissions were 
 paid to anyone through whose influence traffic could 
 be obtained, to prominent townsmen and influential 
 farmers. The cutting of rates and rate wars, inasmuch as 
 they particularly affected competitive traffic which passed 
 over considerable distances between termini or principal 
 junction points, had little or no effect upon the rates to 
 and from intermediate stations where there was no com- 
 petition, and which were usually maintained at full tariff. 
 The charging of a lower rate for a longer than for a 
 shorter haul was, therefore, a common practice, and as 
 the competitive points were those of greater commercial 
 importance, their aggrandizement was enhanced. 
 The desire to obtain traffic, coupled with the undesir- 
 
1 68 Railroad Freight Rates 
 
 able results that followed the exposure of rate cutting, 
 led to the widespread usage of the device known as re- 
 bating. While rebates may have been given at times 
 in previous decades, their use was but sporadic and in- 
 termittent until the period now under consideration. 
 Instead of making a direct reduction in a published rate 
 and allowing a shipper to pay the reduced rate in cash, 
 it would be arranged that a shipper pay the full published 
 rate and the railroad subsequently return to him the 
 amount of the agreed reduction; that is, the difiference 
 would be rebated to him. This device, which came con- 
 spicuously into use in the years immediately succeeding 
 the Civil War, accomplished its purpose as long as it was 
 not detected; but the solicitation of traffic on the part 
 of the rival railroads, and the shopping around among 
 the railroads for still further concessions by the shippers, 
 who were never satisfied, rendered it increasingly diffi- 
 cult for the giving of a rebate long to be a secret. The 
 extent of the rebate, however, often remained unknown, 
 the railroad granting it not being willing to divulge the 
 amount, while a recipient would usually conceal the ex- 
 act concession in his dickering with other roads. The 
 railroad agents, therefore, were often working in the 
 dark. Neither railroad nor shipper knew what conces- 
 sions were obtained from other railroads by other ship- 
 pers. A railroad would not know what terms one of its 
 shippers was obtaining from another road, and a shipper 
 would not know what terms a railroad was granting to 
 other shippers. Competing railroads and competing 
 shippers were all mutually suspicious. What with the 
 open cutting of rates, the rebates and other stealthy de- 
 vices, there was no stability of rates. They were more or 
 less one day than on the previous day, and they might 
 rise or fall on the morrow. Indeed, transportation was 
 regarded by both railroads and shippers as a matter of 
 bargain and sale, the shrewdest shippers securing the 
 lowest rates, and the cleverest freight solicitor the larg- 
 est traffic. Moreover, the business rivalry of the traffic 
 officers and freight soHcitors often degenerated into per- 
 
Rate Wars and Traffic Agreements 169 
 
 sonal antagonism, resulting in a desire on the part of 
 one to take a shipment away from a competitor regard- 
 less of the revenue to be derived therefrom. 
 
 The directing officers of the railroad companies con- 
 tinually deplored this state of affairs. They entered 
 into agreem'ent after agreement, each of which was 
 broken almost as soon as it was made through the suc- 
 cumbing of some traffic officer to the tempting offer of 
 a large shipment if he would depart from the published 
 tariff, or, as often happened, through the initiative of the 
 traffic officer in deliberately offering a cut rate. 
 
 In nearly all other lines of business, when a com- 
 petitor is driven into bankruptcy he is sold out by the 
 sheriff and his competition ceases. When a railroad 
 company is driven into bankruptcy the rails, stations, 
 cars, and locomotives cannot be used for another pur- 
 pose. Bankruptcy simply means that no consideration 
 need be given to the payment of return on capital, the 
 railroad continuing in operation a more dangerous com- 
 petitor than before. 
 
 The problem facing those charged with the direction 
 of the railroads was to establish and maintain rates and 
 at the same time contrive that each of competing lines 
 should receive a fair share of competitive traffic. The 
 most efficient instrumentality to this end was finally 
 found to be an agreement whereby to each of the lines 
 engaged in certain competitive traffic was assigned, for a 
 specified period, a fixed percentage of that traffic as the 
 share which would probably come to it under normal 
 conditions at even rates. Reports of all such competitive 
 traffic carried by each line were made to a central author- 
 ity. At the end of a specified period, if any line had either 
 exceeded or fallen below its allowed percentage, it either 
 contributed to or received from the other lines an amount 
 necessary to make its revenue accord with the amount 
 that would have accrued from the conveyance of the ex- 
 act amount of the traffic allotted under the percentage 
 agreement. This arrangement was designated as a money 
 pool. If a road continually exceeded or ran below the 
 
170 Railroad Freight Rates 
 
 stipulated allotment its percentage was increased or 
 decreased for the succeeding pooling period. The first 
 pool of importance was that organized in 1870 by the 
 lines extending between Chicago and Omaha. 
 
 Another kind of agreement provided for the distribu- 
 tion of competitive traffic in agreed proportions by the 
 forwarding of freight now by one line and then by an- 
 other as might be necessary to preserve the proportions. 
 This was known as a tonnage pool. 
 
 To enable a long line or one of inferior service, party 
 to a pool, to attract the share of traffic awarded to it and 
 thus to minimize its temptation to cut rates, it became 
 customary to permit such a line to charge a specified 
 rate, sufficiently lower than that by the shorter and 
 stronger line, to counterbalance its disadvantages. Such 
 a lower rate between competitive points is designated 
 as a " differential rate." It is an instrumentality for the 
 preservation of rate equilibrium that is still in use, al- 
 though pools have been abolished. The term " dif- 
 ferential " has unfortunately been given other signifi- 
 cance. Its use to designate differences in rates accorded 
 competing cities, as the " grain differentials " allowed 
 Baltimore and Philadelphia under New York and Bos- 
 ton, is analogous, but it is often applied when the simple 
 expression " differing rates " would suffice. 
 
 Even under a pool, however, it was difficult to sup- 
 press entirely the cutting of rates and the giving of re- 
 bates. Each line endeavored to increase the proportion 
 of the traffic which it carried in order that at the time 
 when the percentages were readjusted it might be 
 awarded a larger share. The pooling arrangements, how- 
 ever, unquestionably tended toward stability of rates. 
 The discussion of troublesome problems led in the direc- 
 tion of a harmonious and uniform solution. 
 
 The uncertain status of rate making in the Trunk Line 
 Territory was put on a better basis by the adoption of 
 the Trunk Line Percentage System. A community be- 
 lieving itself entitled to a lower percentage under this 
 system presented its claims to the Trunk Line Associa- 
 
Rate Wars and Traffic Agreements 171 
 
 tion, by which they were considered and adjudication 
 made with reference to all interests involved. During 
 the preceding era railroads serving a dissatisfied com- 
 munity were prone, regardless of other considerations, 
 to make such rates to and from that community as they 
 pleased. In the South the cotton traffic was distributed 
 among the various lines to the general satisfaction of 
 the railroads and the shippers. 
 
 Through the traffic associations repeated attempts 
 were made to abolish the granting of passes, reduced 
 rates, stipends, commissions or gratuities for the purpose 
 of influencing business. Divisions of through rates were 
 agreed upon; rates in general were equalized between 
 competitive cities, competing lines and competing com- 
 modities. It was customary for each of these traffic 
 associations to appoint a classification committee to which 
 recommendations were made as to the classification of 
 various articles as questions were raised by shippers, and 
 as, through the development of industry, commodities 
 were produced not theretofore known to traffic but which 
 had to be classified and rated. For example, the distri- 
 bution of fruits and vegetables to remote markets neces- 
 sitated rate adjustments peculiar to the traffic, as did 
 the commerce in mineral waters, the rise of various 
 electrical appliances and the divers by-products of this 
 industry and that. 
 
 In connection with the traffic association concerned 
 with the broader questions of rate agreement and main- 
 tenance, rate divisions and classifications in a general traf- 
 fic district, subordinate traffic associations were formed 
 at each of the principal commercial centers within each 
 general traffic district. Questions as to local traffic 
 problems came up before and were discussed by these 
 smaller associations, sometimes settled by them, but re- 
 ferred, when necessary, to a general association. 
 
 Through these various instrumentalities the railroads 
 were working out their own salvation. The rate chaos 
 was beginning to crystallize. Out of the nebulous con- 
 dition that characterized an industrial and commercial 
 
172 Railroad Freight Rates 
 
 transformation were evolving organizations working for 
 equity and stability in the freight rate adjustment. 
 
 During the periods of traffic associations of various 
 kinds, of pooling agreements and of arbitration commis- 
 sions, came a vast, increase in the traffic of the country 
 consequent upon the development of industry and com- 
 merce, and the growth and diffusion of population. Be- 
 low the disturbance of the surface caused by the cut- 
 ting and rebate giving, under the influence of rate modi- 
 fying forces that were compelling recognition, the freight 
 rate structures of the different traffic regions were 
 assuming form. Rates were being adjusted that rival 
 producing regions might reach reasonable markets, that 
 rival commercial centers might have their logical areas 
 of distribution. The great industrial centers had become 
 mighty vortices, whose suction drew in raw material of 
 divers kinds and foodstuffs of all varieties from vast 
 areas : to the draught of this suction the railroads had 
 to adjust their rates if they would live. The level of the 
 local tariffs of individual lines had been cut into by the 
 pressure of these great traffic currents, the greatest pres- 
 sure eroding the deepest channels ; less powerful pressure 
 cutting channels not so deep. 
 
 The varying conditions affecting the operation of the 
 railroads in different parts of the country, the differ- 
 ences in the kind and volume of traffic, the different 
 bases upon which local tariffs were originally established, 
 the differences in the pressure to which they have sub- 
 sequently been subjected, including the different degrees 
 of stress with which State legislation has borne upon 
 them, account for the wide variation in these local rates 
 to-day. For example, the rate on merchandise of the 
 first class per 100 pounds for fifty miles ranges from 
 12 cents to 32 cents in various districts between the At- 
 lantic Ocean and the Missouri Valley, and is even higher 
 over certain reaches of the Rocky Mountains and Pacific 
 Coast territory, where, however, the costs of construction 
 and expenses of operation are extraordinarily high and 
 the density of traffic low. 
 
Rate Wars and Traffic Agreements 173 
 
 It must be taken into consideration that local freight 
 is usually in packages in less than carload lots ; that to 
 facilitate unloading, these packages must be placed in 
 the cars, destination after destination, in the order that 
 the stations are approached by the train ; that even when 
 there is volume sufificient to load a car to its capacity it 
 is impracticable to do so because room must be left for 
 the working of the freight handlers at each station, and 
 that, consequently, as cars are practically never loaded 
 to their full capacity in the local service, the trains 
 seldom utilize the full tractive powers of their locomo- 
 tives ; that local freight trains stop at every station at 
 which freight is discharged or received ; that on perhaps 
 the great majority of runs the load of a local freight 
 train constantly diminishes from the starting point until 
 near the end it is almost empty, while on the return it 
 starts with a very light load which increases station 
 by station until the terminal is reached. It is apparent, 
 therefore, that the cost of the local service is several 
 times greater than that of the running of a through 
 train in which a large proportion of the traffic is in car- 
 loads, the weight of the train being limited only by the 
 effective capacity of the locomotive, and, moreover, the 
 through train seldom stops between terminals except 
 when necessary to take fuel or water or go upon a sid- 
 ing to allow other trains to pass. 
 
 The various factors affecting the rates for traffic, and 
 in other ways reacting upon the practices of the trans- 
 portation agencies, have developed certain incidental but 
 important relations to which some consideration must 
 now be given. 
 
CHAPTER XII 
 SECONDARY FREIGHT SERVICES 
 
 la. SWITCHING 
 
 To switch is to move a car from one track to another. 
 Its simplest phases are the shifting by switch engines 
 of cars from the various tracks of a yard into definite 
 arrangement on a train track, whence they are taken out 
 to a main Hne track for road movement; the reverse 
 switching of the cars of an incoming train to the various 
 tracks of a yard, whence they are taken to the freight 
 houses or other destinations, or made up into trains by 
 shifting engines for further main Hne movement ; and 
 the switching of a car or cars from a track to a side- 
 track at a way destination. 
 
 The transportation of less than carload shipments is 
 usually from the freight house at the place of consign- 
 ment to the freight house at the place of destination, 
 the transportation charge being simply the amount speci- 
 fied in the tarifif as covering this conveyance. Likewise, 
 when a car is conveyed from the team track — i.e., a track 
 alongside which a team can be driven — of a railroad 
 company, where it has been loaded by a shipper, to a 
 team track at the place of destination, where it is un- 
 loaded by the consignee, the transportation charge is 
 simply the amount named in the tarifif as applying to 
 the conveyance. 
 
 When a business enterprise has attained such mag- 
 nitude that it is desirable that a track be built to con- 
 nect its mill or mine, factory or warehouse with the 
 railroad, another element is introduced. It is necessary 
 that cars to be loaded at and shipped from, and to be 
 received by and unloaded at the business establishment, 
 be conveyed between the railroad track and that estab- 
 
 174 
 
Secondary Freight Services 175 
 
 lishment by a transportation service distinct from the 
 main line haul ; this is included under the somewhat wide 
 embracing term of switching. Such a sidetrack may have 
 been constructed at the expense of the railroad company 
 or at that of the business establishment, or at their joint 
 expense, as conditions may have determined. If such a 
 sidetrack, or spur track, as it is more correctly designated 
 — leaving " sidetrack " to indicate a passing as distin- 
 guished from a main track of the railroad itself — ^be not 
 more than a few hundred yards in length and be adjacent 
 to the yard of a railroad company where switching en- 
 gines are generally employed, the railroad company usu- 
 ally switches cars to and fro over the spur without extra 
 charge. Even when such a spur track leads from the 
 main line at a locality where the switching has to be 
 performed by the regular locomotive of the train that 
 brings cars to or takes them from the spur tracks, this 
 special service is often performed without extra charge. 
 The performance of such kinds of switching service 
 without specific charge therefor is, however, more fre- 
 quent in the industrial regions of the East than at places 
 in the far West and South, where the traffic is not so 
 dense and the proportion of cars and locomotives not 
 so great. 
 
 At most junctions where freight cars are transferred 
 from the tracks of one to those of another railroad com- 
 pany, the transfer is effected over a connecting track, 
 which may belong to one or to the other or to both com- 
 panies, the shifting being performed by the locomotive of 
 one or the other company as part of the service called 
 for by the through rate under which the traffic is moved, 
 that is, if it be through traffic destined to a station beyond 
 the place of transfer. If, however, a car filled with freight 
 destined to a certain city, and taken by a railroad at the 
 rate applying thereto, be consigned to an establishment 
 located on the track of another than the railroad that 
 brought it to that city, the latter railroad moves the car 
 from the tracks of the company performing the road 
 service to the establishment situated upon its Hne, and 
 
276 Railroad Freight Rates 
 
 usually charges the former road for this switching for 
 which it obtains reimbursement from the shipper or 
 consignee in addition to the rate paid for the road ser- 
 vice. At a few places where each railroad performs 
 such switching service for traffic brought to the city over 
 another railroad, and such reciprocal switching service 
 in the course of time is approximately equal, it is some- 
 times done by each road for the other without charge, 
 the rate for the road service therefore applying to the 
 establishment to which a car is consigned, whether it be 
 on the track of the company performing the road service 
 or not. In other instances the road on which an indus- 
 trial establishment is located will make a separate charge 
 for switching on shipments that come over a competing 
 road from a point common to both lines, its natural de- 
 sire being to induce the shipments to come over its own 
 line for the entire distance. This policy is carried to the 
 extreme in certain cities where roads that are strongly 
 competitive refuse to perform any reciprocal switching 
 service, each line taking cars from the other only upon 
 the payment of full local rates. 
 
 A^ still other cities, especially the larger industrial and 
 commercial centers, such as Chicago, where the tracks 
 of many railroads converge from and radiate in all di- 
 rections, it has been out of the question for any one com- 
 pany to have tracks connecting with those of all other 
 companies. The most frequent solution of this problem 
 is the construction, usually by a separate company, of a 
 " belt " line, or a " connecting " railway extending gen- 
 erally a part of the way, or, perhaps, all the way around 
 the city and linked by connecting tracks with the various 
 railroads to and from each of which it is thus enabled to 
 transfer cars. The charge for this kind of switching 
 service, whether performed by one railroad for another, 
 or by a belt line for other railroads, varies usually from 
 $2.00 to $3.50 per car, according to the locality and the 
 characteristics of the service, but sometimes is as high as 
 $6.00 and $7.00 a car. In certain cases the extension 
 of the switching service and the absorption of the switch- 
 
Secondary Freight Services 177 
 
 ing charge by the railroads has tended to place in one city 
 the aggregate of the terminal facilities of the different 
 railroads at the service of a shipper without charge in 
 excess of that for the road service. This applies to the 
 switching of full carloads. A car is sometimes switched 
 back and forth with less than carload shipments : this is 
 designated as " trap car " or " ferry car " service and is 
 the subject of a charge. Of recent years, however, the 
 terminal facilities of many a railroad have often been 
 inadequate for the needs of its own traffic, and the 
 switching of cars for another railroad is regarded as a 
 burden for which any ordinary switching charge is not 
 reasonable compensation. The history of the belt and 
 connecting lines does not indicate that, as a rule, their 
 operation has been pecuniarily successful, and the ten- 
 dency has been for them to pass into the ownership of 
 the great railway systems which can utilize them to ad- 
 vantage. 
 
 The growth of certain of the larger cities has some- 
 times caused what was originally a belt road in the 
 suburbs to become a line encircling what is compara- 
 tively a central portion of the manufacturing district. 
 Industries have been located upon such a belt line be- 
 tween which there arises the need for transportation which 
 its locomotives perform. This is not a switching but a 
 complete transportation service, for which, at the begin- 
 ning, when it was inconsiderable, the ordinary switching 
 charge per car was applied. As its business increased and 
 the inadequacy of the switching charge became apparent, 
 such a belt line has sought to make its charge per ton 
 carried, instead of per car moved, advancing, as one 
 point, that the switching charge per car was established 
 when freight cars were of small capacity, seldom ex- 
 ceeding 20 or 25 tons, and that such a charge is out of 
 proportion to the capacity of the present cars, which 
 ranges from 30 to 50 tons. 
 
 Analogous, in a way, to the switching service is that 
 transportation by water necessary when a railroad's 
 track ends on the shore of a river, an estuary, or other 
 
178 Railroad Freight Rates 
 
 waterway, on the opposite bank of which is the city that 
 is the real commercial terminus. The two conspicuous 
 examples are San Francisco, which is located on a penin- 
 sula projecting into San Francisco Bay, across which 
 freight is conveyed from Oakland ; and Manhattan Island, 
 extending southward between the East and North Rivers. 
 Vast numbers of loaded cars are floated on barges, that 
 are fitted with tracks, across these rivers and to and 
 fro in New York harbor between one railroad freight 
 station and another. Into barges, known as lighters, 
 freight is unloaded from cars at stations and " lightered," 
 within the lighterage limits of New York harbor, to other 
 stations, to the water front of manufacturing establish- 
 ments, to the side of any vessel for whose cargo it may 
 be destined. For many years this water delivery was 
 the subject of a separate charge in addition to the 
 freight rate, but for a long time freight received from 
 or destined to points west of the Trunk Line termini is 
 lightered as a part of the service called for by the regu- 
 lar rate to and from the city. In case of through ship- 
 ments, the other lines allow the terminal railroad especial 
 compensation for this service in the division of the 
 through rate. Another conspicuous instance of trans- 
 fer from rail to boat is that of coal, which is loaded di- 
 rectly from cars to vessels, both at the ports on the Atlan- 
 tic and on the Lakes. The custom has grown up on the 
 Atlantic to deliver the coal free on board (f. o. b.) ves- 
 sel, the railroad undertaking to dump it from the car. 
 On the Lakes a very large amount of the coal is dumped 
 by dock companies who control piers and coal handling 
 machinery, making a charge therefor, which the railroad 
 companies add to their rates when their contract provides 
 for the delivery of coal to the vessel. 
 
 At some places, notably across Lake Michigan, Lake 
 Erie, and across some of the large rivers, railroads main- 
 tain regular car ferries as parts of their route, transport- 
 ing entire trains on barges as part of the service called 
 for by the regular rate. 
 
Secondary Freight Services 179 
 
 b. PRIVATE INDUSTRIAL TRACKS 
 
 The operation of a business, especially of a mill or 
 factory utilizing material that is large in bulk and heavy 
 in weight, may so develop that it will need to build rail- 
 road tracks to carry material and products between its 
 different plants. For example, a steel mill may so en- 
 large that furnaces, converters, rail mills, and structural 
 mills may all be embraced in one vast enclosure wherein 
 the transportation to and fro between the different build- 
 ings, of ore, coal, coke and limestone for the furnaces, 
 ingots, blooms, billets, rails, bars, and other forms, by 
 any other conveyance than a steam railroad would be out 
 of the question. Many of such establishments include 
 several miles of track and numerous cars and locomotives 
 as part of their plant within the area occupied by various 
 buildings. Such a plant is a large patron of the rail- 
 roads, receiving every day many carloads of ore, fuel, 
 and flux, and forwarding daily many carloads of finished 
 material over its tracks which connect with the 
 main lines of the adjacent railroad companies. 
 
 The service of the railroad companies designated as 
 switching varies at different establishments of this and 
 similar character, because of the stress of competition 
 or because of peculiar local conditions. At one mill, for 
 example, a railroad delivers cars to and takes cars from 
 that point on the connecting tracks which is located on 
 the boundary line between the right of way of the rail- 
 road and the land of the mill site. At another mill the 
 railroad company switches the loaded cars to and takes 
 loaded cars from tracks well within the interior of the 
 mill. At still another, the railroad company switches 
 cars of ore, fuel, and limestone to the places in the in- 
 terior of the mill yard most convenient for their unload- 
 ing, and takes cars of the finished product from those 
 places in the mill yard where they have been loaded. 
 That is, it " spots " cars for unloading and removes 
 them when empty, " spots " empty cars for loading and 
 
i8o Railroad Freight Rates 
 
 takes such cars, when loaded, from where they have 
 been " spotted." At places this entire service is per- 
 formed without other transportation charge than that 
 made for the road haul under the ordinary tariffs. 
 
 At such an extensive industrial plant, however, that has 
 its own interior tracks and its own locomotives for serv- 
 ice upon such tracks, it is usually inconvenient and even 
 hazardous for the locomotives of the railroad company 
 to enter within the plant for service upon those tracks. 
 At this kind of a plant it has, therefore, frequently been 
 arranged that its locomotives take cars from and deliver 
 cars to the tracks of the railroad company. Because of 
 its enormous receipts and shipments of freight, which 
 can generally be made over one or more competing rail- 
 road lines, such an industrial establishment has often 
 compelled the railroad companies to pay to it, in consid- 
 eration of its performance of the switching service, an 
 amount much in excess of what it would cost the rail- 
 road company to perform that service. When the tracks 
 of the industrial establishment have extended over con- 
 siderable distances, connecting widely separated plants, 
 as well as reaching to the tracks of a railroad company, 
 the allowance to the industry has sometimes been a pro- 
 portion of the regular transportation charge. That is, 
 the tracks of the industrial establishment, for which a 
 separate and usually merely titular corporation has ob- 
 tained a charter, have been considered as those of a 
 separate railroad company, and the transportation charge 
 as a through rate of which a proportion should accrue 
 to it. Such a proportion of the transportation charge, at 
 different times and in different places, has been made to 
 manufacturing concerns of various kinds, to mining, and 
 to lumber companies that have built tracks over which 
 their own locomotives have performed switching service 
 to and from the main tracks of a railroad. This prac- 
 tice has been bitterly and justly condemned as one form 
 of giving rebates. The industrial establishment owning 
 tracks and locomotives for its own convenience has un- 
 
Secondary Freight Services i8i 
 
 doubtedly, through such payments, obtained an advan- 
 tage over competing plants not so equipped. It has been 
 held under the English law that the public and lawful 
 rate of a railroad company covers service rendered on its 
 own tracks by its own instrumentalities. In its decisions 
 in the cases brought by the General Electric Company 
 and the Solvay Process Company the Interstate Com- 
 merce Commission has held that a railroad company is 
 under no pecuniary obligation to an industrial plant for 
 the performance by that plant with its own equipment 
 of interior switching service. 
 
 C. TAP LINES 
 
 Of the same nature as the interior tracks of the great 
 industrial plants are the " tap lines " owned by the lum- 
 ber companies, of which there are a great many in the 
 timber districts, connecting the places where timber is 
 being cut with the tracks of the railroad over which it 
 is conveyed toward the markets. Unlike the industrial 
 tracks which form a network over the comparatively small 
 area occupied by an industrial plant, a tap line may ex- 
 tend for a dozen or a score or more of miles from the 
 railroad into the forest. It may be a common carrier to 
 the extent of carrying the lumbermen back and forth, 
 and supplies for their use to the logging district, but in 
 all cases the function of the tap lines is primarily and 
 overwhelmingly that for which they were constructed 
 by the lumber companies. Especial allowance for switch- 
 ing or proportions of the through rate have been allowed 
 these tap lines just as such allowances have been made 
 to industrial companies, and with the same effect of 
 practically paying a rebate by which the lumber com- 
 panies owning tap lines benefit to the disadvantage of 
 lumber companies that do not. The question is before 
 the Interstate Commerce Commission at this writing 
 with every probability that its decision will be similar to 
 that in the Solvay Process Company and General Elec- 
 tric Company cases. 
 
II 821 Railroad Freight Rates 
 
 2. ELEVATION AND WAREHOUSING 
 
 To conserve their traffic railroad companies have often 
 arranged for the unloading of inbound merchandise and 
 its storage until the time of outbound shipment. The 
 earliest exemplification of this practice was doubtless 
 afforded by the elevators erected for the storage of grain 
 received from the western fields. Grain shipped into 
 a primary market from the farms had previously been 
 held in cars so long that it was more economical to 
 erect elevators to serve for storage, especially as in those 
 days the railroads were not willing that their cars should 
 go beyond their respective lines with through grain ship- 
 ments. The railroad companies at first operated the ele- 
 vators through agents in their employ, the elevation 
 charge being an expense incident to the movement of 
 the grain crop. The next development was the leasing 
 of the elevators and the payment of the cost of eleva- 
 tion to the lessee. This was upheld by the Interstate 
 Commerce Commission as a legitimate arrangement, 
 it being considered lawful for a railroad company to 
 pay another for doing what otherwise it would have to 
 do itself at the same expense. With the development of 
 the processes of grain handling the lessee of an elevator 
 obtained an advantage in dealing in grain not possessed 
 by a dealer not having such facility, in that he was en- 
 abled to conduct the mixing, treating, weighing and in- 
 specting through which the value of grain is enhanced. 
 The allowance for elevation, therefore, became less and 
 less customary, and was finally declared illegal by an 
 order of the Commission. The order was contested by 
 interests beneficiary of the elevation charge and the case 
 taken to the Supreme Court of the United States. The 
 Commission deferred the taking effect of its decree to 
 July 1st, 1909, in the hope that the Court will have ren- 
 dered a decision by that time. 
 
 The storage performed for grain by an elevator is 
 rendered in the South for cotton by warehouses, in some 
 cases erected and maintained by the railroads; and for 
 
Secondary Freight Services 183 
 
 tobacco in other warehouses, also in some instances 
 erected and maintained by the railroads. 
 
 A dockage or warehouse charge is customary on car- 
 load or less than carload freight unloaded on docks, or in 
 warehouses belonging to a railroad company, if it is not 
 taken away within a specified time. 
 
 3. SPECIAL EQUIPMENT CARS 
 
 This is the designation now generally applied by the 
 railroads to what are ordinarily and not so appropriately 
 known as private freight cars. It was at first the cus- 
 tom, even to a greater degree in England than in this 
 country, that the cars in general use on a railroad be 
 owned by the shippers. The demonstrated inconvenience 
 of this arrangement led to the ownership in nearly all 
 cases passing to the railroad companies. 
 
 Until well after the Civil War the freight equipment 
 used by the railroads consisted principally of box cars 
 and open flat cars, and some slatted cars, comparatively 
 few in number, owned by the companies especially en- 
 gaged in the livestock traffic. The railroads resisted in- 
 vestment in cars of special design because they did not 
 care to spend money for contrivances in the experi- 
 mental stage, because they would not have continuous 
 use for such cars that could not, like the ordinary box 
 and flat cars, be loaded with one commodity or another 
 at any time of the year, and there was strong resistance 
 to the refrigerator cars designed for the carriage of 
 dressed meat, because neither the livestock shippers nor 
 the railroads desired that the traffic in livestock diminish, 
 and the livestock cars thus fall into disuse. 
 
 The development of freight cars especially suitable 
 for particular commodities was, therefore, conducted by 
 individuals, and their subsequent ownership rested chiefly 
 with private car companies instead of the railroad, this 
 being in a measure a reversion to the early practice. 
 
 Refrigerator cars, particularly adapted to the convey- 
 ance of perishable foodstuffs, were devised after long 
 
184 Railroad Freight Rates 
 
 experiment. They became a factor to be reckoned with 
 in the transportation of dressed beef about 1876, and in 
 that of fruits and vegetables during the following 
 decade. As their most extensive use was for the car- 
 riage of dressed meats, the great packing companies 
 came into the ownership of the greatest number of re- 
 frigerator cars, and, therefore, were better equipped than 
 any other agencies for the conveyance not only of pack- 
 ing house products, but of dairy products, and fruits and 
 vegetables as well. The packing house company owning 
 the largest number of these cars, through its control of 
 tremendous trafSc in livestock and the products thereof, 
 was enabled to induce many railroad companies to make 
 contracts providing that its refrigerator cars should be 
 used exclusively in the fruit and vegetable traffic of 
 those companies. The refrigerator car company assumed 
 the duty of providing ice for such commodities as needed 
 to be transported under refrigeration, and assessed the 
 shippers with a charge for icing that was in addition to 
 the rate for transportation. The undoubtedly excessive 
 nature of the charges made for this service from some 
 localities brought forth complaint that led to the require- 
 ment by Federal legislation that such charges be defi- 
 nitely published in connection with the rates for trans- 
 portation, and that they be under the jurisdiction of the 
 Interstate Commerce Commission. This has done away 
 with serious complaints on the part of the shippers 
 against the refrigerator car companies, whose service, 
 administered through a most competent organization, 
 is admittedly excellent. 
 
 Such shipments of livestock as are now made are 
 principally from the western grazing and fattening 
 grounds to the packing houses, and are in the ordinary 
 livestock cars owned by the railroad companies. There 
 are other " palace livestock cars," owned by private car 
 companies, which contain racks and troughs from which 
 stock can be fed and watered while on the trains, and 
 movable partitions which can be so adjusted that the 
 animals may have separate compartments. There are 
 
Secondary Freight Services 185 
 
 similar cars of still more elaborate construction used for 
 the carriage of race horses and other valuable animals. 
 
 About the year 1885, cars with large cylindrical iron 
 tanks came into use for the conveyance of oil, which had 
 previously been shipped in cars with wooden tanks, and 
 before that in ordinary box cars in barrels that often 
 leaked and were liable to cause fire. It is obvious that 
 only the largest oil companies can afford to own a con- 
 siderable number of tank cars. 
 
 Cars of designs peculiarly suitable for the transporta- 
 tion of furniture and certain other commodities have 
 also been constructed, and are owned either by private 
 car companies or, more pronouncedly in recent years, by 
 the railroad companies themselves. 
 
 Large numbers of cars are also owned by many of the 
 numerous coal mining companies. These are not, how- 
 ever, as a rule, materially different from those owned by 
 the railroad companies and used for the same purpose. 
 The object of a coal mining company in owning private 
 cars is to assure itself of an adequate supply at times 
 of great commercial activity when the pressure upon the 
 railroad companies for cars is so strong that the coal 
 companies would not be regularly supplied from ordinary 
 sources with the number sufficient for each day's opera- 
 tions. In the older parts of the United States, when the 
 railroad companies came generally into the possession 
 of the freight cars that had theretofore been owned by 
 the shippers, coal cars were frequently an exception. One 
 of the coal companies in Pennsylvania, for example, 
 has utilized its own cars for fifty years. On some of 
 the English railroads the coal cars are owned exclusively 
 by the coal companies; on others partly by the railroad 
 and partly by the coal companies. 
 
 When there was a certain reversion to the ownership 
 of cars by shippers, that is, when special equipment cars 
 owned by private car companies were first introduced, 
 it was considered advantageous on the part of the pri- 
 vate car companies to have their cars hauled by the rail- 
 roads, and it would seem that in at least a few instances 
 
1 86 Railroad Freight Rates 
 
 the railroads charged for hauling them. It is positive 
 that dressed beef was carried at 5 cents per loo pounds 
 less from Chicago to New York in railroad cars than 
 in private cars and that the railroads charged $25 per 
 tank for carrying empty tank cars back from the Missouri 
 to the Mississippi River. In order to secure some of 
 the oil traffic, a new railroad between Chicago and the 
 Missouri River offered to pay three-fourths of a cent a 
 mile on all tanks whether empty or loaded. This forced 
 the competing railroads to make the same arrangement. 
 The railroads at first declined to allow mileage on private 
 livestock cars, but their owners circumvented the re- 
 fusal by leasing the cars to the packers, who were per- 
 mitted three-fourths of a cent per mile on the cars, empty 
 or loaded, and this payment became general. After pay- 
 ment by mileage was introduced it was allowed to owners 
 of refrigerator cars only on the mileage made by such 
 cars while loaded. The competition between the railroads 
 for the enormous traffic of the packing houses, how- 
 ever, led them to offer mileage on the refrigerator cars 
 whether empty or loaded. It also became customary for 
 the railroads to grant to the owners of other private 
 freight cars the same mileage as given by one railroad 
 company to another for the use of its cars, a payment 
 that has ranged as high as one cent per car per mile. It 
 was 6 mills per car per mile when a charge of so much 
 per day was substituted. This has fluctuated between 
 20 cents and 75 cents for each car of a company while 
 on the rails of another. At this writing it is 25 cents, but 
 will probably be increased. 
 
 The railroads hold that the mileage of three-fourths of 
 a cent now paid for refrigerator cars is excessive because 
 of the especial attention and accelerated movement de- 
 manded when they are under load of refrigerated ship- 
 ments, and because, as a rule, they cannot be loaded for 
 return. It is otherwise with livestock cars and coal cars, 
 upon which the mileage is six mills. 
 
 The excessive mileage paid to the private car com- 
 panies is undoubtedly a severe drain upon the railroads, 
 
Secondary Freight Services 187 
 
 whic/i, it has been suggested, can be prevented by the 
 purchase of the various private cars by a special equip- 
 ment company owned and controlled by the railroads. 
 There does not seem to have ever been any serious com- 
 plaint from shippers as to the service rendered by the pri- 
 vate car companies, and such abuses as have arisen out 
 of the exactions these companies have made upon the 
 shippers seem to have been ended by the enactment of 
 the Hepburn law. There can be no doubt that the spe- 
 cial equipment cars, on the whole, have been of invalu- 
 able service in the development of the industry and the 
 commerce of the country. 
 
CHAPTER XIII 
 
 INCIDENTAL DEVELOPMENTS OF THE 
 FREIGHT SERVICE 
 
 (l) THE BILL OF LADING 
 
 When a shipper entrusts merchandise to the care of 
 a railroad company it goes without saying that he is 
 entitled to a certificate that it has been received by that 
 company for transportation as specified. This document 
 at first was very crude, oftentimes little, if any, more 
 than a blank receipt. Before the railroads were author- 
 ized to form continuous through lines, a shipment that 
 was offered for transportation over two or more lines 
 was merely turned over to one railroad after the other, 
 the road receiving the shipment from another paying 
 the freight charges to the point where received, and add- 
 ing them to its own charges for collection. 
 
 When freight was lost, stolen, burned, or in one way 
 or another damaged in transit, dispute often arose be- 
 tween a railroad company and a patron as to who should 
 bear the loss. The railroads formulated stipulations ex- 
 empting themselves from liability from loss because of 
 leakage, or the bursting of barrels, the breaking of brit- 
 tle ware, the waste of grain, and other deterioration. 
 These and other provisions at first were printed on 
 tariffs and later on the bill of lading, which each rail- 
 road company drafted for itself. These bills of lading 
 differed according to local conditions and to the legis- 
 lative enactment in different States. 
 
 With the introduction of through billing came a 
 tendency to homogeneity in the various bills of lading, 
 and a uniform bill of lading applicable to shipments in 
 the Trunk Line Territory was adopted by the Trunk 
 Line Association in 1890 ; or, rather, two bills of lading 
 were adopted. In addition to the exemptions from lia- 
 
 188 
 
Developments of the Freight Service 189 
 
 bility by the carrier specified by the common law, the 
 " Ordinary Form of Uniform Bill of Lading " contained 
 certain stipulations as to further exemption ; the other, 
 a " Form of Uniform Bill of Lading at Carriers' Lia- 
 bility," provided that the carriers assume all liability 
 limited only by the common law, which frees the carrier 
 in case of loss arising from any of the following causes : 
 first, Act of God or the pubHc enemy; second, inherent 
 defect, quality or vice of the thing carried; third, seiz- 
 ure under legal process; fourth, any act or omission of 
 the owner of the goods. 
 
 Under the contract made by the ordinary bill of lad- 
 ing the transportation charge was that specified in the 
 tariffs of general use. Under the bill of lading at car- 
 riers' liability the transportation charge was 20 per cent, 
 in excess of the regular tariff, this premium being fixed 
 by the railroads as compensation for their insurance 
 against fire and the other hazards for which it makes 
 them responsible. This form, however, was seldom or 
 never used. In 1904, at the instance of certain manufac- 
 turers' and merchants' associations, the matter of a uni- 
 form bill of lading was taken up before the Interstate 
 Commerce Commission, which instituted a series of hear- 
 ings and negotiations lasting over three years. The 
 shippers contended for the greatest and the carriers for 
 the least degree of liability under the ordinary bill of lad- 
 ing, covering transportation at the ordinary and regular 
 rate. An especial brand of discord was the misappre- 
 hension of many shippers that the 20 per cent, premium 
 for transportation under liability, unrestricted save by 
 the common law, was a blind, under the cover of which 
 all rates were to be advanced to that extent. 
 
 Because joi the conflict between the laws of different 
 States, discussion was also acute as to the proper word- 
 ing of the stipulation that would render the bill of lad- 
 ing acceptable to bankers as a collateral for loans. 
 
 The result of the three years' debate was the agree- 
 ment between the representatives of the railroads and 
 those of the shippers upon a bill of lading that, with the 
 
I90 Railroad Freight Rates 
 
 sanction of the Interstate Commerce Commission, was 
 placed in use in different parts of the country at dates 
 varying from September ist, 1908, to February ist, 1909. 
 This document clearly recognizes that the carriers can- 
 not even by contract — although seperate States have en- 
 acted otherwise — relieve themselves of the liability for 
 loss or damage caused by their own negligence. It ex- 
 empts the carriers, however, from liability from certain 
 other causes. This is the bill of lading used for ordinary 
 shipments at the regular rates of freight. There remains 
 the bill of lading under which the carrier assumes all 
 liability, save that from which it is exempted by the 
 common law : of this the shipper may avail upon payment 
 of 10 per cent, advance upon the customary tariff. 
 Either form of bill, provided it is made to the order of 
 the shipper or the consignee, is acceptable as collateral, 
 and, as a matter of fact, bills of lading constitute a very 
 large proportion of the commercial paper upon which 
 the banks make loans. 
 
 Viewed in this respect, the bill of lading is an instru- 
 ment for facilitating commerce, the importance of which 
 is not generally known. It is not only a certificate that 
 merchandise is in transit, but a first lien upon that mer- 
 chandise, in a way a title to ownership, and, as fulfilling 
 this function, negotiable. For example, a grain dealer 
 buying a carload of wheat at the western field may, and 
 in the vast majority of cases does, deposit the bill of lad- 
 ing covering that car in a bank as security for a loan to 
 its value. If that car goes through to a port where it is 
 sold for export the loan may not be paid and the bill 
 of lading lifted until the grain is transferred from the 
 car to the vessel. There is a similar procedure in the 
 case of other commodities, with bills of lading cover- 
 ing raw material to the factory, and finished product 
 from the factory. The bill of lading thus contributes 
 to that fluidity of the circulating medium, that celerity 
 in the transfer of merchandise, which are striking 
 achievements and essential requirements of current civ- 
 ilization. 
 
Developments of the Freight Service 191 
 
 (2) DEMURRAGE 
 
 It was for many years not an unusual, if in reality 
 it was not the usual, custom of a shipper to hold a 
 freight car as long as he pleased before loading it, 
 and of a consignee to hold it as long as he wished be- 
 fore unloading it. Indeed, it was a recognized practice 
 of many large manufacturing establishments to hold their 
 fuel in the coal cars until it was emptied into the fur- 
 naces, the coal thereby requiring less handling than 
 if it were transferred from the car into storage bins and 
 thence taken to the furnaces. These establishments, how- 
 ever, would advance, and often with much truth, a coun- 
 terclaim that the deliveries to them by the railroads were 
 so irregular that while meager supplies were brought at 
 one time, an oversupply was brought at another, for 
 which they could not be expected to have storage 
 capacity. As early as 1874 certain railroads began to 
 establish a demurrage charge, which became general 
 about 1888, designed to afford a stimulus to the prompt 
 loading and unloading of cars by shippers. This demur- 
 rage charge is a rental of so much per car per day 
 charged by a railroad company for the detention of a 
 car longer than a limited period, usually from two to 
 four days, but sometimes longer to meet peculiar condi- 
 tions. Demurrage is sometimes averaged by allowing 
 the consignee credit for each day under the limit after 
 which demurrage accrues. For example, if the free 
 time be two days and a car is unloaded and liberated in 
 one, credit is allowed for one day : this will offset the de- 
 murrage in case of another car not liberated until the third 
 day. The demurrage charges and practices are now 
 prescribed in eighteen of the States by their re- 
 spective legislatures or railroad commissions. Several 
 of the States have established " reciprocal demurrage," 
 under which a penalty of a specified amount per day is 
 exacted from a railroad company for not supplying cars 
 to a shipper in accordance with his orders, under cer- 
 tain allowances. The railroads point out that this is not 
 
192 Railroad Freight Rates 
 
 " reciprocal demurrage," inasmuch as a rental for a car 
 detained by a shipper and used as a warehouse is differ- 
 ent from a fine for not providing that which under con- 
 ditions of sudden and extraordinary traffic pressure even 
 a well equipped railroad company may be unable to 
 supply. These reciprocal demurrage charges are, how- 
 ever, usually inoperative, because the law often requires 
 that shippers deposit a cash guarantee at the time cars 
 are ordered. This they are seldom or never willing to do. 
 Moreover, a State cannot apply reciprocal demurrage 
 except in intrastate traffic, which ordinarily constitutes 
 but a small portion of the shipments of a large estab- 
 lishment. In many of the countries of Europe the free 
 time is but twenty-four hours, the demurrage charge be- 
 ing augmented for each day thereafter. 
 
 A track storage charge is a rental for the use of the 
 track in addition to the demurrage charged for detention 
 of a car after a specified time. It is usually assessed for 
 use of tracks in large cities that occupy valuable real 
 estate. 
 
 (3) RECONSIGNMENT 
 
 When a shipment is delivered to a railroad company 
 and directed to a specified consignee at a specified place, 
 it is the natural assumption that it is to be forwarded 
 with due despatch and promptly delivered to the con- 
 signee at the place of destination. Contingencies may 
 arise, however, leading the shipper to desire a change, 
 both of consignee and destination. The earliest cases of 
 this kind were those in which a consignee may have 
 been found unworthy of credit, or may have failed after 
 a shipment had been forwarded. In either case the ship- 
 per would countermand delivery and perhaps desire that 
 the shipment be forwarded to another consignee at an- 
 other destination. As an accommodation the railroad 
 company often, in such an instance, instead of exacting 
 the full rate from the place of shipment to the first des- 
 tination, and the full rate from the first to the second 
 destination, has charged the through rate applicable via 
 
Developments of the Freight Service 193 
 
 the first to the second destination, or even, in some cases, 
 the through rate applying direct from the place of ship- 
 ment to the final destination. In various analogous in- 
 stances when there has been a misunderstanding between 
 the shipper and the consignee; or the consignee, for 
 one reason or another, may have refused to receive a 
 shipment, it has been sent to another destination under 
 similar accommodation. In such cases a small charge 
 may or may not have been made as compensation for 
 the clerical work and additional handling made neces- 
 sary by the reconsignment. 
 
 It often happens that the sale of commodities of va- 
 rious kinds has been negotiated through brokers who do 
 not desire the purchaser to be known to the sources 
 whence the commodities have been obtained, nor the 
 producer to become known to the purchaser, for fear 
 that negotiations would thereafter be conducted direct 
 and the broker eliminated. Shipments so negotiated are 
 often consigned by the broker to the order of himself, 
 or a colleague at some intermediate point, and thence 
 reconsigned to the ultimate destination, the first bill of 
 lading not indicating the purchaser nor the second bill 
 of lading the producer. For reconsignment under such 
 conditions a small charge is usually made per car. 
 
 Perishable foodstuffs, particularly fruits and vegeta- 
 bles, are often diverted en route from one destination 
 to another as the representatives of the grower find that 
 the needs at one market are in excess of those at another. 
 This diversion, however, is hardly to be classed as re- 
 consignment. It is a concession extended by the rail- 
 roads to facilitate the marketing of such products. 
 
 Certain railroads have allowed the dealers in another 
 class of commodities, such as hay, grain and grain prod- 
 ucts, who have not storage facilities, to consign ship- 
 ments to the railroad yards while awaiting orders for 
 their disposition. In the case of hay and grain thus con- 
 signed to the great yard at Altoona, the destinations of 
 about fifty-two per cent, are furnished to the railroad com- 
 pany before the shipments reach the yard To stimu- 
 
194 Railroad Freight Rates 
 
 late this practice a charge is made for shifting in the yard 
 and a storage charge of $2 per day for detention; this 
 is fairly typical of the charge made at similar yards for 
 like service. When this storage awaiting consignment 
 is availed of, it means that the cars of the railroad com- 
 panies are used as warehouses, and sometimes thou- 
 sands of cars are tied up in this manner, with the x"esult, 
 especiahy in times of heavy traffic, that the country is 
 deprived of cars which should be in movement, and the 
 railroad tracks are clogged with the cars so used when 
 they should be open for the expediting of transporta- 
 tion. Lumber is another commodity in connection with 
 which the reconsignment privilege is frequently availed 
 of. A car loaded with lumber may be held in a termi- 
 nal yard and thence forwarded to a market upon pay- 
 ment of a fee per day for detention. At Buffalo the 
 reconsignment privilege is very serviceable, especially 
 on flour brought down the Lakes 
 
 In all cases the reconsignment privilege means that 
 the commodity pays the through rate from the original 
 point of shipment through the place of reconsignment 
 to the final destination, provided it be beyond the place 
 of reconsignment. As the through rate for nearly all 
 hauls of considerable length is less than the sum of the 
 rates for the separate links forming the through haul, 
 this privilege is a material concession. It is especially 
 beneficial to the shipper where the place of reconsign- 
 ment is intermediate on the longer line between the 
 place of supply and the place of destination, as he is 
 in such a case being placed on a parity with a competi- 
 tor at a station on the short and direct route on which 
 the sum of the intermediate rates is more likely to make 
 an aggregate not exceeding the through rate. The re- 
 consignment privilege also permits the dealer in grain 
 who has not an elevator under his control, or the dealer 
 in another commodity for which he likewise has no ware- 
 house, to compete with shippers who have such storage 
 conveniences, inasmuch as it enables them to use the cars 
 of the railroads for storage purposes. 
 
Developments of the Freight Service 195 
 
 It only remains to add that, through the stress of 
 competition and the pressure of shippers, the reconsign- 
 ment privilege has been extended from one commodity 
 to another, until it is applicable upon nearly all mer- 
 chandise that moves in carloads. It is sometimes utilized 
 by dealers in coal and other staple commodities to 
 send carloads from one place to another in search of a 
 market, the reconsignment charge not compensating the 
 railroads for the use of their cars for storage. In other 
 ways the concession has been much abused and, con- 
 ducted as at this time, unduly restricts the serviceability 
 of the freight car equipment and therefore calls for 
 better adjustment. 
 
 (4) MILLING IN TRANSIT 
 
 Another practice that is of much benefit to interme- 
 diate localities on a long line that are in competition 
 with localities on a rival short line, or are in competi- 
 tion with an initial point shipping to a market at an ex- 
 treme point on the line on which they are intermediate, is 
 known as milling in transit. 
 
 This is the privilege of transforming raw material 
 into a manufactured product at some point en route, 
 and forwarding this product to market on the rate appli- 
 cable from the original place of shipment of the raw 
 material to that market of the product. That is, al- 
 though the raw material has been unloaded at an inter- 
 mediate point, there transformed and the product loaded 
 and forwarded to final destination, the through rate is 
 applied from point of origin of the raw material to des- 
 tination of the product. 
 
 It is evident, for example, that a miller located adjacent 
 to wheat fields at A, and having a through rate on flour 
 to a remote market at C, would have an advantage over 
 a miller at an intermediate point B, if the latter has to 
 bring wheat from the fields adjacent to A at the local 
 rate to his mill at B and pay therefrom the local rate on 
 flour to the market at C. 
 
 Before the lands to the west of Chicago became the 
 
196 Railroad Freight Rates 
 
 great grain-growing region, flouring mills had risen at 
 numerous points in the Eastern and Central States, each 
 of which obtained wheat principally from the near-by 
 farms, and sold flour throughout a more or less extended 
 area. As the western farming land was developed and 
 mills were built near the fields, these mills could ship 
 flour on through rates — that were forced to a low level 
 by the competition of the waterways, and the needs of 
 the export traffic — to the markets throughout the Cen- 
 tral and Eastern States. At that time the rates on wheat 
 the flour were identical, and, although some exceptions 
 have arisen, they are, generally speaking, still substan- 
 tially the same. The flouring mills in the Eastern and 
 Central States found the area of their markets diminish- 
 ing, and at times when, owing to crop failures in their 
 immediate vicinity, they could not get wheat except from 
 a distance, they found that they were being driven out of 
 business. For their benefit milling in transit was ex- 
 tended until it is now a concession granted generally 
 by the railroads to millers in all parts of the country, 
 from Oregon to New England and from Minnesota to 
 Georgia. By protecting the millers on its lines this privi- 
 lege retains traffic to the rails of a company that might 
 otherwise go over the lines of a competitor, especially 
 if the flour comes from mills at a distant point. The 
 practice, by promoting the milling on the line of a rail- 
 road, also tends to keep that business near the wheat 
 fields on or tributary to its line. Cars loaded with grain 
 from these fields, therefore, have a short haul to the place 
 where they are unloaded, a great desideratum during 
 the crop movement when there is a heavy demand for 
 cars. In so far as information has been obtainable, the 
 practice had its origin in the early years of the decade 
 beginning with 1870. 
 
 Its development in Minnesota and the adjoining States 
 to the west was under peculiar conditions. As soon as 
 wheat was grown in southern Minnesota and northern 
 Iowa in sufficient quantities to leave a surplus above the 
 needs of the residents, this surplus found its way to the 
 
Developments of the Freight Service 197 
 
 Mississippi River at Hastings, Red Wing, Wabash, 
 Winona, LaCrosse and other towns, for storage and sub- 
 sequent forwarding to market via the Mississippi River. 
 The accumulation of this surplus wheat at the Missis- 
 sippi River led to the establishment at these points of 
 flour mills, which disposed of their surplus product in 
 various markets to the East, where it was sold in com- 
 petition with flour produced at mills in Milwaukee, which 
 drew their supply of wheat from practically the same 
 territory. 
 
 The water power at Minneapolis induced the estab- 
 lishment of flouring mills in that city, which were ob- 
 liged to compete, both with the more southerly mills 
 along the Mississippi River and with Milwaukee in the 
 purchase of wheat. Increase in the capacity of the 
 mills at Minneapolis was coincident with the building 
 of railroads from that point farther into the West. With 
 this growth of the Minneapolis mills, it became more 
 and more difficult for them to secure an adequate supply 
 of wheat to enable them to continue in operation through- 
 out the entire year, and they gradually encroached into 
 the territory that was the source of supply of wheat for 
 the Mississippi River and Milwaukee mills, railroads hav- 
 ing been constructed west of the various river towns 
 mentioned. Competition between Minneapolis and Mil- 
 waukee for this wheat became so intense that at times 
 the same price was paid in both cities. This rivalry 
 between markets was naturally reflected in rivalry which 
 increased between the railroads that reached from 
 the southwestern Minnesota and Dakota wheat fields 
 through Minneapolis to Milwaukee, and the lines ex- 
 tending directly to Milwaukee ; and the high prices paid 
 at Minneapolis for wheat drew so large a proportion 
 from the territory previously tributary to the Mississippi 
 River mills that the latter were no longer able to secure 
 an adequate supply from the fields direct, but were 
 obliged to resort to Minneapolis. In order to protect 
 the Mississippi River mills and enable them to secure a 
 sufficient supply of wheat for their continuous operation. 
 
198 Railroad Freight Rates 
 
 as well as to make it possible for the originating lines to 
 retain control of the wheat for the long haul beyond the 
 milling point to or toward the market of the flour, the 
 milling in transit privilege was established. This priv- 
 ilege, after its establishment at Mississippi River mills, 
 was subsequently extended to Minneapolis by the lines 
 to the west and north of that city to enable its mills 
 in turn to secure a sufficient supply of wheat to compete 
 with the mills at Hastings, Red Wing, and the similarly 
 situated towns on the river. 
 
 There was great competition between the millers of 
 Minneapolis, which led to their forming an association 
 for the purchase of wheat, thereby lessening the rivalry 
 between the Minneapolis mills for their supply. It was 
 then quickly ascertained that the severity of the com- 
 petition was due very largely to the fact that the wheat 
 regions then developed did not produce grain enough to 
 satisfy the needs of both Minneapolis and the ports on 
 Lake Michigan, of which Milwaukee was the most im- 
 portant. This condition was overcome as wheat fields 
 were further developed to the north and west of Min- 
 neapolis and railroads were extended into them. 
 
 The building of lines from the northern wheat fields 
 to Duluth and from Minneapolis to Duluth, and the con- 
 sequent advent of that city as a factor in the move- 
 ment of wheat via the Lakes to the East, and the result- 
 ant building up of BuflEalo as a milling center, further 
 complicated the situation. The rates to Duluth and other 
 Lake Superior ports from a large area of the wheat 
 growing regions were established. at 2^ cents per 100 
 pounds less than the rates to the Lake Michigan ports. 
 This differential was the result of the contention by the 
 lines operating through the Duluth gateway that infe- 
 rior lake service, and excessive marine insurance rates 
 owing to extra-hazardous navigation, made their route 
 unattractive to shippers on an even basis of rates with the 
 routes via the Lake Michigan ports. The diflference 
 was accorded the route through Duluth by the addi- 
 tion of a milling in transit charge of 2| cents per cwt. on 
 
Developments of the Freight Service 199 
 
 shipments milled and forwarded through Lake Michigan 
 ports. The milling in transit charge thus established 
 continued in existence until a considerably later period, 
 when the rates from Minneapolis to the Atlantic sea- 
 board were arbitrarily fixed at five cents over the rates 
 from Duluth. The rate from Minneapolis being seven 
 and one-half cents over the rate from Lake Michigan 
 ports to the seaboard, it then became necessary, in order 
 to maintain the Duluth differential at 2^ cents per cwt., 
 to eliminate the milling in cransit charge, which previ- 
 ously applied on shipments milled in transit at Minne- 
 apolis and forwarded east through Lake Michigan ports. 
 The milling in transit charge was still continued at inte- 
 rior and Mississippi River milling points, placing them 
 at a disadvantage in comparison with Minneapolis under 
 which they labored until very recently. 
 
 Under milling in transit as originally established at 
 Minneapolis, it was estimated that a given quantity of 
 wheat produced only 72 per cent, of flour, and the tran- 
 sit privilege was accorded upon that alone. As the prac- 
 tice developed, mills were permitted to consign as " tran- 
 sit " the total weight of products derived from the wheat 
 received, it being permissible to include bran and other 
 by-products, which, in connection with the flour, aggre- 
 gate very nearly the same weight as the wheat from 
 which they are made. 
 
 The mechanism of the arrangement includes the pay- 
 ment at the shipping or milling point of the through rate 
 on the wheat from the place of purchase to the final 
 market, and the issue of receipts to the miller at the 
 place of transformation, which are later accepted by the 
 railroad as vouchers covering the shipment of product 
 of an equal weight or approximately an equal weight 
 therefrom. 
 
 Before the harmonious adjustment of rates from 
 Minneapolis via the various routes to the East, the mill- 
 ing in transit certificates were a source of harassment 
 to the railroads. These certificates were bought and sold 
 on the Board of Trade, and because of the accumulation 
 
200 Railroad Freight Rates 
 
 of grain at times at Minneapolis, and the fluctuation of 
 rates, the railroads leading from that city often found 
 that they were carrying flour and grain products under 
 the transit privilege for utterly inadequate compensa- 
 tion. This condition finally resulted in the abolition, 
 by mutual consent of the millers and the railroads, of 
 the milling in transit privilege at Minneapolis. 
 
 The milling in transit privilege, developed largely in 
 aid of the milling industry in the Northwest, has, in 
 its extension throughout the interior and Eastern States, 
 been designed in large part to protect the millers of those 
 regions against the competition of the Minneapolis mills, 
 which have extended their market through the country. 
 Even with this concession, however, the flour mills of 
 New England have not been able to persist in competi- 
 tion with those of the Northwest, but one remaining 
 in the States to the north of Massachusetts. Mills that 
 grind corn into meal and oats into meal still exist there, 
 being able to continue in operation partly because of the 
 water power, but largely because the machinery and 
 processes for grinding these grains are not nearly so 
 highly developed as those for grinding wheat. 
 
 This milling in transit, like the reconsignment privi- 
 lege, through the stress of competition and the pressure 
 of shippers, has been extended to the manufacture of 
 various other commodities, especially of corn into corn 
 meal, of oats, oil cake, cottonseed, and in some cases 
 of lumber. The privilege is seldom or never applied 
 to liquid products. That is, for example, while of the 
 products of linseed it applies to oil-cake, it does not to 
 linseed oil. 
 
 ^,5) CARLOAD AND LESS THAN CARLOAD RATES 
 
 The distinction between rates by the hundred pounds 
 for carload, and rates by the hundred pounds for less 
 than carload shipments, has acquired an economic sig- 
 nificance unforeseen when the discrimination was first 
 made between shipments loaded and unloaded in car- 
 
Developments of the Freight Service 201 
 
 load quantities by the shipper and consignee, and those 
 loaded and unloaded in less than carload lots by em- 
 ployees of the railroad. 
 
 Meanwhile the rates on livestock and on lumber, which 
 long continued to be based upon the carload as a unit, 
 had also changed to the basis of the hundredweight as 
 the unit. This came about through the enlargement of 
 the freight car. A generation ago the standard car was 
 24 feet long, and a full load was always of about the 
 same number of cattle or other livestock, the rate per 
 carload applying. The length of the car was increased 
 by one road and then by another, each enlargement per- 
 mitting the accommodation of a few more animals. The 
 old-time rate per car, however, still applied, the larger 
 car thereby being used as an instrument to cut the rate, 
 inasmuch as it offered the shipper more for his money. 
 The railroads tried to equalize the rates by establishing 
 different rates for cars of various sizes, but the variety 
 of cars so increased that after much friction the rate 
 on cattle was made so many cents per 100 pounds, with 
 a certain minimum weight for each size of car. The 
 change of custom in the case of lumber was along similar 
 lines. The recognized weight of the load of the early 
 car was 20,000 pounds. As cars were increased in 
 size it was found that in the struggle for traffic, com- 
 peting lines would often load as much as 30,000 pounds 
 without advancing the rate. In the endeavor to stop 
 this practice, which was equivalent to a cut in the rate, 
 a rule was made that an agent who loaded more than 20,- 
 000 pounds in a car should be discharged, and weighers 
 were appointed to enforce the rule. This was an ex- 
 pensive procedure, even under the restrictions not diffi- 
 cult of evasion, and it prevented the full loading of 
 cars of large capacity. Finally it was suggested that 
 lumber be charged for per 100 pounds, as were nearly 
 all other commodities. Each of the railroads said that 
 it would be glad to establish this custom if the others 
 would do so; but in that era of suspicion there was 
 hesitation. Ultimately a few of the roads put the ar- 
 
202( Railroad Freight Rates 
 
 rangement into effect. It resulted in such immediate 
 satisfaction that within a short time practically every 
 freight rate for carload shipments of every commodity 
 was based upon loo pounds or the ton as a unit. Even 
 at this time, however, remain a few exceptions, in 
 remote localities or under unusual conditions. For ex- 
 ample, in some parts of the Pacific Coast the unit of 
 charge for livestock is the carload; from some parts 
 of the northeastern forests to the paper mills the unit 
 of transportation charge on lumber is the cord. 
 
 As the hundredweight was thus becoming the univer- 
 sal unit for the freight charge, the difiference between 
 the carload and less than carload rate was arousing 
 contention between the established distributing centers 
 and the smaller towns aspiring to that rank. The dif- 
 ference of but a few cents per lOO pounds on such 
 staple commodities as sugar, flour, bacon, nails, common 
 furniture, can readily enough make the difiference be- 
 tween a retail and wholesale business. That is, for 
 example, if this difiference, or " spread," as it is termed 
 in commercial parlance, be lo cents per loo pounds on 
 flour in sacks, the difference on a carload of 30,000 
 pounds, or six hundred 50 pound sacks, would be $30, 
 which of itself might give adequate profit in case of 
 quick sales to a wholesale grocer doing a fair general 
 business. The purchase of many kinds of goods by 
 the carload, moreover, would enable him to obtain lower 
 prices than the purchase of smaller lots. The carload 
 rate is, therefore, often a substantial aid in the build- 
 ing up of a wholesale and even sometimes of a retail 
 business. It is but natural that the wholesale dealers of 
 a large city should not desire that their business be 
 broken into by a number of wholesale dealers in various 
 towns and cities within the area which they have come 
 to consider as their normal market. The retail dealers 
 of such large cities, who send catalogues of their wares 
 to consumers through an extensive area, are likewise 
 opposed to such an increase in the "spread," as will 
 attract their customers to local merchants. The strug- 
 
Developments of the Freight Service 203 
 
 gle on the part of the large cities to diminish the 
 " spread " and on the part of the small towns to increase 
 the " spread," has often placed the railroads between the 
 upper and the nether millstone. Such a struggle was 
 once the source of bitter contention between Chicago and 
 St. Louis on one side and San Francisco and other Pa- 
 cific Coast ports on the other, the former wanting a 
 narrow and the latter a wide spread to serve their re- 
 spective desires to distribute to the retail merchants of 
 the western interior. 
 
 The resultant of the two forces has been an augmenta- 
 tion in the number of carload ratings. Sometimes the 
 distinction has been made by placing carload lots in a 
 different class than the less than carload lots. For ex- 
 ample, in the Western classification nails in carloads 
 are in the fifth class, while in less than carloads they are 
 in the fourth class. The pressure of the interior cen- 
 ters for carload rates has led in some parts of the coun- 
 try to the grouping of different kinds of merchandise 
 of the same nature in a car under the carload rate. This 
 practice, however, has been generally resisted by the 
 railroads, who have endeavored to insist that the carload 
 rate be granted only on merchandise of the same nature 
 shipped from one consignor to one consignee. This in- 
 sistence, in turn, has in many cities been largely evaded 
 by the organization of shipping companies through 
 whose warehouses merchandise for the same destination 
 is assembled from several consignors. To such a ware- 
 house may likewise be consigned a carload of freight 
 intended for several consignees, to whom it is distributed 
 by the warehouse company. The practices of these 
 forwarding companies, export companies, receiving com- 
 panies, as they are variously designated, although upheld 
 by the Interstate Commerce Commission, has been over- 
 ruled by the courts. 
 
 The constant tendency furthered by the carload ratings 
 is toward the decentralization of distribution, especially of 
 the staple commodities. This is promoted by the fact 
 that a railroad extending to a point in the same terri- 
 
204 Railroad Freight Rates 
 
 tory as a jobbing center of another railroad usually gives 
 that point the benefit of the same rate for jobbing pur- 
 poses as is granted by the other railroad to its jobbing 
 center. It thereby secures to its rails a portion of the 
 traffic that is distributed to consumers in the area through- 
 out which the two jobbing centers compete. This has 
 particularly tended to build up distributing centers in 
 the region to the west of the Mississippi River, the 
 rates, for instance, being the same from Chicago to 
 Sheldon and Sioux City, which are on different roads 
 penetrating the same region. 
 
 In order that such interior centers may have command 
 of the distribution to retail dealers at the towns in their 
 vicinity, they bring pressure upon the railroads to make 
 the carload rate to a jobbing center, plus the less than 
 carload rate therefrom to an adjoining town, no higher 
 than the less than carload rate from the place where the 
 jobber purchases to that adjoining town. This is an- 
 other phase of the contention that is everlastingly being 
 raised at every interior town whose merchants desire to 
 extend their business beyond retail limitations, and be- 
 cause of which the railroads are in an everlasting quan- 
 dary between the opposing onslaughts of the established 
 commercial centers and the towns that are struggling to 
 become distributing centers. It cannot but be realized 
 that the undue multiplication of such centers restricts the 
 area of distribution of each. That growth of popula- 
 tion, however, which makes a town the nucleus of a dis- 
 trict which quickly consumes a carload of any of the 
 merchandise of daily and general use invariably causes 
 the merchants of that town to purchase such merchan- 
 dise by the carload and to endeavor to dispose of it in 
 an extended area. This decentralization of distribution, 
 particularly of the staple foodstuffs, is one of the con- 
 spicuous current economic phenomena of the United 
 States. It relieves the large cities in great measure of 
 the rehandling and reconsigning of the heavier staple 
 merchandise ; it enables jobbers of groceries and kindred 
 commodities to exist at interior centers one or two hun- 
 
Developments of the Freight Service 205 
 
 dred miles apart and, therefore, relieves the retail dealer 
 in that radius of keeping as large a stock as formerly, 
 his orders made by telegraph, if necessary, being filled 
 by the jobber over night. The retailers with limited 
 capital are, therefore, enabled to keep a varied stock of 
 fresh and up-to-date merchandise. The consumer hav- 
 ing the range of such a stock on the counters in front of 
 him is apt to buy more than if he awaited exhaustion of 
 his home supplies and calculated definitely as to their 
 replenishment. That is, the decentralization of distribu- 
 tion of the staple commodities of daily need tends to in- 
 crease the purchasing power of communities and, there- 
 fore, to build up a population that the great cities, such 
 as Boston, New York, Chicago, and St. Louis, supply 
 direct with the higher grades of merchandise and manu- 
 factured specialties. 
 
 Another effect of the " spread " between the carload 
 and the less-than-carload rate has been the building up 
 every here and there of a chain of retail stores under 
 the same ownership, each in one of a dozen or more towns 
 in the same general district. Such chains of stores exist 
 in New England, in central Pennsylvania, and in other 
 comparatively well populated sections. Because of their 
 aggregate sales, the proprietors of such a chain can pur- 
 chase merchandise direct from the factories at low 
 prices ; they can consign it at carload rates to their store 
 in one town, whence portions can be reconsigned to the 
 stores in the other towns, a continual flow of fresh mer- 
 chandise thus being kept in circulation throughout the 
 entire chain. 
 
CHAPTER XIV 
 
 THE FREIGHT TRAFFIC DEPARTMENT 
 OF RAILROAD ADMINISTRATION 
 
 In the earlier days of the short local railroads the 
 superintendent usually had charge of matters pertaining 
 to the shipment of freight as well as of other phases of 
 operation. The tariflfs were issued over his signature, 
 as well as instructions to agents in regard to the handling 
 of freight. With the extension of the railroads and the 
 beginnings of competition came the instalment of an 
 officer upon whom these duties particularly devolved, as 
 well as that of endeavoring to secure traffic for his line 
 in competition with its rivals. As this officer directed 
 the station agents in the performance of their duties in 
 connection with the freight traffic, it became customary 
 for him to be designated as the general freight agent. 
 
 The enactment of Congress in 1866 authorizing the 
 through billing of freight and the association of railroads 
 in the formation of continuous through lines led to a 
 call being issued for a meeting of general freight agents 
 to be held at Indianapolis on May 10, 1866. A commit- 
 tee was appointed to draft a constitution for a permanent 
 organization to be known as the Association of General 
 Freight Agents. This committee reported at an ad- 
 journed meeting held at the St. Nicholas Hotel, New 
 York, June 27, 28, and 29 of the same year. The con- 
 stitution, providing for an association to consist " of the 
 general freight agents, or authorized representatives of 
 the freight departments of the railway and steamship 
 lines of the United States and Canada," was adopted. 
 At this meeting there was discussion of the classifications 
 of eastward and westward bound freight which were 
 then separate; the maintenance of rates by the eastern 
 and the western lines; the cutting of rates by the boat 
 
 206 
 
Freight Traffic Department 207 
 
 lines between Louisville and Cincinnati. Differences 
 were established between rail and water rates on flour to 
 the East; rates were adopted from various places in the 
 interior to New York, and on cotton from Memphis to 
 the eastern markets. This association was evidently, 
 therefore, the precursor of the somewhat more firmly ce- 
 mented associations of the following decade. 
 
 The discussions indicate that considerable competi- 
 tion had already arisen between the lines leading to the 
 seaboard, which became the more pronounced with the 
 development of the fast through freight lines. The vari- 
 ous companies participating in one of these through lines 
 maintained an organization especially in its interest, 
 headed by a manager who employed agents to solicit 
 freight in its behalf, and attended to the investigation of 
 claims and other business affecting the through line. 
 The employment of variously designated agents to so- 
 licit freight for their divers lines also became the com- 
 mon practice of the separate railroad companies. These 
 solicitors spent about all of their time in going about 
 among the shippers, ascertaining when a consignment 
 was ready to move and quoting the rates necessary to 
 secure it. Their anxiety to obtain freight and ability to 
 quote rates regardless of the published tariff and without 
 communication with their superior officers led to their 
 becoming a most troublesome and persistent factor in 
 creating rate disturbances. Their superior officers, the 
 general freight agents, would often connive in their cut- 
 ting of rates when it meant the obtaining of business 
 that otherwise might have gone over the rails of a com- 
 peting line. But even when these general freight agents 
 would, in all sincerity, forbid the solicitors to depart 
 from agreed rates, those men, because of their intimate 
 knowledge of the shipping procedure, could suggest to 
 shippers, when soliciting their traffic, dodges and evasions 
 of one kind and another through which their merchandise 
 could be moved at lower than tariff rates. 
 
 As the adjustment of rates and the promulgation of 
 rules and regulations governing traffic became more and 
 
2o8 Railroad Freight Rates 
 
 more centralized in the various traffic associations, the 
 function of these soliciting agents tended to become less 
 that of a free lance and more that of a scout who, while 
 actively soliciting business, came in closer subordination 
 to the general freight agent, keeping him constantly in- 
 formed as to the traffic conditions in the district in which 
 the solicitor maintained acquaintance with the shippers 
 and watched the action of competitors. 
 
 During the period of chaotic competition the time of 
 the general freight agent was largely occupied with at- 
 tending meetings, at which it was agreed to maintain 
 rates, and in the intervals either directly or through the 
 soliciting agents purchasing business at the best terms ob- 
 tainable. At the beginning of a year an arrangement, for 
 instance, would be entered into with a cattle dealer where- 
 under he agreed to make all of his shipments, or, per- 
 haps, a specified proportion of them, over the line of the 
 railroad throughout the year if it would pay to him, say 
 $5.00 a car. A similar arrangement would be made 
 with a grain shipper for a few cents per 100 pounds. 
 At the end of the year the cattle shipper and the grain 
 shipper would turn up at the general office of the railroad 
 and receive the agreed compensation, which, of course, 
 was equivalent to a rebate. 
 
 As the era of chaotic competition passed into the 
 period during which a m.easure of restraint was exercised 
 through traffic agreements, pooling associations and ar- 
 bitrations of one kind and another, the attention of the 
 general freight agent was in great measure turned toward 
 securing the largest consideration for his company in 
 the various adjudications. This is the period when the 
 regional rate structures and the commodity rate struc- 
 tures began to assume definite form. 
 
 The amalgamation of the smaller Hnes into the large 
 railway systems led to the centralization of the directive 
 functions, that had theretofore been performed by several 
 general freight agents of various lines, into the hands of 
 one ranking officer charged ' with the conduct of the 
 freight traffic of each system, who, in most cases, came 
 
Freight Traffic Department 209 
 
 to be designated as the freight traffic manager. Through 
 such an officer a shipper can often in half an hour — 
 even from a remote city, by telegraph, if necessary — gain 
 information or make arrangements for traffic re- 
 quirements that in previous decades would have required 
 communication or a personal conference betvi^een half 
 a dozen general freight agents that might have con- 
 sumed a week. Such an officer, less burdened with detail, 
 is in constant receipt of information as to the volume 
 and flow of traffic throughout the territory penetrated 
 by his lines and has time to give to the consideration of 
 means by which that traffic can be developed. It is 
 such consideration that has led to the establishment of 
 industrial agents, who familiarize themselves with the 
 natural resources of the regions served by their lines, 
 and endeavor to attract agricultural, industrial, and com- 
 mercial enterprises to the localities naturally fitted to 
 their prosecution. It is this consideration that has found 
 fruit in the establishment of the demonstration trains 
 that are an admitted benefit to the growers of grain, 
 fruits, and vegetables, of poultry and cattle, and to the 
 manufacturers of dairy products. 
 
 The diminution of unrestrained competition, the bet- 
 ter ordered conditions that were being brought about 
 by the era of pools and agreements, tended to make 
 the freight traffic officer, whether a solicitor, a general 
 freight agent, or a freight traffic manager, more of 
 a student of economic conditions, less of an intriguer 
 with the shipper, less of a wily and foolhardy foe of his 
 competitor. This development, with occasional retro- 
 gressions, continued with results that on the whole 
 were beneficial and progressive until it was rudely inter- 
 fered with by the era of legislation that, prohibiting pools 
 and traffic agreements, finally sought not simply to regu- 
 late, but through legislatures and commissions to ad- 
 minister the railroads. For a period of several years 
 the time of the freight traffic officers was largely taken 
 up with the preparation of presentations and arguments 
 for submission to legislatures and commissions, and. 
 
2IO Railroad Freight Rates 
 
 finally, as many ill-considered laws found their way to 
 the statute books, with the endeavor to sail between the 
 Scylla and Charybdis of conducting affairs on the one 
 hand without violating the law, or, if they did, to do so 
 without being found out, and on the other without in- 
 curring for their companies a greater loss than could 
 be avoided. 
 
 The failure of many of the hastily made laws to 
 stand the test of constitutionality, the ultimate enforce- 
 ment of the Elkins Law against rebates, the prohibition 
 of the issue of passes, which had, at various times been 
 a most effective instrumentality for the securing of traf- 
 fic, and the severe penalties against the cutting of pub- 
 lished and legal rates, have brought about an evident 
 change in a large portion of the activities of the freight 
 traffic officers. The freight solicitor still endeavors to 
 keep on cordial terms with the shippers in his district 
 and to merit their confidence by the performance of a 
 hundred and one offices which facilitate their intercourse 
 with the railroads and the movement of traffic. In- 
 stead of promoting all the stealthy ways in which a rate 
 may be cut, he must familiarize himself with the current 
 tariffs so that he can readily quote rates on any commod- 
 ity to any place. He must talk convincingly as to car 
 supply, time of trains and facilities in general for han- 
 dling traffic. He must trace and endeavor to expedite the 
 movement of shipments. The freight solicitor many 
 years ago was aptly termed " an employee of the shipper 
 in the pay of the railroad," because of his ingenuity in 
 conniving with the shipper to get the better of other rail- 
 roads in the interest of his own; or sometimes, indeed, 
 ingratiating himself with a shipper by pointing out ways 
 to evade even the tariffs and regulations of his own 
 company. He is now none the less the employee of 
 the shipper, in that he ministers to his needs in numerous 
 ways, looking after details of transportation in his in- 
 terest. He is especially useful in the negotiation of de- 
 tails with the operating officials of a railroad that would 
 not otherwise come to their attention. 
 
Freight Traffic Department 211 
 
 The general freight agent and the freight trafiSc man- 
 ager find that the shipper who seldom complained about 
 the service in the days of rebates, allowing delays in 
 movement to pass without comment, is now quick to call 
 attention to comparatively slight delays and minor 
 faults. This is causing more studious attention to the 
 characteristics and needs of the different kinds of traffic 
 and provision of the facilities required for prompt move- 
 ment and satisfactory handling. The main currents, 
 rather than the eddies, are now foremost in their con- 
 sideration. 
 
 In dealing with one another in regard to traffic, com- 
 peting railroads have a greater degree of mutual con- 
 fidence than ever before. There is not the fear that the 
 rates will be cut. A meeting of traffic officers is no 
 longer a conference of competitors, each so suspicious of 
 the other that he is afraid to say what he thinks ; but a 
 consultation of experts, whose minds are devoted to the 
 solution of the problems presented to them, with a de- 
 sire to obey the law and conserve the business interests 
 of the country as well as the traffic of the railroads. 
 
 Such meetings with the traffic officers of connecting 
 railroads, at which are discussed matters pertaining to 
 the exchange of traffic, the division of through rates, the 
 securing of the application of rates over connecting lines 
 that will permit commodities to move to markets from 
 a producing region, now consume a great deal of the 
 time and energy of every freight traffic manager and 
 general freight agent. The collection and arrangement 
 of the information necessary to the intelligent partici- 
 pation in such discussions, and the conduct of the cor- 
 respondence with other transportation companies inci- 
 dent to the matters considered in and arising from such 
 discussions, absorb much of the time and energy of their 
 office forces. 
 
 Due credit should be given to the officers of the freight 
 traffic departments for that extension of markets which 
 is one result of their efforts to increase the traffic of 
 their companies. As the information which comes to 
 
212 Railroad Freight Rates 
 
 them of the ebb and flow of supply and demand in vari- 
 ous commodities gives them an intimate knowledge of 
 market conditions in an extended territory, they are 
 often able to call the attention of shippers to openings 
 through which their business can be extended. 
 
 There are numerous examples of this discernment. A 
 few years ago it was evident that there would be a 
 dearth of ice during the ensuing summer in eastern Penn- 
 sylvania, the ice crop at the customary sources having 
 largely failed. A general freight agent asked the mana- 
 gers of a manufacturing ice company why they did not 
 make ice in excess of their current demands and store 
 it. They replied that there were no available storehouses. 
 The general freight agent instituted inquiry that brought 
 to light several empty ice houses and made such low 
 rates from the factories to them that the company could 
 afford to make ice and ship it for storage. In the sum- 
 mer it found a ready market, affording profit to the ice 
 company and to the railroad company, while the con- 
 sumers were greatly benefited. 
 
 The general freight agent of a railroad on Long Island 
 found that large shipments of fertilizer were going out 
 of New York to potato fields at the eastern end of the 
 line, but that no potatoes were being shipped from those 
 fields to New York. Upon inquiry it was ascertained 
 that the potatoes were being taken across Long Island 
 Sound for consumption in southern New England. The 
 growers said that no shipments were made to New York 
 City because that market was supplied from other sources. 
 The general freight agent thereupon printed a circular 
 calling attention to the practicability of obtaining fresh 
 potatoes from fields not far distant from the city, and 
 mailed a copy of it to every produce dealer from Harlem 
 to the Battery, with the result that the Long Island farm- 
 ers quickly received orders which have so increased as 
 to necessitate a substantial enlargement of their oper- 
 ations. 
 
 It was the foresight of the railroads serving the popu- 
 lous regions in eastern Pennsylvania, northern New 
 
Freight Traffic Department 213 
 
 Jersey, and southern New York that gave the first great 
 impetus to the consignment of fruits and vegetables from 
 the far South to those markets. Representatives of the 
 railroads had studied the capacity of the southern soil 
 for production and of these markets for consumption, and 
 put before the southern farmers the desirability of ex- 
 panding their cultivation. In like manner representa- 
 tives of the railroad companies have been energetic in 
 furthering the sale of these products over extending 
 areas. A traveling freight agent, for example, went to 
 a grocer in a town of upper Vermont, asking why he did 
 not get strawberries direct from the South by the carload 
 instead of buying a few crates at a time through com- 
 mission dealers. The grocer replied that nine-tenths of 
 a carload would spoil on his hands. The freight repre- 
 sentative suggested that he try the experiment for once, 
 making special announcement to consumers in his own 
 town and sending word to grocers in adjacent villages. 
 The result was that an entire carload of strawberries 
 was disposed of in three or four days, the profit of 
 two or three hundred dollars opening a new field to the 
 eyes of the grocer. The extension of the carload rate 
 applying to New York or to Philadelphia to the re- 
 spective groups of stations within one or two hundred 
 miles of those cities has facilitated the distribution of 
 these fruits and vegetables with annual augmentation 
 in their sale. 
 
 Incidental to the freight traffic department are other 
 functions, some of which are performed by each railroad 
 for itself, while others are effected through agencies, 
 each of which may be established and maintained by a 
 number of railroads. 
 
 The function of the freight claim agent belongs to the 
 former class, the freight claim bureau having long been 
 an important adjunct of the general freight office. All 
 claims for recompense because of overcharge of one kind 
 or another, because of loss through articles having been 
 destroyed through misshipment or theft or otherwise, 
 and because of damage through wreck or fire and from 
 
214 Railroad Freight Rates 
 
 other causes, are referred to the freight claim agent for 
 investigation and report as to the justification for making 
 settlement with the claimant. The investigation of a 
 claim, the securing of statements of the various agents 
 and conductors through w^hose charge the shipment 
 may have passed, often consumes time, which is all the 
 more extended in the case of a through shipment that 
 has passed over many railroads, the employees of each of 
 which have to be interrogated. 
 
 It was, for a long time, the practice of many com- 
 panies to procrastinate in making settlement, even after 
 a claim was ascertained to be just. This was a main 
 cause in the irritation which developed into the popular 
 antagonism to the railroads. The companies have come 
 to feel the necessity for more prompt settlement, and 
 many of them have authorized their local agents to make 
 immediate recompense out of their cash boxes for losses 
 and damages of small amounts in cases that are ob- 
 viously well founded. The freight claim bureau is also 
 charged with the adjustment of the claims for overcharge 
 that may have been caused through clerical error of 
 the agent billing the shipment, or for one reason or 
 another. 
 
 An abuse to which the railroads have been long sub- 
 jected is the practice of shippers, not overscrupulous, 
 to misrepresent the contents of packages in order that 
 they may receive the benefit of a rate applying to a 
 lower class than that in which the shipments belong ; and 
 in cases where for one reason or another shipments can- 
 not be weighed at the place of receipt, to make under- 
 statements of the weights. Such practices were connived 
 at during the era of unrestrained competition. They 
 were of the nature of rebates and each company feared 
 to take effective steps toward their abolition in the fear 
 that the shippers would send their freight over the lines 
 of more acquiescent competitors. The problem was finally 
 solved by the establishment of joint weighing and in- 
 spection bureaus, which are maintained jointly by the 
 various railroads. Such a bureau is located at each of the 
 
Freight Traffic Department 215 
 
 principal shipping points and its inspectors deploy within 
 a considerable radius of that point, the country in gen- 
 eral being fairly well covered by their operations. These 
 bureaus and their inspectors have unearthed abuses whose 
 detection and prevention saves the railroad companies 
 hundreds of thousands of dollars annually. 
 
 The formulation of rules for the proper packing, mark- 
 ing, and handling of powder, dynamite, nitro-glycerine, 
 and other material easily susceptible of explosion, and 
 their enforcement, has been placed in charge of the Bu- 
 reau of Explosives, an organization subsidiary to the 
 American Railway Association, through whose offices 
 the risks arising from this transportation have been 
 minimized. 
 
CHAPTER XV 
 
 THE BASIS FOR THE TRANSPORTATION 
 CHARGE 
 
 The old-time turnpike, both in England and America, 
 was a public highway over which anyone could drive his 
 own horse and wagon by paying for the support of the 
 road a toll that was composed of an assessment upon 
 the number of horses attached to the conveyance and, 
 not infrequently, of an additional assessment upon the 
 contents of the wagon. That is, the owner of horses and 
 vehicle paid a transportation charge which contributed to 
 a return on the cost of the road and to the expense of 
 its maintenance, but he provided the equipment and the 
 motive power himself. A shipper hiring the services of 
 a turnpike wagon in forwarding goods paid a transporta- 
 tion charge which contributed to the payment the wag- 
 oner was obliged to make to the road, and also con- 
 tributed to the cost and maintenance of the wagoner's 
 equipment — i.e., the wagon, and the motive power — i.e., 
 the horses. Over the primitive railroads, as over the 
 turnpike, any person was privileged to forward his own 
 wagons. A charge, as by the toll road, was made 
 upon the wagon and' its burden, and also upon the 
 tractive power, for the cost and maintenance of the road. 
 As on these first railroads horses were usually the 
 tractive power, the practice was not markedly more dif- 
 ficult in application than to the toll roads. As horses 
 were superseded by the locomotive, it becarrie imprac- 
 ticable for the shippers to own their motive power, but 
 they continued for a considerable period to own vehicles. 
 Separate charges were at first made by the Philadelphia 
 and Columbia, and doubtless by other railroads, for the 
 use of the road and for the use of the motive power ; a 
 toll for the benefit of the road being placed upon the 
 car and a toll for the benefit of the road on its con- 
 
 216 
 
Transportation Charge 217 
 
 tents ; a toll for the benefit of the motive power on the 
 car and a toll for the benefit of the motive power on its 
 contents. In the accounts separate allotment was made 
 of these tolls to the purposes for which they were col- 
 lected. 
 
 This method of levying the transportation charge was 
 not uniform, and by the time the railroads had admittedly 
 outstripped the canals their tariffs generally were based 
 upon either the bulk or the weight and, as we have 
 learned, came finally, without exception, to be based upon 
 the weight of the commodity carried. It is evident, how- 
 ever, that the revenue collected even upon this basis 
 must be applied to the upkeep of the road, to the sup- 
 port of the equipment — both cars and locomotives — and 
 to the expense of operation as well as to the return upon 
 capital. 
 
 A modern railroad, therefore, consists of the roadway 
 over which traffic is transported, the equipment by means 
 of which and in which that traffic is transported over the 
 roadway, and the various appurtenances of roadway, 
 equipment and transportation. 
 
 The construction of the road includes the grading, 
 the building of embankments, the erection of bridges, 
 the boring of tunnels, the laying of ballast, ties, and 
 rails for main tracks and sidetracks, the provision of 
 yards, telegraph lines, switches, signals, stations, and all 
 the appurtenances of each of these components. While 
 the expenditure for a given length of road may be frac- 
 tionally greater or less, as there are more or fewer side- 
 tracks and stations, greater or less necessity for bridges 
 and tunnels, a tremendous investment is requisite before 
 the company can engage in the movement of traffic, or be- 
 fore it can know how much traffic will come to it. Bridges 
 and stations are beaten and worn by the weather, tracks 
 rust, ties decay, ballast and embankment are wasted by 
 rain and snow: therefore, there is compulsory a large 
 outlay for the maintenance of road in conflict with these 
 destructive agencies that is independent of the volume of 
 traffic. 
 
21 8 Railroad Freight Rates 
 
 It is a practical impossibility for a railroad company 
 to provide exactly the number of cars and locomotives 
 needed for the volume of traffic that may accrue to it 
 at any given period, because the volume of that traffic 
 rises and falls at different seasons of the year and one 
 year after another. With the same equipment it may run 
 a greater or fewer number of trains as the traffic may 
 demand. In stations ticket agents, baggage men, freight 
 agents, cashiers, and freight handlers are needed: the 
 aggregate number may vary writhin limits as traffic may 
 be light or heavy, but large working forces must be kept 
 even for the lightest traffic. At the general offices a 
 force extending from the heads of administration down 
 to the corps of clerks is necessary, the number of these 
 varying only fractionally with the volume of traffic. Last 
 but not least of constant expenditures are taxes, which, 
 under the methods of assessment generally prevailing, 
 must be paid regardless of the amount of traffic. 
 
 It will be perceived that a large investment is im- 
 perative in the preparation of a railroad before it can 
 carry traffic, and a large expenditure is requisite for its 
 maintenance, whether it carry traffic or not. There is 
 a further kind of outlay which varies more nearly in 
 proportion to the volume of traffic, that which is incurred 
 directly for operation. This includes the provision of the 
 fuel, oil, and waste consumed in the movement of trains, 
 and the salaries of enginemen, firemen, conductors, 
 brakesmen. These vary with the number and mileage 
 of trains, but still, a train can be run 120 miles, for in- 
 stance, at relatively less expense than for 100, and it may 
 haul 20 cars at but a trifling higher cost than 15. Even 
 if it be attempted to apportion this running cost per unit 
 of traffic it must be remembered that at times a passen- 
 ger train may have but a dozen occupants, while at other 
 times fifty ; that a freight train may consist of a greater or 
 a lesser number of cars, that it may consist entirely of 
 loaded, entirely of empty, or in parts of loaded and of 
 empty cars. 
 
 Even if all freight were entirely homogeneous, every 
 
Transportation Charge 219 
 
 given cubic content being exactly equal to every other 
 in texture, weight, value, and all other characteristics, 
 it would be difficult to ascertain from first to last, from 
 the share of running expense to the share of expenditure 
 for maintaining bridges and culverts, just what propor- 
 tion that given cubic content of traffic should contribute 
 to each. If it were endeavored to base the charge for 
 transportation upon the cost of moving any given unit 
 of even an absolutely homogeneous freight traffic, it 
 would have to be borne in mind that fire and flood wreak 
 greater devastation one year than another; that fuel is 
 more expensive in one part of the country than another; 
 that greater investment is necessary for the construc- 
 tion, and greater outlay for the same volume of traffic 
 in the operation, of roads that are built across ravines 
 and over mountains than for those laid upon the prairie ; 
 that the cost of operation is relatively greater on branch 
 lines of light than on main lines of heavy traffic. Even 
 if freight were absolutely homogeneous and it were the 
 endeavor to charge for the transportation of any given 
 quantity in proportion to the cost of transporting that 
 given quantity at any given time, that transportation 
 charge would have to vary from time to time as the fac- 
 tors that have been specified may vary. 
 
 It is evident that the only way in which the cost of 
 transportation could be ascertained would be to cal- 
 culate for all traffic for a given time on a given railroad, 
 or portion of a railroad, the running expenses, the oper- 
 ating expenses, the administrative expenses, the main- 
 tenance expenses and the taxes. This total cost would 
 have to be apportioned between the passenger traffic and 
 the freight traffic. If this be done, as is the general 
 practice, by dividing the residue, after the expenses di- 
 rectly allotable to each kind of traffic have been ascer- 
 tained, in proportion to the number of revenue passenger 
 train miles and revenue freight train miles, the apportion- 
 ment is but an approximation. Let it be assumed that 
 this approximation be the fairest possible and that the 
 aggregate apportionment represent the total cost of trans- 
 
220 Railroad Freight Rates 
 
 porting the total volume of freight for the given period. 
 The total of the amounts obtained by multiplying each 
 ton by the number of miles it was carried will represent 
 the aggregate of tons carried one mile; that is, the ton 
 miles. If the entire cost of freight transportation be 
 divided by the total ton miles the quotient will represent 
 the cost of transportation of one ton over one mile ; that 
 is, the average cost — it is only an average. If an amount 
 necessary to make return upon capital, adequate, at least, 
 to attract additional capital when needed and to provide 
 a surplus sufficient for emergencies, be apportioned 
 between the passenger train traffic and the freight train 
 traffic, and the sum apportioned to freight be divided 
 by the total ton miles, the quotient will indicate an 
 amount which, if added to the previous quotient showing 
 the cost of transportation, would give the amount that 
 should be charged for transportation per ton per mile. 
 This, however, would be but an average even in 
 the case of traffic absolutely homogeneous in bulk, 
 weight, value, and every other characteristic. It would 
 be an average based upon past and not upon future 
 traffic. 
 
 The freight traffic is, however, anything but homo- 
 geneous. A certain degree of homogeneity is manifested 
 by the great train-loads of grain, flour, dressed meats, 
 fruits, and vegetables that move from the place of as- 
 sembly to the principal markets. When such train-loads 
 of one commodity are the chief product of a region to 
 and from which little other traffic moves, the cost of 
 transporting that traffic can be very closely approximated. 
 In other than such instances as these, nearly every train 
 is loaded with a great variety of commodities and often 
 carries a number of empty cars. In such cases the actual 
 running expense of any particular train, or any particu- 
 lar car as a fractional part of that train, can be very 
 closely approximated. To subdivide that running ex- 
 pense, ton for ton, among all the different commodities 
 that in differing quantity may constitute the train-load 
 may not be impossible. This could be done by sub- 
 
Transportation Charge 221 
 
 dividing the total running expense of a train by the 
 total number of tons and multiplying the quotient by the 
 number of tons of each commodity. That is, this quotient 
 would apply if all the commodities in that train were 
 carried from the beginning to the end of its run and if 
 all the cars were loaded. Further complications ensue 
 if, as nearly always happens, certain carloads or less than 
 carloads were taken ofif at various stations, and other 
 carloads or less than carloads were taken on at various 
 stations, or if one or more of the cars were empty. Even 
 could a dependable estimate of such cost be ascertained 
 under these further complications, it would be the cost 
 per ton of the running expense for that train only. This 
 cost would vary with dififerent trains as they might run 
 longer or shorter distances and as they might carry a 
 greater or a lesser number of cars. The application of 
 the cost of transportation per unit of traffic carried, in 
 all its ramifications down to the maintenance of roadbed, 
 would still be only a matter of average over a given 
 line for a given period, and it would vary on different 
 railroads. 
 
 Granting that this average cost of transportation per 
 ton per mile could be satisfactorily determined, and like- 
 wise the average additional amount necessary to make 
 each ton mile pay its proportion of the return to capital 
 and contribution to surplus, how could the sum of these 
 averages be applied to each ton of traffic, as the aggregate 
 of traffic is constituted? 
 
 If the rate thus found were applied to every ton for 
 every mile transported the same rate would apply to 
 feathers and to iron ore, to silk and to sawdust. As it 
 requires several times as many cars to transport the 
 same weight of feathers as of iron ore, or the same weight 
 of silk as of sawdust, this means that the railroad would 
 be placed at much greater expense to earn the toll on 
 feathers than on ore, or on silk than on sawdust. This 
 also means that the same transportation charge would 
 apply to the less valuable commodity, the less able to 
 bear it, than to the more valuable commodity, which can 
 
2221 Railroad Freight Rates 
 
 more readily bear a higher charge. If it were attempted 
 to equahze the charge between these different commodi- 
 ties on some other basis than that of weight, there would 
 have to be reversion to the practice of the old-time 
 wagoners in having two such different bases as cubical 
 content and weight. This would mean the immediate 
 uselessness of the average cost per ton arrived at through 
 the calculations that have been described. 
 
 It was the early struggles in regard to the basis for 
 the transportation charge, through which even the canals, 
 that antedated the railroads, passed, that led to the de- 
 vice of classification. Indeed, the custom of the wag- 
 oners to charge by the cubical content for articles light 
 in weight and by the loo pounds for articles heavy in 
 weight was a rudimentary classification. It was early 
 ascertained that articles heavy in weight but low in 
 value — such, for example, as stone, brick, coal, cement — 
 at an average rate would not seek transportation except 
 for very short distances, the mounting transportation 
 expense soon making the cost so high that the commodity 
 could not be marketed. On the other hand, articles low 
 in weight but high in value, such as silks and other 
 fabrics, and many kinds of tools and utensils, could 
 be conveyed long distances at comparatively high rates 
 with little or no appreciable effect upon the cost to the 
 producer or the price to the consumer. It was also early 
 learned that the transportation of the low grade com- 
 modities from places where they were produced to places 
 where they could not be produced, even for considerable 
 distances, often met requirements necessary to the es- 
 tablishment and growth of communities. At those con- 
 siderable distances there might be the material and facili- 
 ties for the production of other commodities of commer- 
 cial value; and such communities, moreover, furnished 
 markets for the high grade commodities. The railroads, 
 therefore, found that by making low rates upon the low 
 grade and high rates upon the high grade commodities 
 the communities in general were benefited and the traffic 
 of the railroads increased by the rates that, although 
 
Transportation Charge 223 
 
 discriminatory, were justly so, in the very nature of 
 things. 
 
 A main purpose of the classification, therefore, has been 
 to facilitate that adjustment of rates between the various 
 commodities which enables articles that are for sale to 
 be transported to where there are buyers: that is, the 
 classification is a device which facilitates the adjustment 
 of rates in the interest of commerce. 
 
 As a railroad company, however, in so far as its in- 
 come and outgo are concerned, is a private business cor- 
 poration dependent for its success upon producing a 
 credit balance sheet, it is evident that its total income 
 must exceed its total outgo: in other words, that its 
 rates must be so adjusted that the aggregate of the 
 revenue, derived from the commodities of various kinds 
 transported in divers quantities, exceed the total ex- 
 penditure for all purposes. 
 
 In the case of a new railroad penetrating an unde- 
 veloped territory the rates first established are even to 
 this day experimental, arrived at after a study of the rates 
 and the volume of traffic moved upon other railroads 
 in regions of similar characteristics. Such experimental 
 rates need to be modified from time to time until they 
 are fairly adapted to the requirements of the population 
 dependent upon the railroad, and to the requirement of 
 the railroad that its traffic yield a profit. In the older 
 and more densely settled parts of the country, where there 
 is a wide diversity of traffic, accumulated experience has 
 taught the railroads what rates will yield the greatest net 
 revenue without prejudice to the movement of any com- 
 modity. That is the essential point, but so difficult of de- 
 termination in practice that it is almost theoretical. A rate 
 may be so high that it will diminish the amount of traffic 
 which would move at a lower rate and which the railroad 
 company could better afford to carry at that lower rate 
 rather than not at all. Vice versa, rates may be lower 
 than that necessary to bring out the fullest traffic without 
 injustice to either shipper or consignee. A railroad in 
 an undeveloped region cannot know what volume of 
 
224 Railroad Freight Rates 
 
 traffic in a particular commodity will be forthcoming at 
 a specific rate until that rate has been placed in effect, 
 and hence the necessity for experiment. In an older 
 and more densely settled region the volume of traffic of 
 each of the leading commodities of commerce, its 
 fluctuations from year to year, and the effect of rate 
 variations upon those fluctuations are fairly well known. 
 
 In considering at what rate it will carry a commodity 
 it is necessary for a railroad company to reflect whether 
 that commodity will freely move at a rate which, judged 
 by the averages calculated upon its total traffic of a pre- 
 ceding period, will contribute to all expenditure and, in 
 addition, to capital or surplus ; or whether it will not move 
 except at such rate as will contribute only to expenditure 
 for both operation and maintenance; or whether no 
 higher rate can be obtained than will pay for the actual 
 expense of movement, which, in some instances, may be 
 only what it would cost to haul one or more additional 
 cars on a train. Or, to put it in another way, which is 
 the phase most often presented to a railroad company, 
 it has to consider in which of these degrees the revenue 
 yielded by traffic obtainable at a certain rate will con- 
 tribute. 
 
 In all such contemplation it is necessary for a rail- 
 road company to weigh, not only the direct effect of the 
 immediate traffic upon its revenue, but the indirect effect 
 of that traffic upon its total revenue. To aid a manufac- 
 turer to utilize a raw material, such as clay in making 
 earthenware, or an inferior wood in shaping such prod- 
 ucts as may be marketed, railroads have often granted 
 rates on such raw material that no more than cover the 
 immediate expenses incurred for its movement, so that 
 they may secure the traffic in the product, and the traffic 
 in the general merchandise consumed by the working- 
 men and their families dependent upon the industry, the 
 operation of which the low rate upon raw material makes 
 possible. 
 
 It is for such reasons that low rates have been made 
 on raw material of various kinds, on the fruits 'and 
 
Transportation Charge 225 
 
 vegetables of distant orchards and truck farms to metro- 
 politan markets, such rates as on the fruits of Califor- 
 nia to all places in the East. It was such motives as 
 these that led the railroads first penetrating the remote 
 forests of the South, Southwest, and Northwest to 
 grant what were apparently ruinously low rates on lum- 
 ber, their desire being not only to secure the traffic that 
 would follow the development of the lumber industry, but 
 to further the clearing of the soil for agricultural and 
 other uses that would bring a diversified traffic. 
 
 Over a trunk line, along which commodities flow in 
 great volume in a main traffic channel, a railroad may 
 profit by a rate per ton per mile that would be ruinous 
 on a line of less traffic, especially on a branch line of 
 scant traffic. In the one case, because of the great vol- 
 ume of traffic, it does not require a rate vastly higher 
 than that necessary to cover the handling expense to 
 produce sufficient revenue to defray all of the expenses. 
 In the case in which all of the expenses must be met 
 by a small traffic, each unit of traffic must contribute in 
 greater proportion to the other than handling expenses 
 and, therefore, the rate per unit of traffic must be 
 higher. 
 
 In making an estimate as to what proportion of its 
 expenditure the traffic moved upon a certain rate will 
 contribute, the railroad has to take into account whether 
 it will take the traffic at that rate, or lose it in the event 
 that it can obtain no more. 
 
 In the case of water competition it has to decide 
 whether it will take that share of the traffic which can 
 be secured by approximately meeting the water rate. 
 In the event of competition with another railroad it has 
 to consider whether it will take traffic at the rate ofifered 
 by the other railroad. In these instances the decision 
 almost invariably is that, if the competitive traffic in 
 question can be obtained at rates that will more than 
 pay the immediate expenses of movement, it is better 
 to take it than to lose it. 
 
 This was the nub of the situation during the rate wars 
 
226 Railroad Freight Rates 
 
 which are almost entirely of a past generation, and in the 
 cases of the pressure brought by the great oil companies 
 and the great packing houses for low rates upon their 
 traffic, or for collateral advantages, such as oil contracts 
 and exclusive refrigerator car contracts. The vast traf- 
 fic which these great companies could turn to one or 
 another of rival railroads was not to be ignored by any 
 railroad that under the very conditions of its existence 
 was obliged to struggle for pecuniary success. 
 
 This consideration has application in the case of that 
 competition which applies from contiguous stations of 
 competing railroads. For example, during the period 
 of the rate wars on cattle from the northwestern grazing 
 grounds, when a radical railroad would make a decisive 
 cut in the rate on livestock from one of its stations, 
 a more conservative rival at first refrained from meet- 
 ing such a reduction. It thought itself better off by not 
 carrying the unremunerative traffic, and allowed the cat- 
 tle to be driven across the country to the station of the 
 competing road. It found, however, that the station to 
 which the farmers drove their cattle was the station to 
 which they took their poultry and eggs, and where they 
 purchased their wearing apparel, household goods, flour, 
 cofl'ee, sugar, hardware, and agricultural implements, 
 and that, therefore, to refuse to meet the competitive 
 rate for livestock meant the loss, not alone of the live- 
 stock traffic, but of all the traffic in the merchandise en- 
 tering into the farmers' consumption. 
 
 In deciding whether or not to take traffic at low that 
 cannot be secured at high rates, a traffic manager has 
 always been obliged to reflect that traffic that more than 
 pays the immediate outlay for its movement contributes 
 by the amount of that surplus toward meeting other ex- 
 penditures which, if the low-rate traffic were not taken, 
 would have to be defrayed entirely from the revenue 
 derived from other traffic. The through railroads of this 
 country, for the greater part, have been built to and from 
 cities that were those of the greatest importance before 
 railroads existed. The larger business of these cities 
 
Transportation Charge 227 
 
 attracted traffic, brought other railroads that were forced 
 by competition to struggle for that traffic, and, therefore, 
 to make lower rates than for the traffic to and from 
 intermediate stations that was not under such competi- 
 tion. To such instances as these applies this principle: 
 through competitive traffic, yielding more than running 
 expenses, helps to defray the expenditure necessary to 
 move traffic to and from intermediate stations, which in- 
 termediate traffic would have to bear the entire expendi- 
 ture if the competitive traffic were not taken. 
 
 This discussion leads to the perception that, in adjust- 
 ing their rates in order that their total traffic shall pro- 
 duce sufficient revenue to more than cover their expen- 
 diture, the principle which the railroads have been forced 
 to observe is that known as " what the traffic will bear," 
 which is equivalent to not charging " what the traffic 
 will not bear." What the traffic will bear under the 
 unrestrained competition of carriers means, however, no 
 more than what the longest, weakest, and worst managed 
 lines in their respective struggles will carry the traffic 
 for: this is a serious modification of charging what 
 the traffic will bear under market conditions. It is 
 this adjustment of rates on various commodities, which 
 will permit them to be sold and to be purchased with 
 advantage to both the seller and the purchaser, that, 
 in the aggregate of its effect, has been a power- 
 ful factor in the upbuilding of communities and the 
 development of the entire country. It is this policy which 
 brings the cotton of the South to the New England mills 
 and takes cotton goods from the southern mills to the 
 markets of the West; which places the fabrics and ap- 
 pliances of the North Atlantic seaboard on the shelves 
 of merchants in the interior, in the South, in the West, 
 and on the Pacific Coast; which brings the cantaloups 
 of Colorado to the table of the clerk and the wage 
 earner in Buffalo and Boston; which has enabled the 
 grain of the western farms to be exported to Liverpool ; 
 which has placed the products of every kind — except the 
 heaviest and coarsest — from every place of production, 
 
228 Railroad Freight Rates 
 
 in competition in practically every market throughout 
 the United States. 
 
 If the charge of so much per mile, or a distance tarifif, 
 had uniformly prevailed upon all commodities, while 
 merchandise of the higher classes would still move from 
 various sources of supply to divers markets, raw material 
 would not be transported from places of production to 
 remote places of manufacture. If that arrangement, 
 whereby rates per mile decrease gradually with the dis- 
 tance, known as the " tapering tarifif," had alone pre- 
 vailed, the centers of distribution would be at the sources 
 of production. The great cities that have grown from 
 their beginnings on the waterways would have developed 
 to a still greater degree of importance than at present; 
 there would not be the interior distributing centers, nor 
 that decentralization of distribution toward which there 
 is an accelerating tendency. 
 
 The average cost of transporting one ton per mile, 
 the average revenue obtained per ton per mile, and the 
 average cost per freight train per mile, are computed 
 by the railroads and enter to a greater or lesser degree 
 into that consideration which determines the rate charged 
 for the traffic of the various kinds, which determines 
 whether at an obtainable rate it were better that the 
 traffic in question be accepted or rejected. 
 
 The revenue per ton mile, that is actually obtained 
 from various commodities under this principle of charg- 
 ing what the traffic will bear, modified by the competition 
 of rival railroads, of waterways, of the pressure of large 
 shippers who have been able to impose their will upon 
 competing railroads, and the other factors that have had 
 their effect, is shown by the following statement, which 
 is that of one of the prominent railroad systems of the 
 United States, moving a large and diversified traffic. 
 This statement is the result of an analysis of its traffic 
 for the year ending June 30, 1907. 
 
 Interesting as this table is, it is at best but an analysis 
 on a mathematical basis of a vast number of movements 
 over an extensive field, and, therefore, but a series of 
 
Transportation Charge 229 
 
 EARNINGS IN MILLS PER TON PER MILE 
 
 COMMODITIES 
 
 26 
 
 27 
 28 
 29 
 30 
 31 
 32 
 33 
 34 
 35 
 36 
 
 ^l 
 38 
 
 39 
 40 
 41 
 42 
 43 
 44 
 45 
 46 
 47 
 48 
 
 PRODUCTS OF AGRICULTURE 
 
 1 Wheat 
 
 2 Corn 
 
 3 Oats 
 
 4 Barley 
 
 5 Rye 
 
 6 Rice and Rice Products 
 
 7 Flour 
 
 8 Other Mill Products 
 
 9 Hay, Straw, and Alfalfa 
 
 10 Broom Corn 
 
 11 Cotton 
 
 12 Cotton Seed and Products,- Ex- 
 
 cept Oil 
 
 13 Flax Seed and Products, Except 
 
 Oil 
 
 14 Potatoes 
 
 15 Dried Beans and Peas 
 
 16 Deciduous Fruits — Transcontinental 
 
 17 Citrus Fruits — Transcontinental... 
 
 18 Dried Fruits — Transcontinental. 
 
 19 Sugar Beets and Sugar Cane... 
 
 20 Fresh Vegetables — Transcontinental 
 
 21 Other Vegetables 
 
 22 Other Fruits 
 
 23 Canned Fruits and Vegetables. . 
 
 24 Nuts 
 
 25 Other Agricultural Products.... 
 
 PRODUCTS OF ANIMALS 
 
 Horses and Mules 
 
 Cattle and Calves 
 
 Sheep and Goats 
 
 Hogs 
 
 Dressed Meats 
 
 Canned Meats and Fish 
 
 Other Packing House Products . . . 
 Poultry, Game and Fish (Fresh) . 
 
 Dairy Products and Eggs 
 
 Wool 
 
 Hides 
 
 Fertilizer 
 
 Other Animal Products 
 
 PRODUCTS OF MINES 
 
 Anthracite Coal 
 
 Bituminous Coal 
 
 Coke 
 
 Zinc Ore 
 
 Copper Wire 
 
 Iron Ore 
 
 Other Ores 
 
 Borax 
 
 Bullion 
 
 Asphaltum 
 
 03 = " 
 
 U o O " 
 
 e = " U 
 
 S.S.S o 
 
 9.85 
 10.30 
 9.21 
 
 18.88 
 10.03 
 6.80 
 
 8.73 
 
 8.SI 
 13-78 
 20.39 
 19-33 
 
 12.59 
 
 13-73 
 
 10.22 
 
 6.41 
 
 9-32 
 
 9-36 
 
 7-31 
 
 18.43 
 
 8.00 
 
 10.13 
 
 16.14 
 
 9.81 
 
 11-33 
 
 9.90 
 
 16.94 
 12.61 
 11. 49 
 20.40 
 11.41 
 
 6.05 
 12-45 
 11.74 
 16.45 
 17-33 
 10.15 
 10.74 
 
 8.87 
 
 5-88 
 6-66 
 6.61 
 3-90 
 12-47 
 3-II 
 8.16 
 4-13 
 7.72 
 
 4-55 
 
 O 3 o •- 
 
 tj — " c '^ 
 
 MPS., 
 
 ■Zb^SI 
 
 .i o S"3 S 
 
 O 
 
 6.43 
 6.47 
 5-24 
 10.53 
 6-34 
 3-77 
 4-44 
 4.42 
 5-46 
 7-40 
 8-43 
 
 7.16 
 
 7-56 
 4-95 
 3-52 
 3.81 
 3-84 
 4.18 
 12.00 
 2.85 
 4.62 
 7-25 
 5-24 
 5.08 
 5-55 
 
 6-43 
 4-93 
 3. II 
 6.96 
 4.54 
 3-34 
 5-74 
 4.82 
 6.04 
 6.45 
 5.18 
 5.88 
 4-52 
 
 3-87 
 4-50 
 4.26 
 2.68 
 8.48 
 2.05 
 5-57 
 2.70 
 4-99 
 2.85 
 
 o o ^ bt~ 
 
 -a e **F.c 
 
 -- o " -2 ; 
 
 u U ft Cht 
 
 Q 
 
 5-94 
 5-95 
 4-76 
 9-56 
 5-84 
 3-42 
 3-99 
 3-98 
 4-79 
 6-45 
 7-46 
 
 6.51 
 
 6.84 
 4.42 
 3-19 
 3-52 
 3-55 
 3-80 
 10.22 
 2.62 
 4.10 
 6.57 
 4.73 
 4-50 
 S-04 
 
 4-33 
 3-34 
 2.82 
 4.60 
 2.83 
 3-03 
 5-II 
 4-45 
 5-55 
 5-64 
 4-65 
 5-23 
 4-OS 
 
 3.20 
 
 3-74 
 3-50 
 2.25 
 7-09 
 1.69 
 4.66 
 2.50 
 4.61 
 
 2.62 
 
230 
 
 Railroad Freight Rates 
 
 EARNINGS IN MILLS PER TON PER MILE- 
 
 Continued 
 
 COMMODITIES 
 
 49 Stone 
 
 50 Sand, Clay, etc 
 
 5 1 Salt 
 
 52 Crude Oil 
 
 53 Other Mineral Products 
 
 PRODUCTS OF FORESTS 
 
 54 Lumber, Timber and Box Shocks.. 
 
 55 Staves and Heading 
 
 56 Logs 
 
 57 Ties 
 
 58 Cord Wood 
 
 59 Poles, Posts and Mine Props 
 
 60 Other Forest Products 
 
 MANUFACTURES AND MISCEL- 
 LANEOUS 
 
 61 Refined and Manufacturing Oils... 
 
 62 Sugar 
 
 63 Glucose, Syrup and Molasses 
 
 64 Pig and_ Scrap Iron 
 
 65 Iron Rails and Trimmings 
 
 66 Iron Pipe 
 
 67 Structural and Bridge Iron 
 
 68 Bar and Sheet Metal 
 
 69 Stoves and Other Heating App... 
 
 70 Wire and Nails 
 
 7 1 Brick 
 
 72 Sewer Pipe and Drain Tile 
 
 73 Cement, Plaster and Lime 
 
 74 Agricultural Implements 
 
 75 Machinery and Castings 
 
 76 Vehicles 
 
 77 Household Goods and Emg. Mov. .. 
 
 78 Furniture 
 
 79 Pianos and Organs 
 
 80 Wine and Brandy 
 
 81 Beer and other Liquors 
 
 Hz I'aper, Pulp, etc 
 
 83 Empty Kegs and B?rre's 
 
 84 Empty Cars — On own wheels 
 
 85 Ice 
 
 86 Water 
 
 87 Other Manufactures and Miscel... 
 
 8.56 
 
 5-92 
 
 4.98 
 
 10.58 
 
 7-14 
 
 5.9s 
 
 8.59 
 
 4.96 
 
 4-51 
 
 11.70 
 
 7.16 
 
 5.70 
 
 9.43 
 
 5.75 
 
 5.27 
 
 6.55 
 
 3.79 
 
 3-45 
 
 • S-z6 
 
 3.17 
 
 2.91 
 
 3-35 
 
 2.18 
 
 1.62 
 
 5-47 
 
 3.43 
 
 3-15 
 
 10.77 
 
 6.47 
 
 5.96 
 
 10.58 
 
 6.75 
 
 5.68 
 
 7.70 
 
 4.19 
 
 3-79 
 
 11.36 
 
 6.74 
 
 5.43 
 
 8.65 
 
 4.81 
 
 4.37 
 
 8.47 
 
 4.63 
 
 4.19 
 
 6.86 
 
 4.13 
 
 3.78 
 
 4.67 
 
 3-24 
 
 2.72 
 
 ?-S9 
 
 4.28 
 
 3.47 
 
 6.81 
 
 4.44 
 
 3.77 
 
 6.71 
 
 4.10 
 
 3.76 
 
 11.29 
 
 5.40 
 
 4.91 
 
 8.38 
 
 4.50 
 
 4.07 
 
 7.62 
 
 4.95 
 
 4.57 
 
 9.29 
 
 4.74 
 
 4-25 
 
 5.82 
 
 3.44 
 
 3.15 
 
 14.91 
 
 6.98 
 
 6.21 
 
 12.58 
 
 6.38 
 
 5.73 
 
 14.98 
 
 6.13 
 
 5.39 
 
 14.56 
 
 5.67 
 
 4.97 
 
 13.15 
 
 S.oi 
 
 4.37 
 
 16.31 
 
 4.36 
 
 3.73 
 
 6.09 
 
 3.14 
 
 2.83 
 
 11.77 
 
 5.24 
 
 4.64 
 
 7.98 
 
 4.22 
 
 3.8i 
 
 7.01 
 
 2.46 
 
 2.14 
 
 2.96 
 
 2.96 
 
 2.96 
 
 14-77 
 
 7.71 
 
 6.94 
 
 ^g't 
 
 4.74 
 
 3.42 
 
 8.80 
 
 4-55 
 
 4.09 
 
 relative approximations. The possibility of such ap- 
 proximations being made with conclusive accuracy for 
 practical use is challenged by most railway executives. 
 Much as the principles underlying the transportation 
 charge have been discussed, all writers of recognized 
 
Transportation Charge 231 
 
 authority agree that the proper basis is what the traffic 
 will bear. Not the cost of service, but the value of the 
 service, is the essential point to be considered in the 
 making of freight tariffs. That the revenue of a railroad 
 company must bear some relation to its capital is self- 
 evident. That specific rates, however, cannot be adjusted 
 with reference to its capitalization is a corollary to the 
 deduction that the proper basis is the value of the serv- 
 ice, or, in other words, what the traffic will bear. Under 
 the existing conditions affecting all business, when a new 
 enterprise is considered the first calculation of the pro- 
 jectors is as to what markets they can enter, what prices 
 they can obtain, and what quantity of product they can 
 probably sell. From the probable revenue they calculate 
 backward, estimating the probable cost of maintaining 
 the plant and of manufacture and what residue will be 
 necessary to provide for a return on the capital required 
 for the construction of that plant. On a given capital 
 it may sometimes be found that the estimated revenue 
 will yield a high profit ; sometimes the prospect is for an 
 immediate profit that is but meager, but still the plant 
 will be built in the hope of future development; some- 
 times the prospect of profit will be so slight that the proj- 
 ect will be abandoned. 
 
 As an example of this consideration may be instanced 
 the Cape Cod Ship Canal, a project that was proposed 
 and discussed a hundred years ago. It was largely a 
 matter of national protection then, the desire being to 
 obtain a passageway from Boston to New York for 
 vessels of the merchant marine and the navy, in which 
 they would not be exposed to foreign attack. At this 
 time the proposition is a matter of commercial profit. The 
 commissioners had an expert estimate made of the 
 amount of traffic that would probably go through the 
 canal instead of going around Cape Cod, of the canal 
 tolls that can probably be charged on such traffic and, 
 therefore, of the probable aggregate revenue. A care- 
 ful estimate was made of the cost of the canal and the 
 probable expense for maintenance. In this manner was 
 
233 Railroad Freight Rates 
 
 reached the conclusion that the probable revenue will ex- 
 ceed the current expenditures by enough to provide for 
 a return on the capital vi^hich it will be necessary to 
 invest to produce the canal. All calculations are subject 
 to error, all estimates are affected by the personal 
 equation, the fulfillment of any prediction may be 
 thwarted by occurrence of the unforeseen and, therefore, 
 the construction of the Cape Cod Ship Canal is not with- 
 out an element of hazard, which, however, the investors 
 are willing to take. It will be noted that they. have not 
 first calculated how much it will cost to build the canal 
 and then determine what tolls they will charge. They 
 have first investigated what tolls the traffic will bear — 
 that is, the tolls that will induce traffic to move by this 
 route — as a measure toward ascertaining whether they 
 dare invest the capital. 
 
 The same considerations apply to the adjustment of 
 railroad freight rates. To say that rates have been made 
 absolutely regardless of the capitalization of a railroad 
 may sound preposterous, but it is very nearly, if not quite, 
 true. Traffic officers have repeatedly stated under oath 
 that in the fixing of rates the capitalization of their re- 
 spective roads has never been a factor. An exceedingly 
 bright and efficient general freight agent, whose time is 
 largely given to the adjustment of rates, says that he 
 does not know what is the capitalization of his company. 
 
 If a railroad could fix its rates in accordance with its 
 capitalization, would any railroad ever go into bank- 
 ruptcy? In 1894 a third of the railroad mileage of the 
 United States was in bankruptcy. If it be argued that 
 the capital was so inflated that they could not earn return 
 upon it, the argument admits that rates cannot be forced 
 up because capitalization has been forced up. 
 
 If a current valuation be urged as the basis upon which 
 rates are to be adjusted, it is pertinent to ask what effect 
 would the adjustment have upon the competition between 
 railroads? Between the commercial centers A and B 
 are two railroads, number i and number 2, each having 
 towns of more or less importance along its line, but 
 
Transportation Charge 233 
 
 each depending, in large measure, upon the share which 
 it obtains of the through traffic between A and B. One 
 railroad has been built along level country and, there- 
 fore, has cost less than the other, which has been con- 
 structed over mountains and across chasms. Are the 
 rates on railroad number i to be correspondingly lower 
 than those on railroad number 2? If so, all of the 
 through traffic will go over the first railroad, and the 
 second will be obliged to derive its entire revenue from 
 the local trafific upon which it will, therefore, be obliged 
 to impose still higher rates. Suppose that railroad num- 
 ber I, while a good enough railroad, be not of the most 
 advanced type, either in construction, equipment, or meth- 
 ods of operation ; while railroad number 2, under efficient 
 administration, has spent enormous sums in the improve- 
 ment of its traffic structures, for the provision of expen- 
 sive and efficient equipment, and in developing its meth- 
 ods to the highest standard. In this case, while the 
 valuation of railroad number i would be far less than 
 that of railroad number 2, the second railroad would be 
 able, because of its efficiency and developed methods, to 
 haul traffic at less expense. Are the rates of number i 
 to be made lower than those of number 2 in proportion 
 to the valuation? If so, a premium will be placed upon 
 the unfortunate and the backward, the incentive toward 
 development and improvement will be stifled. 
 
 These are no suppositious cases. They find conspicu- 
 ous illustration in the entire trunk line situation between 
 Chicago and New York, in the situation between Chicago 
 and New Orleans, and, in greater or lesser degree, in the 
 situation between any two or more important commercial 
 centers of the United States. The earnings of railroad 
 number 2 would not only be diminished, but the industries 
 along its lines, by having to bear a greater proportion of 
 the expense for the operation and the maintenance of 
 the railroad, would be handicapped in competition with 
 the industries on railroad number i. If, by adjusting the 
 rates according to valuation, one of two competing rail- 
 roads be forced into bankruptcy it means a receivership. 
 
234 Railroad Freight Rates 
 
 What adjustment of rates will be allowed then? Will it 
 in turn be allowed to force its competitor into bank- 
 ruptcy? What adjustment of rates will be allowed the 
 railroad to which traffic has not come in accordance with 
 the hopes of its projectors and which, for this or other 
 reasons, has struggled along for years without paying 
 any dividend at all? 
 
CHAPTER XVI 
 
 PUBLIC SENTIMENT AND LEGISLATION 
 TO 1887 
 
 Inasmuch as the motive power of the very first roads 
 with rails was furnished by horses, and the waterway was 
 a tested means of communication, there is no cause 
 for wonder in that public opinion was conservative in 
 regard to the introduction of the locomotive. Indeed, 
 after the Baltimore and Ohio Railroad had been built 
 as far as Cumberland, the directors of the Chesapeake 
 and Ohio Canal, which had also been constructed that 
 far, seriously suggested to the directors of the railroad 
 that, while the railroad could doubtless carry freight 
 more quickly, it would never be able to carry it as cheaply 
 as the canal, and that, therefore, it would be wise for the 
 railroad company to abandon construction beyond Cum- 
 berland and join its capital with that of the canal company 
 in extending the canal to the Ohio River. 
 
 Within the next twenty years, however, the superiority 
 of the railroad over the canal as a constant, cheap, and 
 speedy means of transportation had become demonstrated. 
 By i860, canals that had cost from $14,000 to $17,000 per 
 mile in the interior States, and from $40,000 to $60,000 
 per mile in the North Atlantic States, were being aban- 
 doned: the energy and pecuniary resources of the coun- 
 try were turned toward the building of railroads. Sub- 
 scriptions to capital were made from both private and 
 public sources, it being the universal feeling that the 
 railroad was the instrumentality most needed for the de- 
 velopment of the country. This led to a strain upon 
 private capital, especially as the railroads were largely 
 constructed in advance of traffic. Because of lack of ex- 
 perience the building of both roadbed and equipment 
 was crude, and usually so unsatisfactory that no sooner 
 was a road completed than steps had to be taken toward 
 
 235 
 
236 Railroad Freight Rates 
 
 immediate reconstruction. The speculative promoter, 
 and even the bare-faced adventurer, had already ap- 
 peared with worthless stocks and bonds for which a 
 market was found. Money was thrown away by the 
 credulous, and lost in large amounts even by ordinarily 
 careful investors. Public sentiment, however, was over- 
 whelmingly in favor of railroad building. The State 
 legislatures were liberal in the granting of charters, and, 
 later, in the enactment of general corporation laws under 
 which charters could be obtained without special legisla- 
 tion. The abandonment of such restrictions as were 
 embodied in the early legislation was specially marked 
 after the disastrous failure of enterprises owned and ad- 
 ministered by the State, such as the Pennsylvania Line 
 of Public Works, which that Commonwealth, after 
 twenty-five years of pecuniarily disastrous administration, 
 was only too glad to dispose of to a private corporation. 
 This legislative amelioration is noticeable in the charters 
 of — what were at that time — the Western States, in which 
 the development of agriculture and stock raising made 
 the need for railroads acute. 
 
 From the time when the railroads were established in 
 competition with the canals, to the Civil War, every com- 
 munity strongly desired railroad communication : its citi- 
 zens, both in their private and in their public capacity, 
 were willing to make concessions often amounting to 
 sacrifice to secure such communication. The completion 
 of a railroad was always an occasion for public rejoicing; 
 a special train, with the personages of the country as 
 invited guests, was run from one end of the line to the 
 other: at the principal cities en route and at terminals 
 were processions of citizens to meet the train, brass bands, 
 fireworks, banquets, and speeches. 
 
 During this period there does not seem to have been 
 complaint as to the transportation charge. The era of 
 the turnpike wagon and the slow-going canal boat was 
 too fresh in memory for anyone to think of finding fault 
 with the lower charges made by the railroads for the 
 quicker movement of freight. If there were rebates 
 
Public Sentiment and Legislation 237 
 
 and other personal discriminations they were neghgible 
 both in number and in importance, being regarded as 
 a natural recognition of the wholesale principle, or neces- 
 sary to permit or promote the growth of industry. Com- 
 plaints of rival communities were few and faint. The 
 articles known to traffic could be numbered by the hun- 
 dreds and those furnishing the greater portion of the 
 freight by the dozens. Indeed, both in variety and in 
 volume, the freight traffic of the railroads for the years 
 preceding i860 now seems surprisingly small. Conten- 
 tion arose in Georgia, however, in connection with the 
 tolls to be charged by the railroad' built and at first 
 operated by that State. It was urged by one faction that 
 the revenue of the road be kept to the lowest aggregate 
 consistent with its maintenance and operation in order 
 that the shippers and citizens might obtain the benefit of 
 the lowest possible charges for transportation. The other 
 faction advanced the desirability of the railroad being 
 allowed to adjust its rates on business principles, to the 
 end that should it prove to be more than self-supporting 
 the State, which had made the investment, should reap 
 the reward. The latter seem to have won. A similar con- 
 tention of broader application has not ceased through- 
 out the years. It is still held by many that the railroads 
 of this country, although owned and administered by 
 capital invested as is capital in private enterprises in 
 general, should have their rates adjusted to the sole end 
 of the augmentation of the profits of the shippers. 
 
 The first general complaint against the railroads has 
 been indicated in a previous chapter. Individual railroads, 
 each doing a local traffic, were loath to allow their cars 
 to go from their own rails over those of another line, 
 and to exchange through bills of lading. As was there 
 stated, the military necessities of the government com- 
 pelling the through transportation of troops, the growth 
 of the mail routes making through service desirable, and 
 the clamor of shippers at the inconvenience caused by 
 the unloading and loading of freight at junction and 
 terminal stations, led Congress, in 1866, to pass the law 
 
23S Railroad Freight Rates 
 
 which, while authorizing, did not compel the formation of 
 through routes and the issue of through bills of lading. 
 
 The violent competition consequent upon the too rapid 
 construction of railroads that followed the termination 
 of the great civil conflict again involved many investors 
 in losses. The ensuing irritation led to antagonism 
 which fell, in large measure, upon those immediately 
 charged with the administration of the railroads, many 
 of whom were derelict enough in judgment, reliability, 
 and even essential integrity. The solid strata, however, 
 of managers and employees were not responsible for or 
 connected with the obliquity of unscrupulous financiers, 
 but were battling hard on the one hand for traffic that 
 was bitterly competitive, and on the other for improve- 
 ment in practice and economy that both ends would 
 meet. 
 
 That cutting of rates and giving of rebates, which 
 conservative managers deplored because of the constant 
 devastation of revenue, presented another phase to the 
 shippers and to the public in general. When rates were 
 cut, restored and cut again with such alternate rapidity 
 that the transportation charge between New York and 
 Chicago, or any two other considerable commercial cen- 
 ters, varied as often as forty to sixty times within a 
 single year, the range of the fluctuation frequently being 
 50 cents or even $1.00 per 100 pounds, an element of 
 variability entered into the cost calculations of the man- 
 ufacturer and the merchant comparable to that caused 
 by the fluctuations of an unstable currency. On large 
 lines of raw material or of merchandise for distribution 
 the rate of freight was so uncertain as to make the con- 
 duct of business a game of hazard between a manufac- 
 turer or a merchant and his competitors. The largest 
 shippers, who were usually the shrewd bargainers, se- 
 cured the lowest rates, and allegations of dishonest con- 
 nivance between a traffic official and a shipper in the 
 division of rebates were not always without foundation. 
 During this entire period, however, the development of 
 the country proceeded. The discriminations did not 
 
Public Sentiment and Legislation 239 
 
 seem to have a deleterious effect upon progress in general, 
 nor upon the nation as a whole. 
 
 As the railroads were trying in vain to make an in- 
 sufficient volume of traffic satisfy all competing lines, 
 shippers were clamoring, not so much for low rates, as 
 for uniform rates. Indeed, it was the common admission 
 that the rates embodied in printed tariffs were not ex- 
 cessive, but that serious injury was inflicted by the un- 
 certain departures from these rates. When, however, 
 traffic agreements proved of some permanence through 
 reinforcement by pools, there was the outcry that the 
 railroads through combinations were restricting that free- 
 dom of competition which is the life of trade. Antag- 
 onism against the pools became no less violent than that 
 against the prior rate vacillations. 
 
 An unvarying and widespread occasion for vitupera- 
 tion was the common practice, whether forced by unsur- 
 mountable competitive factors, such as the waterways, 
 or by inevitable commercial necessity for the conveyance 
 of products to market, or the whirlwind of the struggle 
 for traffic, to reduce the rates between stations separated 
 by considerable distances to a level lower than that of the 
 rates which were maintained to and from intermediate 
 stations. This practice, commonly designated as " charg- 
 ing less for the long than for the short haul," naturally 
 seems unjust. The argument that if a railroad can afford 
 to carry 100 pounds for 1,000 miles at $1.00, it is an out- 
 rage for it to charge $1.50 for 500 miles over the same 
 line seems, upon its first statement, to be unanswerable. 
 The railroads, whose fighting was not altogether unlike 
 that of wild beasts in a jungle, were following the instinct 
 of self-preservation common to both them and wild 
 beasts, and all human kind. Although the economic 
 justice that, under certain conditions, underlies charging 
 more for the short than for the long haul, even upon the 
 same route, had been pointed out by an English econo- 
 mist as early as 1849, ^i^ logic had not percolated the 
 minds of the public, the shippers, or the majority of the 
 traffic men themselves, who were ready to admit that 
 
240 Railroad Freight Rates 
 
 they were doing only what they had to do under the 
 conditions that beset them, and did not attempt on an 
 economic basis to justify this practice. It was not until 
 several years later that the American economists, Had- 
 ley, Seligman and Taussig, gave enunciation to the 
 principles underlying the adjustment of freight rates. 
 It is beyond question that had these principles, resting as 
 they do upon an adamantine foundation, been properly set 
 forth by instructors and the press, and had promptly 
 penetrated to and found acceptance in the minds of the 
 American people, the history of the American railroads 
 would have been spared many of its most distressing 
 pages. 
 
 As it was to the west of Chicago that the building of 
 railroads received the greatest encouragement in the 
 period immediately succeeding the Civil War, it was 
 also here that the demoralization of rates became most 
 pronounced and the public antagonism the most acute. 
 One condition, in large measure, grew out of the other. 
 The avidity with which nearly every proposal for the 
 construction of a railroad was welcomed in Wisconsin, 
 Iowa, and Minnesota, and especially by the farmers who 
 wished to get their crops to market, brought forth many 
 worthless schemes which deprived these farmers of their 
 money without even the shadow of tangible return. The 
 desire of the railroads to quickly dispose of their land- 
 grants led to the offer at very cheap prices of thousands 
 of acres, which were purchased largely by men of that 
 adventurous spirit which is easily made antagonistic by 
 even the semblance of injustice. Industrial and commer- 
 cial conditions, moreover, had been thrown out of equi- 
 librium by the return to peaceful pursuits of the hundreds 
 of thousands of men who had been engaged in warfare. 
 There was a too rapid building of the railroads and too 
 rapid cultivation of the soil with resulting superabundant 
 crops and falling prices. The lower the price for grain, 
 the lower was the return to the farmer after the pay- 
 4Tient of freight. Although there was little or no pre- 
 tense on the part of the railroads to observe published 
 
Public Sentiment and Legislation 241 
 
 tariffs, the farmers believed that even the rates that 
 they were obliged to pay were too high, and they were 
 embittered by the discriminations between one shipper 
 and another. The railroads, at war for the movement 
 of crops that, although abundant, did riot furnish suffi- 
 cient volume of traffic to keep them profitably busy, were 
 struggling to secure such revenue as they might by buy- 
 ing traffic at such rates as were necessary to secure it. 
 There was practically no consideration given by the 
 shippers to the needs of the railroads. On the other 
 hand, to the officers of the railroads the farmers seemed 
 so saturated with suspicion as to be utterly unreceptive to 
 a logical exposition of the situation, and both the officers 
 and agents frequently displayed an arrogance that en- 
 hanced the rage of the public in general. Popular sen- 
 timent adverse to the railroads ran so high that the 
 legislatures of Iowa, Wisconsin, and Minnesota passed 
 laws prohibiting discriminations, the charge of less for 
 the longer than the shorter haul, and other practices of 
 which they disapproved. Although these enactments, 
 designated as the Granger Laws, because they were for 
 the most part instigated by organizations of farmers 
 called Granges, did not provide adequate instrumentali- 
 ties for their enforcement, it was soon found that the 
 law in Iowa, forcing all the tariffs of the Iowa railroads 
 down to the lowest competitive level, reduced their rev- 
 enues to the point of impoverishment and deprived the 
 State of capital needed for its development. The Iowa 
 law was repealed in 1876, two years after its enactment, 
 and the repeal of much of the other Granger Laws fol- 
 lowed. 
 
 Practically coincident with the rise of the Granger 
 agitation, certain of the States were developing other 
 agencies for the scrutiny, and, in some cases, for the 
 regulation, of the railroads within their borders. As 
 early as 1844 the State of New Hampshire established 
 a board to inspect the physical condition and operation 
 of its railroads. This was the outgrowth of the general 
 fear that the new methods of transportation were beset 
 
2421 Railroad Freight Rates 
 
 with danger. This action was followed during the next 
 quarter of a century by the appointment in Connecticut, 
 Vermont, Maine, and Ohio of similar commissions to 
 whose duties was here and there added the function pre- 
 viously exercised by temporary boards of arbitration in 
 matters of land appraisal, the award of damages and 
 other disputes that might arise out of the survey, the con- 
 struction and the operation of railroads. It was in 1869, 
 in Massachusetts, under the leadership of Charles Fran- 
 cis Adams, that these separate functions were definitively 
 combined in a permanent State Commission. One State 
 after another has subsequently appointed such a body, 
 until a commission exists in thirty-nine of the forty-six 
 States of the Union. Their powers, however, are vastly 
 different. The advisory commission is typified by that 
 of Massachusetts, whose duty it is to inspect both the 
 physical operation and financial management of the rail- 
 roads, to arbitrate disputes as to rates and other dififer- 
 ences between the railroad companies and the public, and 
 to make annual reports to the legislature. It is gen- 
 erally admitted that the service of this commission in 
 bringing matters pertaining to the railroads of its State, 
 by temperate and well-digested reports, into the full light 
 of publicity, has exercised a restraining influence upon 
 the railroads that has been beneficial in the highest de- 
 gree. Of the other type of commission, that invested 
 with the authority to prescribe rates and issue rules for 
 the observance of the railroads, a most pronounced type 
 is that of Texas. This commission, from its organization 
 in 1890, has exercised well-nigh despotic power over the 
 railroads of Texas, with the result that they are in the 
 poorest condition financially, and are the most sadly 
 hampered physically, of any in the United States. Be- 
 tween these two extreme types the powers of the dififer- 
 ent State commissions vary within wide range, in some 
 States being exercised with great discretion, as in Wis- 
 consin ; in others being administered by demagogues, ig- 
 norant of the elementary principles of railroad practice. 
 In the State of New York the Public Service Commis- 
 
Public Sentiment and Legislation 243 
 
 sion is practically a supervising board of directors to 
 scrutinize the actions of the boards of directors of the 
 various railroad and other public service corporations. 
 
 Prior to the passage of the Granger Laws and the 
 establishment of State commissions, the railroad com- 
 panies were prone to claim that they were entitled to 
 conduct their business without interference by the State ; 
 that it was essentially as private in its nature as any 
 other business, amenable only to the restraints of the 
 common law as interpreted and applied by the courts. 
 Although many of the laws enacted by legislatures dur- 
 ing the Granger irritation were annulled as unconstitu- 
 tional, the decisions of the courts clearly established the 
 right of the States, from whom the railroads derived their 
 corporate existence, to regulate that existence even to 
 the extent of prescribing specific charges for transpor- 
 tation. 
 
 When the thirteen colonies formed themselves into a 
 nation, there was very little traffic between one colony 
 and another. Under national solidarity it was inevitable 
 that commerce should expand. The formation of through 
 lines led to the increase of interstate traffic, and it had 
 become dominant by the time of the Granger legislation. 
 As competitive production, competitive distribution, and 
 consequently long distance traffic increased, the courts 
 displayed a tendency to subordinate the powers of the 
 States to those of the Federal Government. 
 
 As the volume of interstate traffic became increasingly 
 preponderant, the evils growing out of rate wars, rebates, 
 and other discriminations arose in greatest measure from 
 such traffic. Although the Supreme Court of the United 
 States had held that there is a common law in force 
 generally throughout the country to which interstate 
 commercial transactions were subject, it had also declared 
 that there is no definitive power inherent in a State to 
 exercise jurisdiction over traffic between the States. This 
 led to discussion as to means of regulating that traffic, 
 a regulation which manifestly had to be Federal in its 
 provision and in its administration. 
 
244 Railroad Freight Rates 
 
 In 1868 resolutions were presented in both the Senate 
 and the House of Representatives opening inquiry as to 
 the extent of Federal power and the expediency of Fed- 
 eral action in its exercise. A report presented to the 
 House of Representatives in June of that year contended 
 that under the Constitution the Congress had the fullest 
 power of regulation and that in the course of time it 
 assuredly would be obliged to exercise it. The financial 
 depression of 1873 and the ensuing slackening of com- 
 merce forced the railroads to desperation in the fight for 
 a sufficient share of traffic to maintain their respective 
 existence, and, therefore, multiplied the evils of which 
 the public complained. The regulation of the railroads in 
 the conduct of interstate traffic became a problem of 
 national importance. From time to time committees were 
 appointed by the Congress, reports were rendered, bills 
 were introduced, agitation became more acute. There was 
 crystallization in the report rendered by the Cullom Com- 
 mittee to the Senate under date of January 18, 1886. 
 This stated that the railroads of the United States had 
 provided " the most efficient railway service and the 
 lowest rates known in the world," but continued, " its 
 recognized benefits have been attained at the cost of the 
 most unwarranted discriminations, and its efifect has been 
 to build up the strong at the expense of the weak, to give 
 the large dealer an advantage over the small trader, to 
 make capital count for more than individual credit and 
 enterprise, to concentrate business at great commercial 
 centers, to necessitate combinations and aggregations of 
 capital, to foster monopoly, to encourage the growth and 
 extend the influence of corporate power, and to throw the 
 control of the commerce of the country more and more 
 into the hands of the few." This quotation very concisely 
 expresses the general public sentiment that had been 
 taking form from the time the evils of unrestrained rail- 
 road competition began to have perceptible efifect upon 
 the shippers, but it contains no recognition of the dele- 
 terious effects of that unrestrained competition upon the 
 
Public Sentiment and Legislation 245 
 
 fortunes of the railroads, or of the difficulties that con- 
 tinually enhanced the perplexity of the railroad mana- 
 gers who were endeavoring, and not without a degree of 
 success, to themselves work out a solution of the prob- 
 lems. 
 
 The great influence which the causes of complaint 
 against railroad management, as enumerated in this re- 
 port, have had upon subsequent Federal legislation leads 
 to their reproduction here. 
 
 THE CAUSES OF COMPLAINT AGAINST THE RAILROAD 
 SYSTEM : 
 
 1. That local rates were unreasonably high, compared 
 with through rates. 
 
 2. That both local and through rates were unreason- 
 ably high at noncompeting points, either from the ab- 
 sence of competition or in consequence of pooling 
 agreements that restricted its operation. 
 
 3. That rates were established without apparent regard 
 to the actual cost of the service performed, and are 
 based largely on " what the traffic will bear." 
 
 4. That unjustifiable discriminations were constantly 
 made between individuals in the rates charged for like 
 service under similar circumstances. 
 
 5. That improper discriminations were made between 
 articles of freight and branches of business of a like 
 character, and between different quantities of the same 
 class of freight. 
 
 6. That unreasonable discriminations were made be- 
 tween localities similarly situated. 
 
 7. That the effect of the prevailing policy of railroad 
 management was, by an elaborate system of secret special 
 rates, rebates, drawbacks, and concessions, to foster mo- 
 nopoly, to enrich favored shippers, and to prevent free 
 competition in many lines of trade in which the item of 
 transportation is an important factor. 
 
 8. That such favoritism and secrecy introduced an 
 
246 Railroad Freight Rates 
 
 element of uncertainty into legitimate business that 
 greatly retarded the developm.ent of our industries and 
 commerce. 
 
 9. That the secret cutting of rates and the sudden 
 fluctuations that constantly took place were demoralizing 
 to all business except that of a purely speculative char- 
 acter, and frequently occasioned great injustice and 
 heavy losses. 
 
 10. That, in the absence of national and uniform legis- 
 lation, the railroads were able, by various devices, to 
 avoid their responsibility as carriers, especially on ship- 
 ments over more than one road, or from one State to 
 another, and that shippers found great difficulty in re- 
 covering damages for the loss of property or for injury 
 thereto. 
 
 11. That railroads refused to be bound by their own 
 contracts, and arbitrarily collected large sums in the 
 shape of overcharges, in addition to the rates agreed 
 upon at the time of shipment. 
 
 12. That railroads often refused to recognize or be 
 responsible for the acts of dishonest agents acting under 
 their authority. 
 
 13. That the common law failed to afford a remedy 
 for such grievances, and that in cases of dispute the 
 shipper was compelled to submit to the decision of the 
 railroad manager or pool commissioner, or run the risk 
 of incurring further losses by greater discrimina- 
 tions. 
 
 14. That the differences in the classifications in use 
 in various parts of the country, and sometimes for ship- 
 ments over the same roads in different directions, were 
 a fruitful source of misunderstandings, and were often 
 made a means of extortion. 
 
 15. That a privileged class was created by the granting 
 of passes, and that the cost of the passenger service was 
 largely increased by the extent of this abuse. 
 
 16. That the capitalization and bonded indebtedness 
 of the roads largely exceeded the actual cost of their 
 construction or their present value, and that unreasonable 
 
Public Sentiment and Legislation 247 
 
 rates were charged in the effort to pay dividends on 
 watered stock and interest on bonds improperly issued. 
 
 17. That railroad corporations had improperly en- 
 gaged in lines of business entirely distinct from that of 
 transportation, and that undue advantages had been 
 afforded to business enterprises in which railroad offi- 
 cials were interested. 
 
 18. That the management of the railroad business was 
 extravagant and wasteful, and that a needless tax was 
 imposed upon the shipping and traveling public by the 
 unnecessary expenditure of large sums in the mainte- 
 nance of a costly force of agents engaged in a reckless 
 strife for competitive business. 
 
 It will be perceived that these causes of complaint, 
 the substantial justice of nearly every one of which was 
 generally admitted by the railroad managers, failed to 
 express the perplexing conditions with which those man- 
 agers had to contend. 
 
 In connection with this enumeration of complaints 
 should be weighed the luminous report made by its 
 Committee on Transportation to the American Eco- 
 nomic Association in 1887. In commenting upon the fore- 
 going list of complaints it says : " Many of these charges, 
 even where they relate to serious evils and are undoubt- 
 edly true, involve, of course, no moral turpitude on the 
 part of railroad authorities, as many people seem to 
 think. Railroad officials are much like other men, and 
 act very much as other men would act under like cir- 
 cumstances. . . . The evils of our present railroad 
 management are, in other words, to a large extent, the 
 result of carelessness, shortsightedness, and selfishness 
 of the American people, and particularly of its repre- 
 sentatives, and they will not disappear until the opposite 
 of these qualities are exercised by our legislators." 
 
 The Cullom report called attention to the fact that 
 nearly all of the enumerated complaints were based upon 
 one or another form of discrimination, the respective 
 justice and injustice of which was difficult of determina- 
 tion. It states that, fairly construed and applied, the 
 
248 Railroad Freight Rates 
 
 practice of charging "what the traffic will bear" does 
 not work injustice. It urges the desirability of a classi- 
 fication uniform for the United States ; states that while 
 the unfairness of the greater charge for a short than 
 for a longer distance is apparent, the absolute abolition 
 of the practice would deprive the country of many rates 
 beneficial to its commerce ; declares in favor of the pub- 
 licity of rates. This report specifically pronounces 
 against the prohibition of pooling, stating that " The 
 evils to be attributed to pooling are not those which 
 most need correction, and, if agreements between car- 
 riers should prove necessary to the success of a system 
 of established and public rates, it would seem wiser to 
 permit such agreements rather than by prohibiting them 
 to render the enforcement and maintenance of agreed 
 rates impracticable." 
 
 Beginning with 1878 numerous bills offered in one or 
 the other House of Congress failed of passage, but finally 
 after long discussion in both Houses, there was enacted 
 a measure based primarily upon the report of the Cullom 
 Committee. That measure, which became effective April 
 5, 1887, was entitled, " An Act to Regulate Commerce," 
 and is the original Interstate Commerce Law. 
 
 In the discussion that preceded its passage, the rail- 
 road managers of the country generally participated, 
 some of them opposing any form of Federal legisla- 
 tion; while others antagonized particular propositions 
 only. That some sort of Federal legislation was desirable 
 was admitted by the ablest men in the railroad world; 
 by none more candidly than by Albert Fink and George 
 R. Blanchard, pre-eminent authorities whose utterances 
 commanded wide respect. 
 
 Albert Fink, a practical and successful railroad man- 
 ager and eminent railroad economist, as chairman of 
 the Southern Railway and Steamship Association, and 
 later as Commissioner of the Trunk Line Association, had 
 been the dominant factor in the attempts to bring about 
 harmony between the competing railroads and between 
 the railroads and their patrons. By reason of command- 
 
Interstate Commerce Law 253 
 
 traffic were in a similar predicament. Telegrams from 
 the traffic officers of the lines serving these regions at 
 once poured in upon the Commission asking relief, under 
 the powers conferred upon the Commission, from the 
 absolute observance of this clause. In some instances 
 these requests were granted; in others the Commission 
 awaited the presentation of complaints, which were not 
 long in coming. 
 
 Complaint from the San Bernardino Board of Trade 
 that the rates from the East to San Bernardino were 
 higher than to Los Angeles, brought forth an order of 
 the Commission that they should be reduced to not ex- 
 ceed the rate to Los Angeles. In certain other cases the 
 Commission held that market conditions and the compe- 
 tition of carriers were not sufficient to justify a higher 
 charge for the short than for the long haul. It was over- 
 ruled, however, in one case after another brought to the 
 test of the court. In one case the court said : " Shall the 
 millions invested in railroads to afford to the State great 
 systems of transportation result in their ruin? Shall 
 Government undertake the impossible but injurious task 
 of making the commercial advantages of one place equal 
 to those of another ? It might as well attempt to equal- 
 ize the intellectual powers of its people." In reversing 
 the Commission's decision in the Summerville Hay case 
 the Supreme Court held that the railroads were of their 
 own initiative justified in charging more for the shorter 
 than for the longer haul wherever dissimilar circum- 
 stances existed. That is, under the adjudication of the 
 Supreme Court the railroads were themselves allowed 
 to be the judges of dissimilar conditions, and as to 
 whether they warranted higher charge for the shorter 
 than for the longer distance, the court holding that such 
 dissimilar conditions might be caused by the competi- 
 tion of waterways, or the competition of carriers by rail. 
 The judgment of a railroad in any particular case was, 
 of course, subject to test by complaint to the Commission. 
 
 In the typical complaints involving alleged discrimina- 
 tion between localities the Commission was scarcely more 
 
254 Railroad Freight Rates 
 
 happy in its decisions. Its order that the rate on screened 
 coal from the fields of western Kentucky to Nashville 
 be the same as to Memphis, and be not higher in the 
 winter than in the summer, was overruled by the court, 
 which stated that the discrimination between summer 
 and winter rates was beneficial not only to the railroads 
 but to the public. 
 
 When the Chamber of Commerce of Minneapolis com- 
 plained that because of its shorter distance it should 
 have lower rates from the grain fields of the Dakotas 
 than Duluth, the Commission upheld its protest, but 
 when shortly afterward Milwaukee and LaCrosse, com- 
 petitors of Minneapolis upon the south, sought for sim- 
 ilar advantages because of their proximity to grain fields 
 for the product of which they competed with Minneap- 
 olis, the latter city feared to press its claim in the former 
 case to its logical conclusion. 
 
 In the celebrated Danville case it was found that the 
 rates on various merchandise from points on and to the 
 north and west of the Ohio River by the direct lines to 
 Richmond and Lynchburg were very low because those 
 lines had to compete with the low Trunk Line rates to 
 Baltimore. The charges, however, via the southerly and 
 roundabout line from the Ohio River to Danville, a point 
 south of Lynchburg, were maintained at rates made by 
 adding to the short line rates to Lynchburg the local 
 rates back to Danville. Such a rate was applied to Dan- 
 ville over the same line that, although roundabout, car- 
 ried traffic through Danville to Lynchburg at the short 
 line rate to that city. Similar conditions applied to rates 
 from the Southwest to these cities and on tobacco from 
 Danville to the West. Upon complaint the Commission 
 ordered reductions in the differences between the Dan- 
 ville and the Lynchburg rates, but was overruled by the 
 Circuit Court and the Circuit Court of Appeals. The 
 case was then appealed to the Supreme Court, but sub- 
 sequently dismissed on motion of the Commission. 
 
 The import rates case was of great moment. To at- 
 tract vessels to their ports in order to have facilities 
 
Interstate Commerce Law 255 
 
 for the export of grain, the railroads leading from Phil- 
 adelphia, Baltimore, and New Orleans frequently made 
 through rates on the inbound merchandise carried by 
 those vessels far lower than their rates from the same 
 ports on domestic merchandise of the same type. The 
 Commission decided that this was a discrimination by 
 the railroads between similar kinds of traffic, which re- 
 sulted to the disadvantage of the domestic producer. In 
 reversing this decision the Supreme Court said : 
 
 " The effort of the Commission by a rigid general order to 
 deprive the inland consumers of the advantage of through rates, 
 and thus give the advantage to the traders of the large seaboard 
 cities, seems to create the very mischief which it was one of the 
 objects of the Act to remedy. 
 
 "As we have already said, it could not be supposed that Con- 
 gress, in regulating commerce, would intend to forbid or de- 
 stroy an existing branch of commerce of value to the com- 
 mon carriers and to the consumers within the United States. 
 Clearly, express language must be used in the Act to justify 
 such a supposition. . . . It is self-evident that many cases 
 may and do arise where, although the object of the carriers is 
 to secure traffic for their own purposes, and upon their own 
 lines, yet, nevertheless, the very fact that they seek by the 
 charges they make to secure it operates to the interest of the 
 public. 
 
 " That if the Commission, instead of confining its action to 
 redressing, upon complaint made by some particular shipper, 
 firm, corporation, or locality, some specified disregard by the 
 common carrier of the provisions of the Act, proposes to promul- 
 gate general orders which thereby become rules of action to 
 the carrying companies, the spirit and letter of the Act require 
 that such orders should have in view the purpose of promoting 
 and facilitating commerce and the welfare of all to be affected, 
 as well the carriers as the traders and consumers of the country. 
 
 " The mere fact that the disparity between the through and 
 local rates was considerable did not of itself warrant the court 
 in finding that such disparity constituted an undue discrimina- 
 tion." 
 
 Conspicuous among the complaints involving the re- 
 lation of rates are the Freight Bureau Cases. Compe- 
 tition between the lines penetrating the Southeast from 
 the Ohio River and those extending along the Atlantic 
 seaboard had so intensified that shipments from the East 
 
2^6 Railroad Freight Rates 
 
 were being taken over the Alleghany Mountains by the 
 Trunk Lines, and then into the Southeast by way of 
 Cincinnati and Louisville, while, conversely, shipments 
 from the West were being hauled over the Alleghany 
 Mountains and thence into the Southeast by the At- 
 lantic coast lines. To prevent this circuitous competi- 
 tion, which evidently was wasteful, the southern rail- 
 roads had formed an agreement to so apply their rates 
 that the products of the East would be carried into the 
 South by the seaboard lines, and that the products of 
 the West would be carried into the South by the Ohio 
 River lines. At the time this agreement was made the 
 shipments originating in the East were principally of 
 manufactures, and those originating in the West prin- 
 cipally of foodstuffs. The agreement did not, as supposed 
 under a widespread misunderstanding, specifically de- 
 limit the channels of foodstuffs and of manufactured 
 products into the Southeast. The amount of the estab- 
 lished rates was not a factor in nor specified in the agree- 
 ment. Cincinnati, Louisville, Chicago, and St. Louis, 
 as they developed in manufacturing, protested against 
 their higher rates on such merchandise, which they al- 
 leged handicapped them in reaching the southern mar- 
 kets in competition with the manufacturers of the North 
 Atlantic seaboard. The Interstate Commerce Commis- 
 sion, upholding this contention, ordered a sweeping re- 
 adjustment of rates from Chicago and Cincinnati and 
 other points in the Middle West, naming specific rates 
 to apply to certain principal southern cities, and notify- 
 ing the railroads to make proportionate readjustment to 
 other southern points. 
 
 Although the power to prescribe and make specific 
 rates had not been granted to the Commission by the 
 Interstate Commerce Law, the Commission had often 
 assumed that power. Its orders naming specific rates 
 were in some cases obeyed by the railroads, and in other 
 cases ignored. Although the courts had intimated that 
 it did not possess such power, the matter had not been 
 pressed to an issue until the Commission rendered this 
 
Interstate Commerce Law 257 
 
 order in the Freight Bureau Cases, which would have 
 reduced practically all the rates of the lines leading 
 south from the Ohio River. The matter was carried to 
 the Supreme Court, which definitely and finally declared 
 that Congress had not delegated the rate-making power 
 to the Commission. The decision of the Court contains 
 the following: 
 
 " It is one thing to inquire whether rates which have been 
 charged are unreasonable — that is a judicial act — but an entirely 
 different thing to prescribe rates for the future — that is a legis- 
 lative act. 
 
 " It will be seen in this case that the Interstate Commerce 
 Commission assumed the right to prescribe rates which should 
 control in the future ... so that if the power exists, as it 
 is claimed, there would be no escape from the conclusion that 
 it would be within the discretion of the Commission, of its 
 own motion, to suggest that interstate rates on all roads were 
 unjust and unreasonable, notify the several roads of such opin- 
 ion, direct a hearing, and upon such hearing make a general 
 order reaching to every road, and covering every rate. . . . 
 The power itself is so vast and comprehensive, so largely affect- 
 ing the rights of carriers and shippers, as well as indirectly all 
 commercial transactions, that no just rule of construction would 
 tolerate such a grant of power by mere implication." 
 
 The few cases to which reference has been made in 
 this chapter have been selected as indicating the varying 
 interpretations placed by the Commission and the courts 
 upon the saHent features of the Interstate Commerce 
 Law. It is noteworthy that there was not a case of the 
 first magnitude involving the intrinsic reasonableness of 
 a specific rate; that is, its reasonableness per se apart 
 from its relation to other rates. 
 
 Numerous decisions were rendered by the Commission 
 in cases arising out of complaints not so far reaching in 
 importance which were almost invariably observed by 
 the railroads. These, together with its rulings in other 
 respects, tended toward the formulation of a body of 
 case made law concerning charges for transportation 
 and practices connected therewith. These decisions, in 
 large part, are the crystallization in definite expression 
 
2581 Railroad Freight Rates ^ 
 
 of customs arising out of the railroad development, 
 which, with a greater or less degree of uniformity, the 
 railroads had come to observe themselves. In the first 
 era of the Commission's existence, which may be said to 
 embrace the ten years from the enactment of the orig- 
 inal law to the decision in the Freight Bureau Cases, not 
 one of the great basic — but to the popular mind incom- 
 prehensible and unjustifiable — usages of the railroads 
 in adjusting rates had been overthrown. The Commis- 
 sion's interpretation of the long and short haul clause 
 had been overruled by the Supreme Court; as had its 
 decision forbidding lower rates on import than on do- 
 mestic traffic of the same kind; as well as certain of its 
 decisions in cases of complaint as to discrimination, the 
 Supreme Court considering the effect of the alleged dis- 
 criminatory practices upon the entire population rather 
 than upon a particular class or classes thereof. This Court 
 finally declared, what was really evident from the be- 
 ginning, that the Commission had not the power to pre- 
 scribe a specific rate. 
 
 A noteworthy decision of the Commission, pertaining 
 to a contention, frequently made by large shippers, and 
 at times by railroad companies, that a lower charge is 
 justifiable on larger than on smaller shipments of freight 
 because of the analogy to the lower prices obtained by 
 wholesale than by retail purchasers of merchandise, was 
 rendered by Judge Cooley, its first chairman, in 1887. 
 In the case that brought forth the decision a railroad 
 company had allowed a discount of 10 per cent, on 
 30,000 tons, but it appeared that there was only one of 
 several dealers competing in the region in question who 
 could make a shipment of that quantity. The decision 
 included the statement that " a railroad company, if 
 allowed to do so, might in this way hand over the whole 
 trade along its road to a single dealer, for it might at 
 law make a discount equal to or greater than the ordi- 
 nary profit in trade, and competition by those who would 
 not get the discount would then be out of the question." 
 It is evident that a discrimination in favor of a large 
 
Interstate Commerce Law 259 
 
 shipper can in some cases be justified because of a dif- 
 ference in the cost of service, it being recognized that 
 the cost of transporting a large shipment in a solid train- 
 load from one place of shipment to one destination is 
 less and often very much less than that of transporting 
 smaller shipments and under other conditions. There 
 is an obvious difference between according lower than 
 ordinary rates, because of a large shipment transported 
 in a solid trainload, and shipments of the same aggregate 
 transported during a given period by regular trains un- 
 der normal procedure. In the former case there is 
 great saving to the railroad because the cars do not have 
 to be drilled, assorted and shifted, either at the starting 
 point, en route, or at the destination ; the loading and un- 
 loading expenses are less, and there is less of clerical 
 routine. Large shipments, throughout a more or less 
 extended period, no portion of which may be carried 
 at any less expense than an equal quantity of mer- 
 chandise on the same train for a shipper whose 
 aggregate shipments are less, afford no such reason for 
 a lower rate. The Commission has ruled against dis- 
 crimination either in the one case or the other. As re- 
 marked in Judson on Interstate Commerce, " The really 
 controlling consideration is that of public policy in this 
 refusal to apply the analogy of wholesale and retail 
 sales to freight rates. It is because the power to dis- 
 criminate in favor of a large shipper, whatever the busi- 
 ness inducement, is necessarily injurious to business 
 competitors who cannot make such shipments, and there- 
 fore tends to monopoly." It is further to be remarked 
 that, since the chaos in freight rates that was character- 
 istic of the score of years immediately succeeding the 
 Civil War, cuts in rates and rebates have resulted very 
 largely from the pressure of large shippers, who have 
 contended that they should have lower rates simply be- 
 cause of shipments great in quantity, and have used their 
 power of diverting such shipments from one route to 
 another as a means to obtain such lower rates. 
 The debates in Congress, preceding its enactment and 
 
260 Railroad Freight Rates 
 
 the Interstate Commerce Law itself, clearly demonstrate 
 that a prime, if not the foremost, purpose for which the 
 act was passed, and the Commission created, was the 
 stopping and prevention of rebates. Toward this end 
 the Commission accomplished substantially nothing dur- 
 ing the first fifteen years of its existence. The mere 
 fact that rebates were prohibited by the law led to their 
 practical cessation during the two or three years after 
 its enactment, but when it became evident to shippers and 
 railroads that the Commission was not engaged in that 
 vigorous and continuous investigation and prosecution 
 prescribed by the law, the giving and receiving of rebates 
 were resumed, and increased. In its Third Annual Re- 
 port the Commission admitted its duty to prosecute for 
 such offenses, but stated that action had been deferred be- 
 cause of more important duties, among which it consid- 
 ered to be the laying down of general rules. As was to be 
 expected, that condition developed which led to the state- 
 ment in its Fourth Annual Report that rebates were open 
 and notorious. Its record for the next twelve years is 
 practically devoid of achievement toward annihilating 
 what was admittedly the most serious abuse in railroad 
 administration. 
 
CHAPTER XVIII 
 
 FURTHER DEVELOPMENTS IN PUBLIC SEN- 
 TIMENT AND LEGISLATION 
 
 Although the Interstate Commerce Law provided 
 that a rate, to be effective, must be regularly filed and 
 duly posted, thus becoming the lawful rate which should 
 be applied to all shipments, nothing in the law prohibited 
 the charge of a lower rate by one than by another rail- 
 road. It was possible for a road to reduce a rate upon 
 three days' notice to the Commission, and without other 
 notice save the posting on a bulletin board at a station, 
 which could be so managed that the chances were 
 against its being seen by a representative of a competing 
 road. There was nothing to prevent a railroad company 
 agreeing with a shipper to place a reduced rate in effect 
 upon a specified day, thus enabling the shipper to pur- 
 chase large quantities of the specified commodity in ad- 
 vance of the public notice of the rate agreed upon. When 
 the shipper was ready he would advise the railroad com- 
 pany, which would give the Interstate Commerce Com- 
 mission telegraphic notice of the rate to be made effec- 
 tive, and duly post it. The effect upon the market had, 
 of course, been anticipated by the favored shipper, and 
 the rate was withdrawn as soon as notice could be given 
 after his consignment had been forwarded. This device 
 was known as the " midnight tariff." 
 
 Pooling agreements, the instrumentalities through 
 which the railroads had been working toward the aboli- 
 tion of rate cutting, having been abolished by the Inter- 
 state Commerce Act, the only instrument that remained 
 for the maintenance of rates between rival lines was the 
 traffic agreement. This the principal railroad companies 
 endeavored to strengthen. The scope of the traffic asso- 
 ciations was broadened, their administration was im- 
 
 261 
 
262 Railroad Freight Rates 
 
 proved, new safeguards were placed around the promul- 
 gation of rates, and new methods adopted for their main- 
 tenance. The working out of these plans, in connection 
 with the restraining influence exercised by the Commis- 
 sion from the first, led toward a general rate equilibrium, 
 to an approximation to stability of the traffic status that 
 had been unknown during the period of unrestrained 
 competition. In line with this tendency was the general 
 prosperity of the country. With an abundance of traffic 
 offering there was the less temptation to the cutting 
 of rates. Moreover, it had become recognized that the 
 excessive building of railroads had been a main cause of 
 the unsettled condition of the previous years : many kinds 
 of financial manipulation had been so widely exposed 
 that their repetition was difficult. The restrictions of the 
 law, however, were irksome to the longer and weaker 
 railroads, who had only such differential rates as might 
 be awarded by the traffic associations to protect them in 
 obtaining a share of competitive traffic, instead of being 
 assured definite proportions of competitive traffic as un- 
 der the award of the pools. 
 
 While the wiser minds were becoming outspoken in 
 favor of the restoration of pooling agreements, with the 
 proviso that they be given full publicity and be sanc- 
 tioned by the Interstate Commerce Commission before 
 becoming operative, the opinion of the pubHc in general 
 was still strongly adverse to pools, and its aversion was 
 strengthened by a tendency toward the amalgamation of 
 competing industrial establishments. 
 
 The years of depression following the panic of 1873, 
 as drastic in their effect upon the industrial and com- 
 mercial interests of the country as upon the instrumen- 
 talities of transportation, had brought home to many the 
 evils of unrestrained competition. Trusts were being 
 succeeded by combinations and amalgamations. To the 
 greater part of the community, which still pinned its 
 whole faith to the half truth contained in the maxim that 
 competition is the life of trade, this was a movement 
 that, under the utmost integrity and circumspection of 
 
Public Sentiment and Legislation 263 
 
 conduct, would have been abhorrent, every procedure that 
 savored of combination being regarded as a step in the 
 line of that concentration which ends in monopoly. This, 
 together with the fact that the shaping of certain of 
 these combinations was neither honest nor circumspect, 
 caused a great wave of popular antagonism that culmin- 
 ated in the anti-trust law of 1890. 
 
 Under this Act, " Every contract, combination in the 
 form of trust or otherwise, or conspiracy, in restraint 
 of trade or commerce among the several States, or with 
 foreign nations, is hereby declared to be illegal." 
 
 Suit was brought under this Act for the dissolution 
 of the Trans-Missouri Freight Association. It was 
 strongly urged that the Act did not apply to railroads, 
 inasmuch as when the measure was under consideration 
 in the House of Representatives, that body had rejected 
 an amendment making it so applicable, and inasmuch as 
 the Act, when finally passed, contained no such amend- 
 ment. In its decision the Supreme Court was divided 
 with that approximation to exactness which is possible 
 in the division of nine by two. Four of the nine Justices 
 held that even with this statute in effect, the contract 
 forming the Trans-Missouri Freight Association was 
 " valid under the general law," maintaining that a dis- 
 tinction should be made between contracts imposing 
 reasonable restraints, and those that impose unreason- 
 able restraints. The five Justices, who rendered the 
 opinion of the Court, stated that " Looking simply at 
 the history of the bill from the time when it was intro- 
 duced in the Senate until it was finally passed, it would 
 be impossible to say what were the opinions of a majority 
 of the members of each House in relation to the mean- 
 ing of the bill," and that they were forced to determine 
 its meaning " from the language used therein," and that, 
 therefore, the expression " every contract in restraint 
 of trade " admitted of no distinction as to the character 
 of the restraint, but set aside the general law and re- 
 voked the established rule of interpretation. The opinion 
 adds that if the law is not correct in its phraseology, 
 
264 Railroad Freight Rates 
 
 " Congress is the body to amend it." This interpreta- 
 tion disintegrated the Trans-Missouri Freight Associa- 
 tion. In a subsequent suit, brought at the instance of the 
 Interstate Commerce Commission, the Joint Traffic As- 
 sociation was hkewise disestabHshed ; and, of course, by 
 impHcation the other traffic associations of the country. 
 The Interstate Commerce Commission, however, called 
 attention to the fact that while the decision of the Court 
 prevented agreements as to rates, it did not prevent the 
 continuance of the associations for the purpose of form- 
 ing continuous through lines, determining the division 
 of through rates, and discussion as to methods and pro- 
 cedure in various matters pertaining to traffic. The 
 Joint Traffic and other associations have continued in 
 existence in the performance of these functions. It is 
 also widely known that at their conferences, after dis- 
 cussion as to what rates should apply in a particular 
 case, each of the traffic officers states to the conference 
 what rate his company will file, publish and apply in the 
 premises. 
 
 The railroads have been no more disgruntled by the 
 application of the Anti-Trust Act to their agreements 
 than was the Interstate Commerce Commission by the 
 judicial decisions overruling its interpretation of the 
 long and short haul clause, its order in the import rate 
 cases, and the declaration that it had no power to pre- 
 scribe a specific rate. It regarded the latter declaration, 
 in particular, as depriving it in large measure of the 
 power necessary to make its decisions effective. In 
 prosecution for rebates the Commission also declared 
 itself hampered by that provision of the Interstate Com- 
 merce Law as originally enacted, which, while giving 
 it the power of subpoena, and authorizing it to compel 
 the attendance of witnesses and the production of books 
 and records, exempted any witness from giving testi- 
 mony that might be self-incriminative. Inasmuch as the 
 giving of a rebate was, as a rule, so zealously guarded 
 that no one but the railroad officer granting, the shipper 
 receiving, and, perhaps, one or two confidential clerks of 
 
Public Sentiment and Legislation 265 
 
 each, would know of the transaction, and no one of these 
 could be compelled to testify against himself, the judi- 
 cial establishment of a case of rebating was difficult, to 
 say the least. It also complained that the railroad com- 
 panies, to belittle the Commission, often withheld evi- 
 dence from a hearing instituted by it, which they subse- 
 quently presented to the Courts, thereby giving the case 
 a different aspect. 
 
 The sections of the original Act providing penalties 
 for its violation and giving the Commission power as 
 to inquiry were variously amended in 1889, in 1891, and 
 in 1893, respectively, extending the scope of violations, 
 making it the duty of the District Attorney to conduct 
 prosecution, and more specifically providing for the sum- 
 moning of witnesses. The amendment of 1895 provided 
 that a witness could be compelled to give self-incrim- 
 inating testimony, but that he could not be prosecuted 
 or subjected to any penalty because of any matter con- 
 cerning which he might testify. These amendments 
 gave the Commission wide powers in the investigation 
 and prosecution for rebates. In its report for 1896 the 
 Commission stated that the ruling of the Supreme Court 
 in 1894, in Brown vs. Walker, confirmed its power and 
 authority to obtain any desired information. It con- 
 tinued, however, to devote its energies in other direc- 
 tions than in the investigation and prosecution of offend- 
 ers against the important provision of ihe Interstate 
 Commerce Law penalizing rebates and other secret dis- 
 criminations, the enforcement of which clearly devolved 
 upon the Commission. 
 
 A still more effective enactment against rebates was 
 made by the Elkins Act of 1903. Under its provisions 
 not only the officers and agents, but the railroad cor- 
 poration itself, is liable for prosecution. Inasmuch as a 
 corporation cannot be imprisoned, and incidentally be- 
 cause the penalty of imprisonment had been regarded 
 as so onerous that it could not be enforced, that penalty 
 was abolished, but the maximum fine for each offense 
 was increased to $20,000. The published tariff was 
 
266 Railroad Freight Rates 
 
 made the standard of lawfulness, and departure there- 
 from declared a misdemeanor; prosecution was facili- 
 tated and jurisdiction extended. This amendment was 
 hailed by legislators and railroad officers, and praised 
 by the Interstate Commerce Commission in its Annual 
 Report as the most satisfactory and practicable measure 
 against rate cutting, rebate giving and the kindred speci- 
 fied misdemeanors that had yet been enacted. It was 
 generally conceded that if this enactment were fully 
 enforced, if investigations were thoroughly conducted 
 and prosecutions vigorously made under its provisions, 
 the cutting of rates and the giving of rebates must cease. 
 The Commission, however, instituted no proceedings, 
 even under this law, until it was prodded into doing so 
 by the railroads themselves. 
 
 In the ten years that preceded the enactment of the 
 Elkins amendment, the economic relations of the rail- 
 roads to the industry and commerce of the country had 
 passed through various phases. In an earlier paragraph 
 of this chapter it was stated that the increase of traffic, 
 the restraints upon railroad extension, and the salutary 
 effect of the Interstate Commerce Law, had resulted in 
 an approach to rate equilibrium and approximation to 
 general stability of the traffic status. This condition 
 was radically changed by the business depression that 
 followed the panic of 1893, and by the demonstrated 
 unwillingness of the Interstate Commerce Commission 
 to effectively proceed against rate cutting and rebate 
 giving. During the depression the volume of shipments 
 underwent such violent reduction that the railroads were 
 again obliged to struggle for sufficient traffic to keep 
 their cars and locomotives even partly employed, and to 
 provide revenue sufficient to keep them from bankruptcy. 
 That they were not entirely successful is shown by the 
 fact that in 1894 nearly one-third of the railroad mile- 
 age of the country was in the hands of receivers. 
 
 As the markets waned the revenue of the railroads 
 was further diminished through the necessity of aiding 
 shippers who sought reductions in the transportation 
 
Public Sentiment and Legislation 267 
 
 charge to enable them to continue in the manufacture 
 and distribution of products for which there was a fall- 
 ing demand at lowering prices. On every hand the rail- 
 roads acceded to these requests: the cause of the ship- 
 pers was their cause. The primal principle that the 
 transportation charge has to be so adjusted that com- 
 modities may find a market was not arrested by their 
 waning revenue. In some cases concessions were made 
 by open reductions in rates; in others commodities were 
 reduced from a higher to a lower class : in a far greater 
 number special commodity rates were made on various 
 materials and products to meet the exigencies of the 
 times: there was an increase of rebates because of the 
 disinclination of the railroads to openly reduce rates 
 affecting the currents of commerce in the great chan- 
 nels of traffic. The depression in business, in general, 
 was at its lowest ebb in 1897, but the pressure upon the 
 freight rates continued until, in 1899, the average rate 
 per ton per mile was lower than at any other time in the 
 history of the country. Although repeated statements 
 that the rate disturbances and rebate giving had pro- 
 duced as great demoralization at this as at any previous 
 time are doubtless exaggerated, it is beyond question that 
 the demoralization was deep and widespread. Through- 
 out this period of depression a principal use of sidetracks 
 was for the storage of freight cars, which were idle by 
 the thousands; locomotives by the hundreds were dead 
 in roundhouses; the forces of railroad employees were 
 reduced of necessity to a minimum ; the prevailing senti- 
 ment was of gloom, and public expression was almost 
 of despair. Manufacturers and merchants of vast ex- 
 perience were a unit in saying that the productive instru- 
 mentalities of the country had developed to a capacity 
 far in excess of its consumption for many years to come ; 
 the Houses of Congress were filled with imprecations 
 against the pauper labor of Europe that was taking the 
 bread of life from the mouths of American working- 
 men, and reputable magazines printed articles setting 
 forth the danger to American industry from the yellow: 
 
268 Railroad Freight Rates 
 
 peril of the Orient. Under these conditions it is small 
 wonder that no one charged with railroad administra- 
 tion gave his mind to the extension of track, to the pro- 
 vision of additional freight cars and new locomotives. 
 Any railroad manager advocating such procedure would 
 have been universally denounced as a lunatic. No rail- 
 road company, by any possibility, could have secured 
 new capital wherewith to carry out such plans. In 1898 
 came a very substantial improvement in business; de- 
 nuded markets demanded replenishment: the wheels of 
 industry began to move. In 1899 mills and mines were 
 booming, good crops for which there was great demand 
 gave high stimulus to commerce, the formation then 
 well under way of the great industrial combinations be- 
 tokened a degree of industrial prosperity not before 
 known. This period of unwonted industrial and com- 
 mercial activity continued, except for a slight reaction 
 in 1903, with accelerating pace until the collapse of 1907. 
 
 Within two years from the lowest ebb of traffic the 
 railroads found their tracks and equipment fully occu- 
 pied, and the necessity for vast increases in their forces. 
 They endeavored to do away with rebates, to abolish 
 many of the special commodity rates that had been con- 
 ceded to meet the exigencies of poor markets, and finally, 
 beause of the rising prices that beset them, attempted, 
 in 1900, to obtain certain advances in rates that all rail- 
 road men believed had been forced to too low a level by 
 the violent pressure to which they had been subjected 
 for many years. This attempt met with widespread and 
 organized opposition on the part of shippers, and was 
 but partly successful. 
 
 The tendency toward railroad amalgamation, evident 
 since the abolition of pooling and traffic agreements, re- 
 ceived impetus because of the industrial amalgamations. 
 The power that a large shipper had always possessed to 
 compel a railroad to make concessions by the threat of 
 diverting his traffic to a rival line became all the more 
 pronounced when this power was concentrated in the 
 hands of the few representatives of the great corpora- 
 
Public Sentiment and Legislation 269 
 
 tions that were dominant in each line of industry. No 
 one railroad had ever been willing to take the initiative 
 toward resisting the aggressions of the great shippers. 
 If in a meeting of traffic officers the representative of 
 one road would suggest the curtailment of a privilege 
 or an advance in rates affecting a great staple of com- 
 merce, the principal shippers of that commodity were 
 almost certain to learn of it and direct reprisals against 
 the railroad whose representative manifested such 
 temerity. 
 
 The amalgamation of different railroads, that had been 
 predicted when pooling was abolished by the Interstate 
 Commerce Law, proceeded upon an enlarged scale. To 
 the solid front of the great shippers seeking rate con- 
 cessions the railroads found it necessary to present a 
 compact line. This led to the purchase by one railroad 
 company of the stock and securities of another, and the 
 appearance of the same men as directors on the boards 
 of competing companies. This plan, designated as the 
 " Community of Interests," in great measure accom- 
 plished its purpose. The cutting of rates was practically 
 obliterated. The giving of rebates was almost entirely 
 abolished. The credit for this achievement belongs to 
 Alexander J. Cassatt in higher degree than to any other 
 one man. As General Manager and then as Vice-Presi- 
 dent of the Pennsylvania Railroad Company, during the 
 period of chaotic competition that brought the " Pool " 
 into being, he became entirely familiar with the pressure 
 that the great shippers brought to bear upon the rail- 
 roads for rebates, and with the vulnerability of the rail- 
 roads, especially the longer and weaker lines, to their 
 onslaughts. During the seventeen years of exemption 
 from the burdens of routine administration, he remained 
 as a director of his company in touch with the progress 
 of events, and conceived and matured the far-reaching 
 plans which he proceeded to work out when he returned 
 to the active service of the Pennsylvania Railroad in 
 1899 as its President. This was the very time when the 
 extension of the industrial amalgamations gave warning 
 
270 Railroad Freight Rates 
 
 of the increasing power of their managers to force the 
 railroads to their terms, and when, as a result of the 
 intervening legislation, the practice of rebating had be- 
 come vicious because no longer general, but special, and 
 no longer done as a matter of course, but secretly and 
 carefully concealed. With the great resources at his 
 command, interests sufficient to give a voice in the man- 
 agement were purchased in the Baltimore & Ohio, Ches- 
 apeake & Ohio, and Norfolk & Western Railroads, lines 
 extending to the North Atlantic seaboard. The co- 
 operation of the New York Central lines was next 
 secured. It was then announced that rebates would no 
 longer be accorded to any shipper, no matter how im- 
 portant. The larger shippers, accustomed for many 
 years to concessions, the extent of which they had often 
 dictated themselves, could not believe that the new policy 
 would apply to them. The Carnegie Steel Company, in 
 particular, was rebellious, vigorously endeavoring to 
 break through the ramparts with threats of various re- 
 prisals. It finally did divert, in so far as was possible, 
 the tremendous tonnage of the company to other than 
 the Pennsylvania lines, which were able to sustain the 
 loss because of the increase of traffic resulting from the 
 development of business in general. Mr. Carnegie then 
 threatened to build another railroad to the seaboard, but 
 Mr. Cassatt did not yield to the attacks of Mr. Carnegie, 
 the Carnegie Steel Company, or of any other of the great 
 shippers who had come to believe the receiving of re- 
 bates from the railroads to be a vested right. The 
 giving of rebates, which the Interstate Commerce 
 Commission apparently, during the twelve years of its 
 life, had not broken down, was thus brought toward an 
 end in Trunk Line territory by the determined action of 
 one man, a railroad president, notwithstanding that 
 all interests, government, industrial and railroad, had 
 come to think it impossible that business could be suc- 
 cessfully carried forward and developed save on the 
 long established lines of rate concessions, which had 
 been considered analogous to protective tariffs, bounties, 
 
Public Sentiment and Legislation 271 
 
 land grants, exemptions from taxation and other well- 
 known forms of industrial stimulant. Eminent as was 
 Mr. Cassatt as an engineer and administrator, this was 
 his greatest achievement. 
 
 The results of the Community of Interests were at- 
 tained through peaceful methods, and were beneficial not 
 only to the transportation companies, but to the industrial 
 and commercial interests of the entire United States. 
 
 To prevent the resort to secret discriminations, even 
 during a period of commercial depression, the railroads 
 concerned in the movement were largely instrumental in 
 formulating and urging the enactment of the Elkins 
 Law. 
 
 The mounting traffic of the era of unprecedented pros- 
 perity had, however, begun to overwhelm the railroads. 
 There were not nearly enough cars, not nearly enough 
 locomotives; there was a lack of adequate yards and 
 other facilities at division and main terminals. The car 
 factories and locomotive factories were inundated with 
 orders, and, although they turned out new equipment 
 with great rapidity, remained a year and in some in- 
 stances two years behind with their orders. The con- 
 gestion of traffic became so appalling that nearly every 
 person, from the manager of the great steel company 
 who could not obtain adequate cars for the shipment of 
 his product, and whose fuel and ore were woefully de- 
 layed in transit; from the farmer whose grain was de- 
 teriorating in the field because the railroads could not 
 supply the requisite cars, or whose fruits for a like rea- 
 son were rotting in the orchards, to the clerk whose con- 
 signment of household goods had lain on a sidetrack for 
 weeks, had a grievance against the railroads that was 
 wont to form the burden of his conversation. Through- 
 out this period of congestion railroad managers, super- 
 intendents, train despatchers, yard masters, engine men 
 and train men were working as never before. Not only 
 were engine men and train men kept at their posts often 
 for twenty and twenty-four hours at a stretch, but man- 
 agers and superintendents remained on duty both day 
 
272 Railroad Freight Rates 
 
 and night. Indeed, a difficulty with which the railroads 
 were severely beset was that of obtaining trained and 
 responsible employees in sufficient number. Especially 
 in the industrial centers of the East the great mills be- 
 gan to take many of their best employees from railroad 
 companies at wages higher than the latter could afford 
 to pay. One example is of a great steel manufacturing 
 company that went to each of the yard offices of one of 
 the busiest subdivisions of a great railroad and offered 
 each yard clerk, regardless of the salary he was getting 
 from the railroad, an advance of $20 per month if he 
 would leave its service for that of the steel company. 
 
 The revenues of the railroad companies increased — 
 not nearly, however, in such an advancing ratio as those 
 of the manufacturing establishments or of the farmers, 
 who were blessed with successive seasons of plentiful 
 crops. Inasmuch as their shortcomings affected the 
 mine operator, the manufacturer, the merchant and the 
 farmer, the railroads were subjected to castigation that 
 fell from every mouth: unavoidable defects in service 
 were denounced as the outcome of malicious dereliction. 
 The railroad managers could not but admit that they 
 were caught unprepared for a rush of traffic, the volume 
 of which it was beyond the range of the human mind to 
 foresee. They did, however, indulge in one phase of 
 recrimination. They urged that their freight yards and 
 freight houses were blocked with freight which con- 
 signees did not promptly remove; that the owners of 
 mills, factories and warehouses did not increase their 
 storage facilities in anything like a commensurable ratio 
 with the enlargement of their business, but used the cars 
 of the railroads for storage, keeping them without un- 
 loading for unwonted periods. Indeed, at the height of 
 a season of intense car shortage they pointed out that 
 over 45,000 cars were held for unreasonable lengths of 
 time by shippers and consignees at various places on the 
 Atlantic seaboard from Boston to Norfolk; that at this 
 time the railroads of the country, as a whole, had only 
 about 71 per cent, of their cars available for transporta- 
 tion service ; that the facilities of the railroads were 
 
Public Sentiment and Legislation 273 
 
 being used by shippers and consignees for their own 
 purposes; that cars had ceased to be units of freight 
 operation to become warehouses, elevators and store 
 houses. At that time the general manager of a railroad 
 reported that its freight cars were moving to but twelve 
 and one-half per cent, of their capacity ; that if this could 
 be increased to but twentv per cent, there would be no 
 car shortage. 
 
 The increasing revenues of the railroad companies 
 having been made the subject of especial reference by 
 the Interstate Commerce Commission, the United States 
 Senate, in 1903, asked the Interstate Commerce Com- 
 mission to make a report showing the effect of changes 
 in rates or changes in classifications upon the revenues 
 of the railroad companies during 1900, 1901, 1902, and 
 
 1903, as compared with the gross and net revenues that 
 would have been derived by them under the rates and 
 freight classifications in force during the fiscal year end- 
 ing June 30th, 1899; and to also report the changes in 
 cost of operation and maintenance of said railways for 
 said years. In its report the Commission did not include 
 estimates as to the effect of the changes upon net rev- 
 enues, or figures showing the changes in the cost of 
 operation and maintenance. It confined itself to com- 
 paring the earnings of the year 1903 with those for the 
 year 1899, which were at the lowest average rate per ton 
 per mile ever received in the United States, the lowest 
 ebb to which freight rates had been forced by the de- 
 pression following the panic of 1893. This report, 
 known as Senate Document No. 257, issued April 7, 
 
 1904, states that the railroads collected $155,475,502 
 more freight revenue in 1903 than if the rates of 1899 
 had been continued in effect. The railroads at once 
 pointed out that this aggregate had been based upon in- 
 correct premises, notwithstanding that the correct data 
 was in the Commission's possession. Upon these, under 
 the method of calculation followed in Document No. 
 257, the increase would have been $98,047,874. The 
 railroads also showed that the Commission had used the 
 ton as the measure of traffic movement, instead of the 
 
274 Railroad Freight Rates 
 
 ton mile as is customary. The ton mile is a unit derived 
 from both weight and distance, while the ton ignores 
 distance, which varied 3.07 per cent, per ton carried, 
 between 1899 and 1903. Upon the basis of the ton mile- 
 age the amount of revenue accruing to the railroads, in 
 1903, was increased but $67,556,299 because of the in- 
 crease in the average rate over that of 1899. Had the 
 Commission fully responded to the request of the Senate 
 by including the changes in cost of operation and main- 
 tenance, it would have reported that the operating ex- 
 penses for 1903 had increased $391,551,484, an amount 
 nearly six times as much as that derived by the railroads 
 from the increase in rates. In using 1899 as the basis 
 of its calculation, the Commission did not disclose the 
 fact that had it used any year prior to the depression, 
 or even the year 1894, the average rate would have been 
 higher than that of which complaint was made as apply- 
 ing to 1903. 
 
CHAPTER XIX 
 
 PUBLIC SENTIMENT AND THE HEPBURN 
 BILL 
 
 The enactment of the Interstate Commerce Law did 
 not elicit as large a number of specific complaints as to 
 rates as might have been expected in view of the bitter- 
 ness of feeling against the railroads prior to its adoption. 
 From the creation of the Interstate Commerce Commis- 
 sion on February 4, 1887, to December, 1904, it had re- 
 ceived 4,012 complaints. Of these 3,223 were informal 
 and settled by the mediation of the Commission without 
 formal proceedings of any kind. Of the 789 cases made 
 the subject of formal complaint, nearly one-half were 
 settled by agreement, or by withdrawal. Of the 297 
 formal decisions rendered in this seventeen years and 
 ten months, many of which embraced two or more com- 
 plaints, 194, or 65 per cent., were decided in favor of 
 the complainants, the remaining 35 per cent, having been 
 dismissed. In but forty-five of the cases in which the 
 decision was against the defendants did the railroads re- 
 fuse or neglect to obey the Commission's order. This 
 number includes the cases in which the decisions of the 
 Commission were reversed by the courts. 
 
 For several years, with the exception of the resist- 
 ance to the advance attempted by the railroads in 1900, 
 the matter of railroad rates had attracted no general at- 
 tention, and was not at all prominent in public discus- 
 sions until the presentation by the Commission of Sen- 
 ate Document No. 257. This was given publication over 
 the entire country, and inflamed the indignation that had 
 been caused by the unsatisfactory service of the rail- 
 roads during the period of traffic congestion. The idea 
 that the railroads were not only failing* in the perform- 
 ance of transportation, but that they were also obtaining 
 
 275 
 
276 Railroad Freight Rates 
 
 increased payment for inferior service, roused the popu- 
 lar mind to a fury that was fed by the direct amalga- 
 mation of many railroads and the working out of the 
 Community of Interest plan in connection with others. 
 The matter was the subject of newspaper comment far 
 and wide, and of discussion by public speakers. Feeling 
 ran so high that numerous bills were introduced at the 
 ensuing session of Congress, one of which, the Esch- 
 Townsend Bill, was passed in the Spring of 1905, prac- 
 tically without consideration, but with substantial una- 
 nimity by the House of Representatives. This bill gave 
 vastly increased powers to the Interstate Commerce Com- 
 mission. Indeed, according to the analyses made by able 
 lawyers, it would have given the Commission well nigh 
 absolute power over the " rates, regulations, and prac- 
 tices " of the railroads. The Senate referred the bill to its 
 Committee on Interstate Commerce, which, at sessions 
 extending over several weeks, examined prominent law- 
 yers, shippers, and railroad officers as to the probable 
 effect of the bill, and as to various phases of the trans- 
 portation question. At the following session of Con- 
 gress, convening in December, 1905, a new bill was in- 
 troduced in the House of Representatives by W. P. Hep- 
 burn, Congressman from Iowa, which, with some modi- 
 fications, was adopted by the House and formed the 
 subject of a momentous debate that consumed a great 
 portion of the time of the Senate throughout the session. 
 That body introduced several amendments, and the bill 
 as finally modified was passed and approved June 29, 
 taking effect August 28, 1906. 
 It provides: 
 
 (a) That as "common carriers" under the Interstate 
 Commerce Law shall be included companies transport- 
 ing oil by pipe lines, express companies, sleeping car 
 companies, all switches,- tracks, terminal facilities, and 
 that " transportation," under the law shall include all cars 
 regardless of their ownership, and all service in transit. 
 
 (b) Prohibits the issue of passes, with certain speci- 
 fied exceptions that cover mainly employees, either direct 
 
Public Sentiment and Hepburn Bill 277' 
 
 or collateral, and for religious and charitable purposes; 
 fixing a penalty in case of violation that shall apply to 
 both the giver and the recipient. 
 
 (c) Made it unlawful after May ist, 1908, for any 
 railroad company to transport in interstate traffic for 
 sale, any commodities in which it may have a proprietary 
 interest, except lumber and its products. 
 
 (d) Provides that a common carrier shall provide, 
 when practicable, and upon reasonable terms, a switch 
 connection for any applicant who shall furnish sufficient 
 business to justify its operation. 
 
 (e) Makes more explicit the specification as to the 
 filing of tariffs, especially providing for the posting and 
 filing of through tariffs, and the acceptance of the 
 through rates quoted in such tariffs by such carriers as 
 participate therein; fixing penalty for violation. 
 
 (/) Provides that " every person or corporation, 
 whether carrier or shipper, who shall knowingly offer, 
 grant, give or solicit, or accept, or receive rebates, con- 
 cession or discrimination, shall be deemed guilty of a 
 misdemeanor, and on conviction thereof shall be pun- 
 ished by a fine of not less than one thousand or more 
 than twenty thousand dollars." Moreover, any person, 
 whether officer or director, agent or employee, convicted 
 of such misdemeanor, " shall be liable to imprisonment in 
 the penitentiary for a term not exceeding two years, or 
 both fine and imprisonment in the discretion of the 
 court." 
 
 In addition, the acceptor of any rebate shall forfeit 
 to the United States three times the amount of the re- 
 bate. 
 
 (g) Provides for the publication of the reports and 
 the decisions of the Commission and their acceptance 
 as evidence. 
 
 (h) Empowers the ' Commission, if upon complaint 
 it finds that a rate, or any regulation or practice affect- 
 ing a rate, is " unjust or unreasonable, or unjustly dis- 
 criminatory, or unduly preferential, or prejudicial," to 
 determine and prescribe a maximum rate to be charged 
 
278 Railroad Freight Rates 
 
 thereafter, and modify the regulation or practice per- 
 taining thereto. This includes the prescription of a 
 through rate and the apportionment thereof between the 
 carriers parties thereto. Orders of the Commission shall 
 take effect in not less than thirty days and continue in 
 force not exceeding two years, unless suspended or set 
 aside by the Commission or a court of competent juris- 
 diction. 
 
 (i) Empowers the Commission to award damages 
 against a carrier in favor of a complainant. 
 
 (/) Provides for forfeit to the United States, in 
 case of neglect to obey an order of the Commission, in 
 the sum of five thousand dollars for each offense, each 
 violation and each day of its continuance to be deemed 
 a separate offense. 
 
 (k) Empowers the Commission to apply to a circuit 
 court for the enforcement of its order, other than for 
 the payment of money; for the appeal by either party 
 to the Supreme Court of the United States ; and that no 
 order of the Commission shall be suspended or re- 
 strained, except on hearing, after not less than five days' 
 notice to the Commission. The ultimate jurisdiction of 
 the Court is, therefore, specifically stated. 
 
 (I) Provides for the rehearing by the Commission, 
 upon application, at its discretion. 
 
 (m) Authorizes the Commission to require annual 
 reports from all common carriers, that shall contain 
 specified information; to prescribe the form of any and 
 all accounts, records and memoranda to be kept by car- 
 riers, making it unlawful for the carriers to keep any 
 other accounts, records, or memoranda than those pre- 
 scribed and approved by the Commission; provides that 
 all accounts of the carriers shall be open to the inspec- 
 tion of the special agents, or examiners employed by the 
 Commission. 
 
 (m) Provides that a common carrier issuing a 
 through bill of lading shall be responsible for loss, dam- 
 age or injury to the property covered thereby upon the 
 lines of any company over which it may pass, leaving 
 
Public Sentiment and Hepburn Bill 279 
 
 it to the line issuing the way-bill to gain recovery from 
 another line upon which the loss, damage, or injury may 
 have occurred. 
 
 (0) Enlarges the Interstate Commerce Commission 
 from five to seven members, with terms of seven years, 
 increasing the salary from seven thousand five hundred 
 to ten thousand dollars per annum. 
 
 During the several months preceding the convening 
 of this session of Congress a heated nation-wide dis- 
 cussion focused upon the abuses for which the railroads 
 were held responsible, and the measures necessary for 
 their remedy. While there were many accusations as to 
 exorbitant freight rates, they were, as a rule, vague, 
 and the railroads claimed, without foundation. Through 
 their chosen representative the railroads besought Con- 
 gress to strengthen the law against rebates if it could 
 do so, but added that if fully enforced the Elkins law 
 of 1903 would make rebates impossible; that if rebates 
 were still being given, the fault lay with the Interstate 
 Commerce Commission for not availing of the authority 
 conferred upon it under this and preceding laws. Under 
 this prodding the Commission took steps, beginning in 
 1905 and continuing throughout the next two years or 
 more, which resulted in the detection, prosecution, and 
 punishment of many oflfenders in this respect. It is note- 
 worthy that these prosecutions and convictions were 
 without exception made under the Elkins law and not 
 under the Hepburn law, which restored the penalty of 
 imprisonment. It was evident that there was a wide- 
 spread popular confusion of ideas as to cut rates and 
 rebates, it being commonly accepted that if the Commis- 
 sion were empowered to prescribe a specific rate, such 
 prescription would prevent rebates, although there is 
 really no direct connection between the two dififerent 
 things. 
 
 The conflict raged with special bitterness around the 
 proposition to confer upon the Interstate Commerce 
 Commission the power to prescribe a specific rate from 
 which there should be no appeal. Although widely mis- 
 
28o Railroad Freight Rates 
 
 represented at the time, it can be most positively stated 
 that Samuel Spencer, the railroad president chosen by 
 the railroads of the country to voice their views, did not 
 protest against the authority to fix — in case of complaint 
 — a rate to substitute that complained of. He did oppose 
 the conferring of that authority without appeal, stating 
 that to do this would be to give the Commission abso- 
 lute and despotic power. Although doubtless under the 
 Constitution the right to appeal would lie from an order 
 of the Commission, a lengthy debate was waged in the 
 Senate as to whether that right of appeal should be writ- 
 ten in the bill ; it was finally so written. 
 
 The status of the Commission was radically changed, 
 in that it was given the power to prescribe a specific rate, 
 and to make that rate effective within thirty days " un- 
 less suspended or set aside by the Commission or a court 
 of competent jurisdiction." The effect of this is to place 
 the burden of court procedure upon the railroad com- 
 pany if it desires to contest the rate. Under the original 
 Interstate Commerce Act the burden of court procedure, 
 in case a railroad company did not comply with its 
 order, rested upon the Commission. 
 
 That portion of the Hepburn amendment making it 
 unlawful for any railroad company to transport for sale 
 any commodities in which it may have a proprietary in- 
 terest, was declared unconstitutional by the Circuit Court 
 of the United States for the Eastern District of Penn- 
 sylvania at its April session, 1908, and was then appealed 
 to the Supreme Court of the United States. 
 
 After the Hepburn law had taken effect, the Inter- 
 state Commerce Commission publicly stated that the rail- 
 roads of the country were manifesting a commendable 
 desire to observe the law and to co-operate with the 
 Commission in its application. 
 
 Inasmuch as the authority to definitely supersede a 
 rate complained of and to make its decision effective was 
 conferred upon the Interstate Commerce Commission 
 by the Hepburn Act, it is difficult to conceive otherwise 
 than that whatever grievances had been withheld from 
 
Public Sentiment and Hepburn Bill 281 
 
 the Interstate Commerce Commission, because of doubt 
 of the power of that body to make effective redress for 
 the past and to provide effective remedy for the future, 
 would be presented to the Commission as soon after the 
 taking effect of the Hepburn Act as they could be for- 
 mulated. It may be fair to assume that by the close of 
 the calendar year succeeding that in which the Hepburn 
 law took effect, that is, during the sixteen months from 
 August 29, 1906, to December 31, 1907, all of the long 
 standing grievances would have been formulated and 
 presented to the Commission, as well as any new com- 
 plaints that may have been especially developed by the 
 new law. In this period 5,952 complaints were filed with 
 the Commission, a greater number than had been pre- 
 sented during its entire previous existence. Of this 
 number 2,105 were of matters not coming within the 
 jurisdiction of the body, mostly querulous complaints 
 from this person and that person in regard to this thing 
 and that. Of the remaining 3,847 complaints, 3,374 
 were informal and 473 formal. 
 
 The complaints designated as informal are taken up 
 by the Commission with the railroad companies by cor- 
 respondence and adjusted without a set hearing. They 
 principally pertain to cases of oversight, clerical errors, 
 misconstruction of tariffs, misrouting, and overcharges 
 of one kind and another. Many of these complaints are 
 of the same nature as those directly adjusted by the rail- 
 road companies before the taking effect of the Hepburn 
 law, just as the adjusting bureau of a large department 
 store settles similar matters with its customers. The 
 strict interpretation of what constitutes a rebate has, 
 however, led the railroads to be very chary of making 
 allowance for any sort of overcharge and refunding 
 money. It is, therefore, at this time often their prefer- 
 ence, even when the law does not compel, that such com- 
 plaints go to the Commission, and that refunds be made 
 only upon orders issued by it. Of the 3,374 informal 
 complaints entered and recorded during the sixteen 
 months, approximately one-half were adjusted by the 
 
282 Railroad Freight Rates 
 
 carriers after correspondence by the Commission, and 
 approximately one-half were dismissed by the Commis- 
 sion for lack of cause. An order to reduce rates or to 
 modify any practice or to promulgate any principle can- 
 not be made upon informal complaint. Such action can 
 only be taken by the Commission upon a formal com- 
 plaint, involving formal reply by the defendant, a set 
 hearing with the examination of witnesses on both sides, 
 and usually the submission of oral arguments or briefs, 
 or both, by the complainant and the defendant. 
 
 The actual effectiveness of the Hepburn law, in re- 
 dressing grievances as to freight rates and remedying 
 maladjustments in the freight rate structure, in so far as 
 it can be measured by the complaints of the first sixteen 
 months, their nature and their disposition, must, there- 
 fore, rest upon the complaints designated as formal. The 
 490 days constituting the period covered by the filing of 
 the 473 formal complaints brings the average of a trifle 
 under one a day. Of this total twenty-five were against 
 express and sleeping car companies, or were in regard 
 to passenger fares, or for other reasons not within the 
 scope of the present consideration of rates of freight 
 and matters pertaining directly to the transportation of 
 freight. Of the remaining 448, thirteen have been 
 classed as miscellaneous. Of these eight are in reality 
 not complaints, but docket numbers given by the Com- 
 mission, for convenience of reference and filing, to pro- 
 ceedings instituted by it. These numbers cover the in- 
 vestigations, correspondence, and evidence as to rates, 
 practices, accounts, and revenue; car shortage; consoli- 
 dations and combinations; underbilling and misrepre- 
 sentation of freight; the alleged purchase and sale of 
 commodities by express companies. Ten of the remain- 
 '^^S 435 complaints are as to freight classification. They 
 apply respectively to roller letter copiers, cement burial 
 vaults, wall paper, oil, wire brushes and brooms, wire 
 coat hooks, coal tar, cement, multigraphs and hay. 
 
 These complaints are of trifling importance, except 
 that on hay. The advance of this commodity from the 
 
Public Sentiment and Hepburn Bill 283 
 
284 Railroad Freight Rates 
 
 sixth to the fifth class of the official classification on 
 January i, 1900, was immediately protested, but the 
 courts decided that the Commission did not have author- 
 ity to order a change in classification. The complaint 
 was presented anew on July 17, 1907. At the suggestion 
 of the Commission a conference was held between rep- 
 resentatives of the National Hay Association and repre- 
 sentatives of the railroads between the Mississippi River 
 and the Atlantic seaboard. The railroads presented 
 statistics showing that for 1907 they had carried 25,000 
 cars of hay, averaging 11.3 tons per car, yielding aver- 
 age earnings per car of $16.77; while they had hauled 
 60,000 cars of grain, averaging 27.8 tons per car, yield- 
 ing average earnings per car of $32.16. The average 
 haul per car of hay was 167.4 miles, and the average 
 earnings per car per mile were 10 cents ; while the aver- 
 age haul per car of grain was 304.7 miles, and the aver- 
 age earnings per car 10.5 cents per mile. At this 
 conference it developed that the Hay Association desired 
 concessions in methods of handling rather than in rates. 
 The remaining 425 complaints are classified in the fol- 
 lowing tables as to the commodities to which they per- 
 tain, and as to the territorial group in which they arose. 
 Their disposition is shown as of April 11, 1908, the last 
 day that could be taken into consideration when the 
 docket of the Commission was examined, but subsequent 
 decisions are indicated in the text. In a number of 
 cases a decision covering more than one point has 
 been partly in favor of the complainant and partly 
 in favor of the defendant. All such are listed in the 
 tables as decided in favor of the complainant. To make 
 a distinction between complaints that are important 
 and those that are unimportant is not always easy. 
 Sporadic complaints made by individuals, complaints 
 that affect the transportation charge on but one or a few 
 scattering shipments, or that affect the transportation 
 charge between stations that are not in a principal chan- 
 nel of traffic, may, however, be classed as unimportant. 
 Complaints affecting a wide distribution of any com- 
 
Public Sentiment and Hepburn Bill 285 
 
 modity, in regard to a rate that applies in a main traffic 
 channel, or in relation to a considerable movement of a 
 commodity of importance, may be classed as important. 
 The complaints thus defined as unimportant form by 
 far the greater portion even of those designated as 
 formal. Under each table it will be endeavored to in- 
 dicate the complaints that are important. 
 
 Foodstuffs (see Table I). — The complaints as to grain 
 and grain products in Group II are chiefly on flour from 
 Buffalo to New York, Boston, and Providence, made by 
 the Buffalo millers, who asserted that they were handi- 
 capped by the competition of the mills of the Northwest. 
 The Commission ordered reductions of i and 2 cents per 
 100 pounds. The complaints in Group VIII have arisen 
 out of the disturbance caused by the shifting of the grain 
 currents to the Gulf from Kansas, Oklahoma, and Mis- 
 souri. The Commission made several readjustments by 
 reducing rates from 2 to 5 cents per 100 pounds from 
 various points in these States to the Gulf ports. (See 
 page 124.) 
 
 The live stock complaints in Group VIII are prin- 
 cipally requests for refund, because certain through 
 rates were higher than could be made upon a local rate 
 established for a short time to meet peculiar conditions. 
 These were dismissed by the Commission. Others are 
 petitions for reparation because certain railroads con- 
 testing an order of the Commission have not reduced 
 certain rates specified therein. 
 
 The complaints as to dairy products in Group VI are 
 as to a general increase of rates on cream to creameries 
 in Iowa, Illinois, Nebraska, Colorado, Missouri, Okla- 
 homa, and Wyoming. The large creamery companies 
 besiege the railroads for low long distance rates that 
 they may gather cream from wide areas. The local 
 creameries protest against such rates being granted, 
 stating that the large creamery companies are using un- 
 fair means to drive them out of business. The Commis- 
 sion decided that both the corporate and local creameries 
 are essential to the butter supply of the country and es- 
 
286 
 
 Railroad Freight Rates 
 
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Public Sentiment and Hepburn Bill 287 
 
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 eries may draw cream from wide areas. 
 
 The complaints as to fruits and vegetables in Group 
 V are largely as to peaches to the North from various 
 points in Georgia, as to the rates on citrus fruits from 
 Florida to the North in competition with similar fruits 
 from California, and as to the rates on vegetables in 
 competition with the vegetables from Mississippi and 
 Louisiana. The Commission found the rates on oranges 
 and pineapples to be reasonable, except that it estab- 
 lished certain carload rates to the Northeast. It reduced 
 certain rates on vegetables to the northeastern markets, 
 but found other rates on fruits and vegetables to the 
 cities of the Northeast and north of the Ohio River to be 
 reasonable. 
 
 Miscellaneous Raw Materials (see Table I). — No one 
 of these complaints is of more than minor importance. 
 It is especially noteworthy that cotton, the great staple 
 of the South, produces but two complaints, both of 
 which were dismissed. That in Group V is as to the 
 rates from Lorman, Miss., to New Orleans and to 
 Boston as compared with the rates from Port Gibson, a 
 trifling matter that was adjusted and set aside. The 
 complaint in Group VIII is as to the rates on raw cot- 
 ton from points in Texas, and Oklahoma, to Kansas 
 City, as compared with the rates on cotton fabrics; but 
 the Commission held that the existing rates were not 
 unreasonable. 
 
 Miscellaneous Manufactures (see Table II). — The only 
 comiplaint of passing importance was caused by different 
 rates being charged on different kinds of brick. The 
 Commission ordered that rates on firebrick, building brick 
 and paving brick be the same, stating that from a trans- 
 portation standpoint the value of the brick or the purpose 
 for which it would be used would not be considered. 
 This decision is contrary to the widely applied principle 
 of charging according to the value of the service which, 
 in the case of other commodities, has been directly 
 recognized by the Commission. The brick manufac- 
 
288 
 
 Railroad Freight Rates 
 
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Public Sentiment and Hepburn Bill 289 
 
 turer, who was the complainant in the particular case 
 that brought forth this decision, subsequently pro- 
 tested that it worked injustice to his business and the 
 case was opened for further argument. An example of 
 the application of the principle which the decision in 
 this case ignored is that which arose in Indiana at the 
 time of the waning of natural gas in the district to which 
 glass and tinplate factories had been attracted by the 
 presence of this fuel. These industries made "an ex- 
 position to the railroads showing that they would not be 
 obliged to remove to other locations if they could ob- 
 tain coal to take the place of the disappearing natural 
 gas. The price which they could afford tp pay, however, 
 would necessitate the transportation charge being mate- 
 rially reduced. The railroads, to enable the factories to 
 continue in operation, that they might obtain the traffic 
 in their finished products and in the supplies used by the 
 communities dependent upon them, materially reduced 
 the rate upon coal for their consumption without re- 
 ducing the rates upon the same coal from the same fields 
 to the retail dealers who sell it for domestic consump- 
 tion or to the companies operating the trolley and elec- 
 tric light lines. The latter consumers at once made com- 
 plaint, but the Indiana State Railroad Commission finally 
 upheld the discrimination on the part of the railroads as 
 justifiable. 
 
 The complaints as to the rates on cotton piece goods 
 in Group VIII are from merchants of Wichita, who 
 seek concessions that will enable them to extend their 
 wholesale markets. The two complaints as to rates on 
 furniture are from a new factory in Mississippi that de- 
 sires to extend its markets. 
 
 lumber, Coal, and Oil (see Table II). — Lumber is 
 really the only article of commerce upon which the rates 
 of freight are in turmoil. The rapidly changing sources 
 of supply, necessitating a continual readjustment of the 
 freight rate structure, will account in a great measure 
 for this instability. 
 
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 Cotton Se 
 
 
Public Sentiment and Hepburn Bill 291 
 
 have developed on coal as on lumber, they have not 
 nearly so great an effect upon the coal rate structure, as 
 a whole. Certain mines in Maryland claim that they are 
 charged a higher rate to the seaboard than certain other 
 mines in Pennsylvania which are farther away. The 
 Commission ruled that a lower rate should be applied 
 on thin vein than on thick vein coal from the same dis- 
 trict or even the same mine. Exception is taken in 
 Group III to as high a rate on cannel coal as on ordi- 
 nary bituminous coal. Several complaints in Group 
 VIII have arisen from the rapidly shifting competition 
 of coal fields in this region. One dealer complains that 
 a reduction of 50 cents per ton, made during July and 
 August to stimulate shipment and storage during the 
 dull season, discriminates against the small dealers, as 
 the dealer with capital can accumulate coal at this rate 
 which he can sell at a later period at 50 cents a ton lower 
 than the man whose capital will only permit him to pur- 
 chase coal for immediate sale. 
 
 The complaints as to the rates on oil are of the National 
 Petroleum Association, and applied as to the rates in 
 general on petroleum and its products, especially in the 
 region north of the Ohio and east of the Missouri Rivers. 
 They were dismissed by the Commission as being too 
 sweeping, not sufficient evidence being presented to en- 
 able it to pass upon any specific rate. 
 
 Animal Foods (see Table III). — The complaints on 
 hay are as to the rates on that commodity from various 
 points in Kansas to Kansas City. 
 
 Through Koutes and Through Rates (see Table III). — 
 The one case of interest is that of the electric railway 
 company, which endeavors to establish through rates 
 and through routes in connection with a steam railroad. 
 The Commission ordered one of the railroads extending 
 to the Hudson River to stop discriminating in favor 
 of the Standard Oil Company by refusing to take oil 
 in tank cars from Titusville to Brooklyn. The railroad 
 claimed that, as the oil had to be delivered direct from 
 the cars, its handling at that terminal was exceedingly 
 hazardous and has appealed the case. 
 
292 
 
 Railroad Freight Rates 
 
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Public Sentiment and Hepburn Bill 293 
 
 Incidental Service (see Table IV). — Bituminous coal 
 is not taken from the mines unless there are railroad 
 cars at the mine-mouth to receive it. The operation of 
 a bituminous coal mine is, therefore, dependent upon its 
 supply of coal cars. The equitable distribution of the 
 available cars among the mines in a district is, therefore, 
 of utmost importance to the operators, who jealously 
 watch the number of cars obtained by their competitors. 
 There are points at issue as to what constitutes an 
 equitable distribution. One is, as to whether the cars 
 assigned by a railway company to be loaded with fuel 
 for the consumption of its locomotives should be 
 deducted from the total number of cars before ap- 
 portionment is made among the various mines. Another 
 is as to whether the cars owned by a coal company should 
 be included in the total number apportioned among the 
 mines. These questions are submitted to the Commis- 
 sion in the complaints which are tabulated above, as 
 well as complaints of discrimination for one reason or 
 another against this mine and in favor of that mine. A 
 frequent cause of these complaints is that the propri- 
 etary interest which a railroad company may have in 
 mines along its lines leads the owners of other mines 
 to be peculiarly suspicious of discrimination in the dis- 
 tribution of cars. 
 
 A singular question as to car distribution arose in the 
 citrus fruit regions of California. The commission mer- 
 chants desired that the basis of distribution of avail- 
 able cars be the fruit held in different storehouses. The 
 fruit growers, desiring to ship direct to the markets, in- 
 sisted that the basis of distribution be the fruit available 
 for shipment in the groves. After a lengthy investiga- 
 tion and the taking of much testimony the Commission 
 arrived at the foregone conclusion that a rigid and in- 
 flexible rule was not desirable, thereby leaving the mat- 
 ter as it was. 
 
 The complaints as to switching charges in Group VI 
 are principally petitions for reparation because the 
 switching charge on livestock at Chicago has not been 
 
294 Railroad Freight Rates 
 
 reduced from $2 to $1 a car, as ordered by the Commis- 
 sion, the railroads protesting that the order is unjust. 
 
 St. Louis complains that, whereas the railroads make 
 an allowance of three-fourths of a cent per 100 pounds 
 for elevator service at Omaha, Atchison, and Kansas 
 City, they make no such allowance at St. Louis, that city, 
 therefore, being discriminated against to this extent in 
 the aggregate rate on through shipments. This com- 
 plaint grew out of a long-standing inequality, the ele- 
 vation charge having been allowed at certain cities, while 
 not at others. In the case of grain transshipped through 
 two markets, at each of which allowance was made for 
 elevation, the burden bore especially upon a competing 
 dealer whose grain passed through but one market. 
 For example, the elevation allowance at both Omaha 
 and Chicago, on grain passing through each of those 
 markets in succession, would give the dealers the great 
 advantage of two allowances for elevation, whereas, grain 
 passing through but one primary market, Kansas City, 
 perhaps, would carry but one elevation allowance. The 
 railroads found the matter difficult of adjustment, but 
 it has been settled by the Commission, which has or- 
 dered the abolition of this charge at all of the grain 
 markets. (See page 182.) 
 
 There is also complaint as to the charge of 2 cents 
 per 100 pounds on hay, reconsigned at East St. Louis, to 
 points in the Southeast. 
 
 To obtain carload rates upon less than carload ship- 
 ments consigned for export by various shippers, an ex- 
 port company was formed to assemble such shipments 
 in Chicago and send them to New York in carload lots. 
 The railroads claim that the carload rate on mixed car- 
 load lots applies only to merchandise owned by one con- 
 signor and shipped to one consignee, hence the matter 
 was placed before the Commission, which ruled, but 
 without unanimity, that the practice of the export com- 
 pany was permissible. The Circuit Court of the United 
 States in the New York District decided against this 
 ruling, sustaining the position of the railroad companies. 
 
Public Sentiment and Hepburn Bill 295 
 
 Comnmnity Complaints (see Table V). — In every one 
 of these community complaints it is the endeavor of a 
 community to obtain lower rates in competition with a 
 rival community. The nature of the specific complaints 
 is disclosed in a subsequent chapter. 
 
 Recapitulation (see Table VI). — ^When the total 
 number of complaints made during this sixteen months 
 is compared with the total transactions between the 
 shippers and the railroads of the United States, with 
 the volume and variety of the traffic movements, their 
 number and their importance dwindle into insig- 
 nificance. When it is considered that there is not a 
 mile over which grain and grain products are not 
 shipped, that they flow from the great grain surplus 
 States throughout the East and the South for consump- 
 tion in every community, and for export both through 
 the ports of the Atlantic and of the Gulf, that they 
 also go throughout the West, along the Pacific Coast 
 from Seattle to Los Angeles, the fact that there were 
 but twenty-five formal complaints during the year and a 
 third is a striking testimonial to the fairness of the grain 
 rate structure as a whole. 
 
 If this comparison be followed throughout the tabu- 
 lations — if the total number of formal complaints be 
 compared with the volume of traffic in each commodity, 
 with its ramifications and with the millions of rates 
 that form the total freight rate structure of the country 
 — it is a matter of surprise that the complaints should be 
 ■so few. 
 
 The complaints as to rates on raw materials of manu- 
 facture are conspicuously scant. The slight importance 
 of the complaints as to rates upon manufactured products 
 per se, that is, that do not grow out of the complaints 
 of communities in general, is exemplified by the fact 
 that the commodities which are the subject of complaint 
 are fewer than fifty in number, whereas, an enumeration 
 of manufactured articles of all kinds would include 
 three thousand or more items. 
 
 The list of community complaints is conspicuous by 
 
296 
 
 Railroad Freight Rates 
 
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Public Sentiment and Hepburn Bill 297 
 
 the absence of nearly all of the great commercial centers 
 of the country. It includes Indianapolis, New Orleans, 
 Minneapolis, Denver and Kansas City, but even in these 
 cases, with the exception of Indianapolis, it is certain 
 particular rates that are complained of and not the gen- 
 eral rate structure affecting the commerce of the city. 
 The list does not include Boston, New York, Philadel- 
 phia, Pittsburg, Baltimore, Richmond, Savannah, Atlanta, 
 Cleveland, Cincinnati, Chicago, St. Louis, Galveston, San 
 Francisco, Portland. It embraces a dozen or so of the 
 smaller towns and cities of the South and West, but not 
 one of the thousand or more towns of similar or greater 
 importance in various parts of the country. 
 
 Throughout the tabulations the earlier developed re- 
 gions of the North and East show the effect of the 
 wars of rates and treaties of peace which led to the exist- 
 ing rate adjustments that are of great stability and give 
 general satisfaction. The region from Maine to Illinois 
 produced fewer than one-fifth of the total number of 
 these complaints, although its railroads move more than 
 one-half of the tonnage of the country. That Group 
 VIII should have produced the greater portion of com- 
 plaints is logical, as it includes the new State of Okla- 
 homa and the surrounding States where activity in gen- 
 eral is still at the boiling stage. Here the railways have 
 been extended and intertwined in the last dozen years 
 with a rapidity so great that the exact adaptation of 
 their freight rates to the developing commerce of the 
 region is still in process. 
 
 Although the total number of complaints in a way rep- 
 resents the measure of the grievance felt by the ship- 
 pers against the railroads, it is the measure in which 
 these complaints are adjudged to be well founded that 
 more nearly tests their reasonableness. It is therefore 
 significant that on April 11, 1908, of the formal com- 
 plaints filed with the Commission during the sixteen 
 months ending December 31, 1907, the number disposed 
 of in favor of the defendant railroads exceeded by more 
 than 33 per cent, the number decided in favor of the 
 
298 
 
 Railroad Freight Rates 
 
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Public Sentiment and Hepburn Bill 299 
 
 complainants. If the same ratio of disposition holds 
 throughout the cases not then decided, the greater part of 
 the 425 complaints will have gone against the complain- 
 ants. The considerable number of cases remaining unde- 
 cided at the date of the examination indicates no lack of 
 industry on the part of the Commission. The complaints 
 listed in the tables are those entered upon the docket 
 and not those submitted for decision. After the mak- 
 ing of the complaint an extended period often unavoid- 
 ably elapses before the hearings are held, the evidence 
 and arguments presented, all of which constitute a neces- 
 sary preliminary to the formal submission to the Com- 
 mission for its decision. A great deal of the work is 
 done not directly by members of the Commission, but 
 by " special examiners," men of comparatively small 
 salary, who are sent to different parts of the country 
 to hear cases, and they often write the decisions, the 
 Commissioners being so pressed with work that every 
 case cannot fully receive their direct attention. 
 
 It is not intimated that the efficacy of the Commission 
 as a tribunal for the adjustment of complaints between 
 shippers and the carriers is disclosed in its entirety by 
 the foregoing analysis. As an intermediary and con- 
 ciliatory agency it brings about an agreement in many 
 cases where there has been a difference of opinion before 
 that difference assumes the character of a dispute. This 
 analysis of the complaints made to the Commission dur- 
 ing a fairly extended period in which there was every 
 reason to expect that every formidable or longstanding 
 disagreement would be presented to it, certainly does not 
 indicate any radical fault in the freight rate structure of 
 the railroads of the United States. Even when there 
 is a difference between a shipper and a railroad as to 
 what constitutes a proper rate, the margin of difference 
 is usually narrow. These differences, when applied to 
 all the shipments which they concern, may aggregate, 
 in the course of a year, a large sum, and the sum total 
 of the differences arising throughout a period of years 
 
300 Railroad Freight Rates 
 
 a sum that, although enormous, is an infinitesimal frac- 
 tion of the aggregate payments made by all of the ship- 
 pers to all of the railroads. The proportion borne by 
 the complaints made to the Commission to the aggregate 
 transactions "between the shippers and the carriers is 
 no more than the proportion borne by the cases that 
 come before the justices of the peace to the conduct in 
 general of the inhabitants of an orderly community. 
 Even in an orderly community, however, it cannot be 
 said that justices of the peace are not essential to its 
 well-being. That there should be a tribunal to which a 
 shipper may have recourse as a last resort goes without 
 saying. Its very existence tends toward a diminution 
 of injustice, to the exercise of greater care on the part 
 of the transportation companies in adjusting their 
 charges. A most useful function of the Commission, 
 acting as an impartial body, has been to disabuse the 
 mind of many a. complainant that he had a real griev- 
 ance. Another function of inestimable value to the rail- 
 roads is that the Commission can settle a contention, such 
 as not infrequently arises, wherein they are between the 
 upper and the nether millstone of opposing interests, 
 and powerless to effect an adjustment without bringing 
 upon them the ill-will of one or the other party and often 
 a consequent loss of revenue. 
 
CHAPTER XX 
 
 THE INFLUENCE OF THE COMMISSION 
 TOWARD UNIFORMITY OF PROCEDURE 
 
 THE SYSTEM OF ACCOUNTS 
 
 Although the main items of a balance sheet of one 
 railroad company are necessarily very much the same as 
 those of another, there is room for difference of opinion, 
 sometimes even as to what constitutes an asset and what 
 a liability, as to whether one amount is properly charge- 
 able to profit and loss, or another to surplus. In that 
 classification, whether of receipt or expenditure antece- 
 dent to the aggregation of similar accounts, there is 
 often room for wide difference of opinion as to whether 
 a given sum should be included in this account or that. 
 The great number and variety of purposes for which a 
 railroad company is obliged to expend money, and the 
 great number and variety of sources from which it 
 receives money, necessitate a great number and variety 
 of main accounts, each divided into secondary accounts, 
 which are subdivided into minor accounts, which are 
 again subdivided. Both receipts and expenditures of 
 even a comparatively short railroad are so large that un- 
 less the system of accounts be of logical construction 
 and its keeping be subjected to thorough tests there is 
 the opportunity for manipulation on the part of a skill- 
 ful and unscrupulous accountant, which, in not its most 
 objectionable aspect, may take the form of covering over 
 illicit or surreptitious expenditures by their inclusion 
 under accounts to which they bear no relation. 
 
 The separate development of the railroads of the 
 United States led to a wide diversity in their accounting 
 systems. Through the examination of experts at the de- 
 mand of bankers whose offices have now and then been 
 
 301 
 
302 Railroad Freight Rates 
 
 invoked for the purpose of securing additional capital, 
 or at times of reorganization, the accounting methods 
 of at least the principal railroad systems have been 
 brought into such form that serious manipulation is not 
 facile, but it is difficult, without constant supervision, to 
 prevent the possibility of the concealment of illegitimate 
 expenditures. 
 
 From the time of its original organization, the Inter- 
 state Commerce Commission has insisted that the pay- 
 ment of rebates, or of commissions and gratuities to se- 
 cure traffic, could not be absolutely prevented until all 
 railroad companies were obHged to adhere to a uniform 
 system of keeping accounts, and the Commission, through 
 its authorized agents, was allowed to inspect those 
 accounts. The Association of American Railway Ac- 
 counting Officers, formed in 1888, throughout its various 
 discussions has led toward uniformity in many phases of 
 accounting, but it remained for the Hepburn law, au- 
 thorizing the Commission to prescribe a uniform sys- 
 tem of accounts and enforce its adoption, to bring about 
 absolute uniformity. Immediately after the enactment 
 of the law the Statistician of the Commission, in con- 
 junction with the Association of Railway Accounting 
 Officers, gave to the matter of a uniform system dis- 
 cussion and consideration which resulted in the adop- 
 tion, on July I, 1907, of an approximately complete ac- 
 counting system which is now being perfected for use 
 by all of the railroads of the United States. 
 
 There is one phase of the authorization of the Hep- 
 burn law and the action of the Commission thereunder 
 with which the administrative officers of many of the 
 railroads are not content. The Act specifies that not 
 only shall the Commission prescribe a uniform system 
 of accounts which shall be obligatory upon all of the 
 railroads, but that no railroad shall keep any accounts or 
 memoranda other than those prescribed by the Commis- 
 sion. These administrative officers state that an ac- 
 counting system under which every item of receipt or 
 of disbursement shall be so allocated that any erroneous 
 
Influence Toward Uniformity 303 
 
 disposition may be detected, while it answers the original 
 bookkeeping requirement of checking income and outgo 
 and arriving at a knowledge of profit or loss and present 
 worth, does not meet the purpose entailed upon a thor- 
 oughly comprehensive accounting system by the develop- 
 ments of recent years. With the extension of the rail- 
 roads into large systems, each under centralized control, 
 it has become impossible for any managing or directing 
 officer to know by personal oversight that the various 
 operations are properly and economically conducted 
 throughout their minutiae. It is, therefore, necessary for 
 him to have reports showing the application of material 
 and labor for various purposes, showing the cost of each 
 of various details of operation apportioned by units of 
 this kind and that kind in order that expenditure for a 
 specific purpose at one time may be compared with the 
 expenditure for that same purpose at another time, in 
 order that the expenditure on one division may be com- 
 pared with the expenditure on another division, the ef- 
 ficiency of various officials in the economical performance 
 of their functions thus being brought to definite record. 
 This is the statistical as contrasted with the book- 
 keeping phase of accounting. That is, the entries of 
 receipts and expenditures are so arranged as to afiford 
 a test of the efficiency of operation and not alone to 
 serve the primary purpose of an accounting system de- 
 signed to see that all revenue due to a company is 
 received by it, that disbursements are made only upon 
 proper authority, and that the balance sheet is properly 
 arrived at, which, alone, have been the points of interest 
 to the Accounting Officers' Association and to the Com- 
 mission. These administrative officers claim that not 
 only is the statistical system still in process of develop- 
 ment, but that different statistical records are needed 
 by different railroads to meet peculiar conditions; and 
 that a managing officer, in order to make use of statistics 
 in the directions of greatest service to him, should be 
 allowed to arrange and rearrange them as he may think 
 will best suit his ends. In other words, they claim that, 
 
304 Railroad Freight Rates 
 
 as statistical systems have not, as yet, completely ma- 
 tured on any railroad, that as they need to be varied to 
 meet peculiar conditions, and, above all, that as they are 
 instruments in the hands of particular men, their varia- 
 tion to meet the requirements of those men is essential 
 to furthering the development of efficient administration 
 w^hich would be hampered by the crystallization of sta- 
 tistics at this time along the lines of a prescribed and 
 uniform code. 
 
 A UNIFORM CLASSIFICATION 
 
 The separate classifications, developed each for itself 
 by the different railroads, were not the source of marked 
 inconvenience during that period when there was little 
 or no interchange of traffic. As through bills of lading 
 were issued, and it became necessary to quote through 
 rates of freight, it was a nuisance for an agent of one 
 railroad to be obliged to trace an article on which a 
 through rate was desired through the different classes to 
 which it might be assigned by different railroads. Just 
 prior to the enactment of the original Interstate Com- 
 merce Law there were over 130 different classifications 
 in the territory east of the Mississippi and north of the 
 Ohio Rivers. There were not only different classifica- 
 tions for different railroads, but an eastbound classifi- 
 cation different from the westbound, and special classi- 
 fications for use in different sections of this region. The 
 ascertainment of through rates was about as perplexing 
 an undertaking as was pecuniary adjustment in Central 
 Europe in the days when there were approximately lOO 
 different monetary systems in that region. 
 
 The insistence in the debates in Congress and on the 
 part of the Interstate Commerce Commission that the 
 inconvenience and possibilities of abuse growing out of 
 this medley of classifications should be reduced, led the 
 railroad companies operating in the great traffic sections 
 to take steps toward the unification of the classifications. 
 The 130 or more separate classifications in the Trunk 
 Line and Central Traffic Territory were merged into 
 
Influence Toward Uniformity 305 
 
 one, the Official Classification. In like manner the South- 
 em Classification was arrived at for the railroads south 
 of the Ohio and east of the Mississippi Rivers, and the 
 Western Classification for the railroads west of Chicago 
 and the Mississippi River. 
 
 The adoption of the three principal classifications 
 vastly simplified the quoting of rates and the interchange 
 of traffic between the railroads in the respective territory 
 in which each classification was effective. There re- 
 mained, however, a certain confusion in the ascertain- 
 ment of rates and the through billing of traffic between 
 the territory of one and the territory of another classi- 
 fication, and a perplexing variance in the incidental rules 
 of the different classifications. These are still the source 
 of annoyance, especially in the territory contiguous to 
 a classification boundary. From parts of the State of 
 Illinois, for instance, on traffic destined beyond the Mis- 
 sissippi River, an article has to be shipped either under 
 the Official Classification to the river and the Western 
 Classification beyond, or by way of exception one classi- 
 fication must apply from starting point to destination. In 
 such cases, on traffic destined to a considerable distance 
 beyond the river, the Western Classification is applied 
 from the starting point. Likewise, on southbound traffic 
 from some places in Ohio and Indiana the Southern 
 Classification applies from the shipping points, and there 
 are similar overlappings of the classifications at other 
 places. At a commercial center on the boundary between 
 classification areas there is the perplexity caused by the 
 use of different classifications for shipments in different 
 directions. For example, the freight agents of St. Louis 
 use the Official Classification for eastbound, the Western 
 Classification for westbound, the Southern Classification 
 for southbound, and the Transcontinental Commodity 
 Tariffs for Pacific Coast shipments. 
 
 Throughout its existence the Interstate Commerce 
 Commission has persistently called attention to the de- 
 sirability of a freight classification that shall be uni- 
 form for the entire United States. In 1890, as the result 
 
3o6 Railroad Freight Rates 
 
 of conferences extending- over two years between repre- 
 sentatives of the railroads of the different sections, a 
 uniform classification was drawn up, but not adopted, 
 because of the belief that a sudden attempt to enforce the 
 same rules, classes and rates throughout the different 
 traffic regions of the United States would be injurious, 
 not only to the railroads, but to commerce and industry. 
 At divers times since then the railroads have discussed 
 the feasibility of such a classification, but there have 
 been such wide differences of opinion between the traffic 
 officers of the different railroads as to the practicability 
 of its formulation and possibility of its application that 
 little has resulted from the negotiations except a realiza- 
 tion of the difficulty. The classifications of the various 
 sections have developed along the lines characteristic 
 of their respective traffic. Commodities that are staple 
 and enter largely into the traffic of one region are of 
 minor volume in the traffic of other regions, and, there- 
 fore, have been placed in different classes ; the railroads 
 of one section have restricted and those of another have 
 extended the number of carload ratings ; while difference 
 in local practice or in the workings of many minds have 
 resulted in certain articles being placed in one class in 
 one section and in another class in another. The com- 
 merce of the respective sections has, however, become 
 adapted to the respective classifications, and the railroad 
 companies are still fearful, not only of the effect upon 
 their revenue, but of the disturbance to business that 
 would follow the changes necessary to make a classifi- 
 cation uniform for the entire country. In numerous 
 instances an article would have to be advanced to a 
 higher class in one section or reduced to a lower in 
 another, often with a corresponding change in the rate. 
 There are cases, however, in which the different as- 
 signment of the same commodity in different classifica- 
 tions is without apparent justification. For example, the 
 produce dealers of New Orleans obtain dairy products 
 from the farms along both sides of the Mississippi River. 
 These products are differently classified in the Western 
 
Influence Toward Uniformity 307 
 
 Classification, which applies in Louisiana, and the South- 
 ern Classification, which applies in Mississippi, with the 
 result that butter and eggs and chickens pay different 
 rates into New Orleans from farms that are similarly 
 situated in all respects except that they are on different 
 sides of the river. 
 
 Almost immediately subsequent to the enactment of 
 the Hepburn law the Interstate Commerce Commis- 
 sion renewed its effort to bring about a uniform classi- 
 fication, and a bill was introduced in Congress author- 
 izing the Commission to formulate and enforce the 
 adoption of such a classification, if this were not done 
 by the railroads themselves within one year. The 
 measure was not passed, the Commission and the rail- 
 roads agreeing that the latter would make a further 
 attempt to arrive at a practical solution of the difficulty. 
 To this end a committee, composed of five representa- 
 tives each, from the respective regions in which the 
 Official, the Western, and the Southern Classifications 
 now apply, held protracted sessions during 1907 and 
 1908, checking each item of the various classifications 
 seriatim in order to arrive at a thorough understanding 
 of the changes, concessions, and compromises that would 
 be necessary to bring about uniformity. 
 
 The committee reported that in the Southern Classi- 
 fication there are thirteen classes, six designated by 
 numbers and seven by letters. In all thirteen classes 
 there are less-than-carload ratings, the total number 
 of less-than-carload ratings being 3,503, the total number 
 of carload ratings jy^i^ o^ 22.1 per cent, of the less-than- 
 carload. It reported that the Official Classification has 
 six classes designated by numbers and two classes gov- 
 erned by rules, a total of eight classes, in seven of which 
 are less-than-carload ratings. The total number of less- 
 than-carload ratings is 5,852, and of carload ratings 
 4,235, or 72.4 per cent, of the less-than-carload. It re- 
 ported that in the Western Classification there are five 
 classes designated by numbers and five by letters, and 
 that in four of the ten classes are less-than-carload rat- 
 
3o8 Railroad Freight Rates 
 
 ings. The total number of the less-than-carload ratings 
 is 5,729, and of the carload ratings 1,690, or 29.8 per 
 cent, of the carload. It further reports that in the South- 
 ern Classification 33.92 per cent, of the less-than-carload 
 ratings are in the fifth, sixth, and lettered classes; that 
 in the Official Classification only 1.25 per cent, of the 
 less-than-carload ratings are below the fourth class; 
 while in the Western Classification there are no less- 
 than-carload ratings below the fourth class. 
 
 The Committee reports that it believes a uniform 
 classification can be arrived at in time, although it can- 
 not be foretold what the effect will be upon the revenue 
 of the railroads or upon industry and commerce until 
 such classification and ratings are made and placed 
 in effect. It is certain that numerous advances, as well 
 as numerous reductions, will be necessary to bring about 
 uniformity, and that, as they cannot but have a great 
 and far-reaching effect upon industry and commerce, 
 the readjustment must be gradual and each step the 
 result of thorough consideration. Just one example of 
 the great number of difficulties encountered has been 
 instanced as follows : ' It is not reasonable, for example, 
 to expect that a condition will be easily reached in which 
 the rate on cattle shall bear the same relation to the rate 
 on shoes from the western ranges to Chicago, as the 
 rates on the same commodities bear to each other be- 
 tween New York and Boston. The comparison of the 
 present status is as follows: 
 
 Cattle, Montana to Chicago 75 cts. per 100 lbs. 
 
 Shoes, Chicago to Montana $2.85 per 100 lbs. 
 
 Cattle, New York to Boston 19 cts. per 100 lbs. 
 
 Shoes, Boston to New York 25 cts. per 100 lbs. 
 
 The rate on cattle in the one case is but one-fourth 
 of the rate on shoes, while in the other the difference 
 is an inconsiderable trifle. The conditions of the mar- 
 kets demand a low rate on cattle from the ranges, but 
 such conditions do not exist between New York and 
 Boston, where but few cattle are shipped. 
 
Influence Toward Uniformity 309 
 
 It would seem that at the best there will need to be 
 so many exceptions to a uniform classification as to 
 seriously mar its uniformity. 
 
 There is no doubt that the railroads are seriously at 
 work upon the problem, their desire to solve it, if possible, 
 being indicated by the appointment of a permanent com- 
 mittee to work to that end. 
 
 A classification, however, will not be uniform unless 
 it is uniform in fact as well as in name. This means that 
 if the railroads and the Commission agree upon a classi- 
 fication and decide to make it efifective, the modified 
 classifications adopted by several of the States for intra- 
 state traffic will have to be withdrawn. Virginia has 
 such a modified classification, as have Iowa, Nevada, 
 South Carolina, Georgia, Florida, and other States. Il- 
 linois has a published classification different from all 
 others. The State Railroad Commission of Texas has 
 made exceptions to the Western Classification as it ap- 
 plies upon traffic within the boundaries of that State, 
 and exceptions have also been made by other State 
 legislatures and commissions to the classification apply- 
 ing in the general traffic region of which they are 
 part. 
 
 This leads to consideration of the broad question of 
 
 FEDERAL VERSUS STATE RATE REGULATION 
 
 Even before the formation of through lines conse- 
 quent upon the authorizing Act of 1866 it had become 
 evident that the commerce of the United States, both in 
 volume and characteristics, was becoming widely dif- 
 ferent from that of the time when the nation was founded. 
 The rapid development of both railroad lines and traffic 
 has led to the present status whereunder main traffic 
 channels, secondary, and minor traffic channels inter- 
 lace over the entire United States, carrying raw material 
 and finished products, and merchandise of all kinds, from 
 sources of supply often to far-distant places of manu- 
 facture and through widely separated centers of dis- 
 
310 Railroad Freight iRates 
 
 tribution. These traffic channels have formed under 
 the working of the economic processes which are in no 
 wise affected by State boundaries. In their develop- 
 ment to meet the pressure of this traffic for movement, 
 and to develop new traffic, the railroads have extended 
 without regard to State boundaries. 
 
 The development of through freight rate structures 
 has, likewise, been without relation to State confines. 
 The blanket rates of New England depend upon no 
 State lines; the rates between the North Atlantic sea- 
 board and the Mississippi River are centered upon a 
 traffic base line wrought by the flow of traffic which 
 knows not State boundaries in its course; the rate ad- 
 justment to the west of Chicago and St. Louis has 
 evolved out of the contention between commercial cen- 
 ters regardless of what States they may be in. In the 
 Southeast the action and interreaction of rail and water 
 communication is irrespective of the lines dividing the 
 States, and the flow of traffic to and from the Pacific 
 Coast takes no heed of such lines. In Texas the freight 
 rate structure has developed under the limitations pre- 
 scribed by the State, which, however, are based upon 
 political, rather than upon economic, foundations, and 
 is possible because of its great size and isolated position. 
 
 The development of the freight rate structures, as set 
 forth in previous chapters, discloses how close may be 
 the relation that one rate bears to another. It is evident 
 that a change in but a single one of the rates that is a 
 thread in the woof into which the freight rate structure 
 of a region is woven, or under which moves any one of 
 the great staple commodities of commerce, may, in its 
 ramifications, affect every other rate in that regional 
 structure or in that commodity rate adjustment. A 
 rate so changed may be an interstate rate or it may be an 
 intrastate rate. A change, for example, in the intra- 
 state rate between St. Louis and Kansas City would 
 change the rates between any other point on the Mis- 
 sissippi as far north as Dubuque and any other point on 
 the Missouri river as far north as Omaha, and, by so 
 
Influence Toward Uniformity 311 
 
 doing, would change the rates on all through traffic 
 from points east of the Mississippi to points west of 
 the Missouri River. A reduction in the rate on coal 
 from Dulutli to interior points in Minnesota forces a 
 reduction, not only from Superior, Wisconsin, but from 
 Milwaukee, whose coal dealers compete with Duluth in 
 the Minnesota markets. The change in a rate on grain 
 between a station in Kansas and Kansas City may affect 
 the rate from that and contiguous stations to Omaha, 
 and the rates from a number of stations in Kansas to 
 Galveston. The change in a rate between Savannah 
 and Augusta, Ga., may change all rates between the 
 North Atlantic seaboard and the southeastern interior. 
 
 A rate adjustment, working with satisfaction over an 
 extended area and of proved stability under test of the 
 Interstate Commerce Commission or the courts, may be 
 overthrown by the action of a State legislature or State 
 Commission desiring to obtain a local advantage for 
 the shippers of that State. A change in the local rate 
 between a distributing center and local points in the 
 same State may nullify an adjustment of through rates 
 from various cities supplying those points with mer- 
 chandise. No one of these cases is merely hypothetical. 
 The legislature of Minnesota did make a reduction in 
 the coal rate from Duluth. Legislatures of Kansas and 
 Nebraska have made reductions in the State grain rates. 
 The State Railroad Commission of Texas has offset 
 through rate adjustments by prescribing intrastate 
 changes. The State rates of Arkansas, and of Georgia, 
 have, in instances, been modified to give shippers of 
 those respective States advantages over the shippers of 
 other States. The Railroad Commission of Oklahoma, 
 by establishing a low tariff on lumber within the State, 
 forced heavy reductions from adjoining lumber regions 
 in Arkansas, Texas, and Louisiana. The local rates of 
 the State of Indiana are in a snarl in which the Ohio 
 intrastate rates are a factor. 
 
 Not only may the change of an intrastate rate affect 
 interstate traffic, but the physical separation of the two 
 
312 Railroad Freight Rates 
 
 kinds of traffic is practically impossible. The same 
 trains running over the same rails may carry interstate 
 and intrastate traffic in proportions that vary in different 
 trains ; the services of station men, despatchers, and yard 
 men, and train men may be given to both kinds of traffic 
 in proportions that vary from time to time, and, likewise, 
 with the services of the administrative officers. The 
 average cost of moving one ton one mile is but an ap- 
 proximation when the entire freight traffic of a railroad 
 is taken cognizance of in the calculations. The attempt 
 to ascertain the cost of moving one ton of intrastate 
 traffic one mile as distinguished from the cost of moving 
 one ton of interstate traffic one mile cannot be arrived 
 at except by an approximation that, at the best, is enti- 
 tled to but moderate respect. 
 
 Yet, at this time, the traffic manager of every railroad 
 traversing several States is kept in a condition of chronic 
 perplexity in endeavoring to adjust its practice, not 
 only to the regulations prescribed by the Interstate Com- 
 merce Commission, but to those ordained by the various 
 States. This division of governmental authority over 
 the conduct of the traffic of this country is a factor of 
 greater hindrance to its just and equitable movement 
 than are all the conflicting customs of the different rail- 
 roads and discordant classifications of the different re- 
 gions combined. 
 
 That no one can serve two masters is a maxim which 
 might be amplified by the statement that two masters 
 cannot rule one servant without contention. That strife 
 has grown out of the mixed Federal and State regulation 
 of freight rates is a matter of recent history. A local 
 agent in Northfield, Minnesota, was arrested, tried and 
 sentenced by a local judge to one hour in jail because 
 he would not accept rates enacted by the State legisla- 
 ture, although the enactment had been legally enjoined 
 by a Federal judge. In North Carolina the legislature 
 passed an Act lowering passenger rates, and also re- 
 ducing freight rates, from 15 to 25 per cent. The United 
 States Court issued an injunction against the enforcement 
 
Influence Toward Uniformity 313 
 
 of the order, but the State authorities disregarded the 
 injunction and found numerous indictments against the 
 railroad company, which had been active in obtaining 
 it, and its agents, and for a time it did not seem un- 
 hkely that the president and other officers of the com- 
 pany would be imprisoned. The amazing spectacle was 
 presented of the State deliberately driving the road out 
 of the United States Court to which it had applied for 
 refuge. In this case the controversy over the passenger 
 rates was the cause of the more intense friction. Ala- 
 bama not only legislated as to rates, but decreed that if 
 a railroad company, chartered in another State, but 
 doing business in Alabama, should question in a Federal 
 court a procedure of the State legislature or of the 
 State Railroad Commission, such corporation shall for- 
 feit its license for doing an intrastate business in Ala- 
 bama. In accordance with this decree the license of a 
 principal railroad company traversing Alabama was ac- 
 tually revoked by the Secretary of State, and not re- 
 stored until imminent danger had arisen of a clash 
 between the State and Federal authorities. 
 
 That the States may properly exercise police author- 
 ity over the maintenance and operation of the railroads 
 within their respective limits cannot be disputed at this 
 time. It may, however, not be an entirely absurd prop- 
 osition that, inasmuch as intrastate rates and interstate 
 rates are so closely correlated as fo form a practically 
 indivisible rate structure, such authority as may be con- 
 ferred upon the Interstate Commerce Commission to 
 regulate interstate rates should, as a corollary, include 
 the regulation of so-called intrastate rates. Indeed, it 
 is not too much to predict that before this question is 
 settled, the Federal Government will find itself compelled 
 to exercise the same exclusive control over rail trans- 
 portation that it exercises over marine transportation. 
 
CHAPTER XXI 
 
 TRAFFIC EXPERTS IN THE EMPLOY OF 
 SHIPPERS 
 
 In the absence of recorded law the growth of definite 
 and continued relations between men develops custom 
 governing those relations which subsequently often re- 
 ceives legislative sanction and is made the basis of legal 
 enactment. This development is exemplified by the 
 growth of the freight rate structures of the different 
 traffic regions, and it was in process with the railroads 
 when they formed traffic associations, and especially when 
 they resorted to pooling contracts, for which it was 
 endeavored, throughout a considerable period, to secure 
 legal recognition. 
 
 Another development that has been conspicuous during 
 the past few years is the coming forward of interme- 
 diaries between the shippers and the railroads, through 
 whose instrumentality inequalities and maladjustments 
 in the rate structures are being brought into equipoise 
 with a decreasing resort to either courts or commissions. 
 
 In these days of multiplying and intertwining railroads 
 it is exceedingly difficult for their traffic officers to 
 trace the effect of a change, even in one rate, throughout 
 its various ramifications. The situation is not altogether 
 unlike that when, in a delicately balanced iron bridge 
 or steel tower, the changing of the strain upon one 
 strand of cable or one beam will shift the incidence of 
 weight throughout the entire structure. This compari- 
 son is particularly appropriate to the effect produced 
 by the building of a transverse railroad crossing two 
 or more parallel lines, or, indeed, the building of any 
 new line that, by crossing other lines, changes the pat- 
 tern of the network, as by the introduction of a new 
 thread. In such a case the distances by rail between towns 
 
 314 
 
Traffic Experts 3 1 5 
 
 and cities are changed, the relation of competing markets 
 and competing distributing centers are modified, with a 
 resultant upheaval of the rate structure, whose pertur- 
 bations may extend far and wide. For example, as has 
 been pointed out in a previous chapter, the building 
 of a railroad from Kansas City directly to the Gulf 
 caused another line, that had been bringing grain from 
 points in Kansas to KanSas City for eastbound shipment, 
 to arrange a route to the Gulf, over which it sent grain 
 in competition with the new line, the reversal of the grain 
 currents radically changing the grain rate structure of a 
 considerable section. 
 
 When such changes occur a shipper not infrequently 
 finds new combinations by which a rate can be made 
 from a station on one to a more or less remote station 
 on another line at less than the published rate. Indeed, 
 an appreciable number of the cases in which the Inter- 
 state Commerce Commission has awarded reparation 
 to shippers, have arisen out of just such kinks, which 
 are being gradually straightened out. 
 
 Then, again, it is difficult for a traffic officer, dealing 
 with the adjustment of rates on merchandise of all 
 kinds, to trace the effect of a change in the rate on one 
 commodity throughout the rates on all other commodities 
 to which it bears a direct or indirect relation. It is this 
 difficulty which gives rise to many of the problems that 
 continually beset the classification committees. 
 
 This extension and intertwining of the railroads, the 
 ramifying of the different factors that affect the ad- 
 justment of rates, have made the scrutiny of these 
 rates and the estimate of their effect upon his business 
 too complicated and specialized a task to be handled by 
 a member of a firm or an officer of a corporation in con- 
 nection with other duties. Many a corporation and many 
 a firm that is an extensive receiver and an extensive 
 shipper of freight, therefore, employs a " traffic man," 
 whose principal duty once was to bargain with the rail- 
 roads for rates, obtaining rebates when he could, but 
 whose time and energy nowadays are largely absorbed in 
 
3i6 Railroad Freight Rates 
 
 keeping continually familiar with the tariff sheets of the 
 different railroads, in watching the ramifications of any 
 change in rates in order that he may take advantage of 
 an adjustment that may favor the interests of his em- 
 ployers, and endeavor to obtain a revision of an ad- 
 justment that may militate against those interests. 
 
 Such a traffic representative, by specializing upon the 
 study of the rates affecting the materials and products 
 received and shipped by his company, not infrequently 
 obtains a more thorough and far-reaching knowledge of 
 those rates than many, even of the traffic officers of the 
 railroads, each of whom is concerned with the movement 
 of all sorts of traffic under the divers tariffs affecting that 
 traffic. Such a traffic representative of an industrial or 
 commercial company can often trace combinations of 
 rates and weaknesses in the rate structure applicable to 
 his particular commodity, which the railroads are glad 
 to have called to their attention. It is from such men 
 that the information in previous chapters concerning the 
 relation of the transportation charge to prices on the 
 principal products of manufacture has been obtained. 
 They have almost, if not quite, without an exception, said 
 that the railroad companies are ready, as a rule, to give 
 full and prompt consideration to the matters which they 
 bring to their notice; that they are ready to adjust dis- 
 crepancies, or, in cases of difference of opinion, to make 
 a statement of the points involved as they appear to 
 the railroads. 
 
 Every shipper, however, cannot afford to employ an 
 especial traffic representative. In every considerable city 
 there are many establishments, each having a business 
 which, although large, may not justify any one of them 
 in maintaining a representative exclusively to look after 
 traffic matters in its interest. Such shippers are coming 
 very generally to employ, through a Chamber of Com- 
 merce, Board of Trade, Business Men's League, Freight 
 Traffic Bureau, or other association, a traffic representa- 
 tive, whose duty it is to scrutinize the tariffs and watch 
 the rates of the railroads as they affect the commerce 
 
Traffic Experts 317 
 
 of his city. A few cities had such representatives a 
 dozen or more years ago, but their number has greatly 
 increased in the last five years. The generally ex- 
 pressed reason for this is that in the old days each ship- 
 per wanted to negotiate with the railroads himself to the 
 end that he might secure as large rebates as possible, 
 of which no one but himself would know; but that 
 since the enactment of the Elkins law in 1903, the en- 
 forcement of which makes rebates on interstate traffic 
 impossible, the shippers of each city find it desirable to 
 work together. The duties of a traffic representative 
 of a city and of the traffic representative of a particular 
 firm or corporation are similar, but there is the vast 
 difference that while the latter serves but one master, 
 the former has several. In behalf of his clients he 
 studies the tariffs, watching changes in rates. The 
 members of the association through which he is em- 
 ployed advise with him in regard to the rates of freight 
 as affecting their respective business, put before him 
 what they consider to be grievances, and consult with him 
 as to the possibility of obtaining changes in rates and 
 classifications. The traffic representative proceeds, as 
 an attorney, analyzing grievances, and examining ap- 
 plications for changes in adjustments before approaching 
 the railroads. 
 
 The history of the Freight Traffic Bureau has not 
 been the same in every city. At many places the rail- 
 roads have welcomed the offices of a traffic representa- 
 tive as those of an expert intermediary tending to con- 
 serve the relations existing between the shippers and the 
 carriers. In other cities, however, the railroads at first 
 declined to recognize these functionaries, saying that as 
 their business is directly with the shippers their negotia- 
 tions must also be directly with the shippers. This atti- 
 tude, of course, is, in its essence, without justification, 
 as the shippers have the same right to employ a traffic 
 representative as they have to employ a legal represent- 
 ative. The conduct of the traffic representative, how- 
 ever, has often been such as to bring about this attitude. 
 
3i8 Railroad Freight Rates 
 
 Here and there he has filled the newspapers with ac- 
 counts of how the railroads discriminate against the 
 city, and has approached their traffic officers with the 
 overbearing manner of one who will obtain what he is 
 after whether or no. This type of the traffic representa- 
 tive is prone to keep the air filled with complaints against 
 the railroads in order that his constituents may think 
 he is guarding their interests and earning his salary. 
 
 Many of the causes which, all unwittingly on the part 
 of the railroads, may lead to inequalities in the rates 
 affecting a city have been pointed out, and these they 
 are ordinarily prompt to remedy when attention is 
 directed to them. The pressure of the different influ- 
 ences which have made the rate structures what they 
 are has, however, necessarily borne unevenly. It has 
 forced the lowest rates along the lines of greatest traffic 
 movement, and where there has been water or other 
 forceful competition. This varying incidence of economic 
 demand in connection with the discordant decrees of 
 State legislatures and State Commissions has caused, 
 at certain places in divers sections, an unevenness in the 
 rate adjustment that may be compared to the roughness 
 at the bottom of a river whose rocky bed contains cor- 
 rugations over which the current flows, but that resist 
 its erosive power. In such cases there are often features 
 of the rate adjustment that cause complaint in an im- 
 mediate locality, but which the railroads do not desire 
 to change because of the ramifying effect that would 
 derange the flow of traffic in more important currents. 
 It would be as though an attempt were made to even 
 the bed of the river by blasting out the rocks, but the 
 effect of which would be to break down the banks of 
 the river with a resulting greater disturbance in the 
 flow of the current. A striking example of the situation 
 referred to thus generally exists at Indianapolis, and 
 will be described in a following chapter. 
 
 It should also be borne in mind that in the absence of 
 other adjustments the rates on commodities are deter- 
 mined by the regular tariffs and the regular classifica- 
 
Traffic Experts 319 
 
 tions. The pressure of a large volume of traffic or of 
 competition of whatever kind forces reductions. A 
 rate thus reduced and applying on a particular commodity 
 in a considerable traffic channel may be much lower than 
 the regular classification rate for a similar distance 
 where the movement of that commodity may be infre- 
 quent and inconsiderable. That is, to use extreme ex- 
 amples, the rate on raw cotton from Memphis to Savan- 
 nah is much less than the rate on raw cotton from Los 
 Angeles to San Francisco; the rate per ton on iron ore 
 from Ashtabula to Pittsburg much less than the rate on 
 iron ore from Des Moines to Little Rock. The rates 
 upon which little or no traffic moves are known among 
 the railroad men as " paper rates." It is an easy matter 
 for a man to collect a bundle of tariffs and, by picking 
 out a lot of paper rates, make a superficial demonstration 
 that his city is the victim of discrimination. There 
 are traffic representatives who employ a portion of their 
 time in this very procedure. 
 
 Still another situation is presented in a large city of 
 an interior State. The President of the Chamber of 
 Commerce, a man of sane conservatism, capable of see- 
 ing both sides of a question, frankly says that while the 
 railroad rates are not in every case exactly as he would 
 like them, he thinks the railroads are doing the best 
 they can to smooth out inequalities and that they should 
 not be the object of persecution. This man is the head 
 of a large business and an extensive shipper. It hap- 
 pens, however, that the Chairman of the Transportation 
 Committee of that Chamber of Commerce, a broker of 
 but slight practical contact with traffic matters, is what 
 the railroad men designate as a " fire-eater," unsparing 
 in his attacks upon railroad rates and railroad methods 
 in general. The traffic representative of that Chamber 
 of Commerce at the time of his appointment was rather 
 inclined to work along the lines of his immediate superior, 
 the Chairman of the Transportation Committee. The 
 railroads would have none of it. In time he moderated 
 his demeanor and it is now his own testimony that the 
 
320 Railroad Freight Rates 
 
 railroads, as a rule, are willing and ready to give cour- 
 teous consideration to any proposition he makes to 
 them, and that the freight rates affecting the commerce 
 of his city on the whole are satisfactory. 
 
 It is noteworthy that the traffic representatives of 
 the large firms and the great corporations, as well as 
 the traffic representatives of the shippers' associations 
 of the various cities, are, in nearly all instances, men who 
 have been trained in the railroad service, and are fa- 
 miliar with traffic conditions and the construction of 
 rates and rate sheets. In very many cases these men 
 have been taken directly from positions in the railroad 
 service by the offer of higher salaries and find no jiiffi- 
 culty in conducting intercourse with the railroad com- 
 panies on the dignified basis that elicits mutual respect. 
 In other instances these representatives are men who, 
 for one reason or another that oftentimes has not re- 
 flected in the least upon either their character or ability, 
 have not been in the transportation service at the time 
 of their selection, but are entirely efficient in the sphere 
 to which they have been chosen. In exceptional cases, 
 however, an officer or an employee of a railroad com- 
 pany, discharged for cause, has enlisted in behalf of a 
 shippers' association, and actively taken up the cudgels 
 against his former employer. 
 
 With all its incidental evils, however, it is happily 
 evident that the conduct of negotiations on behalf of the 
 shippers of the country with the railroads by traffic rep- 
 resentatives, made expert by their training in the railroad 
 service, and study of the situation on behalf of their 
 clients, is leading, and will lead in increasing degree, to 
 the attainment, not only of amicable relations between 
 the shippers and the carriers, but of a status mutually 
 satisfactory to both. 
 
 A traffic representative having the confidence of the 
 shippers of his city can analyze complaints before they 
 are presented to the railroads, and, by explaining to his 
 cHents the nature of those that are without foundation, 
 can save their being brought to the attention of the rail- 
 
Traffic Experts 321 
 
 road officers at all. That their efforts are often used 
 in this direction is testified to by the railroad officials 
 themselves. When direct resort to the railroad com- 
 panies does not bring redress of what is considered to be 
 a well-founded grievance, and resort to the Interstate 
 Commerce Commission or other tribunal finally be neces- 
 sary, it can be made upon a clearly defined issue. 
 
 It happens in that city which produces a greater ton- 
 nage than any other in the United States that the re- 
 lations between the shippers and railroads are amicable 
 to an extraordinary degree. This good feeling has been 
 brought about in a large measure by the Traffic Club, 
 formed for the purpose of promoting acquaintance be- 
 tween the traffic representatives of the large manufac- 
 turing establishments and the traffic representatives of 
 the railroads, it being thought that through acquaintance 
 and calm discussion would be attained by the shippers 
 and by the railroads a knowledge of the view point of 
 each, and that this would lead to harmony. The shippers 
 who are represented in the Traffic Club, however, are the 
 concerns of great production, each having a representa- 
 tive who gives his entire attention to its transportation 
 interests. The similar needs of the smaller manufactur- 
 ing and mercantile establishments are met by the Mer- 
 chants' and Manufacturers' Association, whose achieve- 
 ments, through methods inaugurated by its traffic man- 
 ager, who used both energy and urbanity in solving the 
 problems that confronted him, have been so remarkable 
 that they are chronicled here in some detail. 
 
 A fundamental discussion of the freight rates indicated 
 that many members of the Association were lacking in 
 comprehensive knowledge of the adjustments. It was 
 found that ostensible inequalities did not work to the 
 prejudice of the city — indeed, that in at least one case 
 an apparent disadvantage on the whole inured to its 
 benefit — and that the rates on the raw material consumed 
 in and the products manufactured by the city were en- 
 tirely equitable in almost every instance. Real grievances 
 were promptly adjusted by the railroad companies, who 
 
322 Railroad Freight Rates 
 
 also made certain modifications that were requested in 
 classifications. 
 
 It was ascertained that the wholesale dealers of the 
 city, although enjoying freight rates as favorable as those 
 of competing commercial centers, were not selling mer- 
 chandise in as large volume in some parts of the com- 
 petitive area ; that in many cases shipments did not 
 reach their destination in this area until 24 or even 48 
 hours after shipments from rival commercial centers at 
 no greater distance. This led to the Association arrang- 
 ing that each of its members enclose a postal card with 
 the invoice of each shipment to a customer. The cus- 
 tomer would note upon the card the number of days 
 the shipment had been in transit and whether it was 
 received in satisfactory condition, and return the card 
 to the traffic manager of the Association. In the course 
 of a year nearly 20,000 of these postal cards were re- 
 ceived by the Association and classified according to 
 the towns from which they were received. 
 
 When it was exceptional that a shipment took an undue 
 time in transit complaint was not made to the railroad, 
 but when such long time in transit was the rule, inves- 
 tigation was made to ascertain the cause. It was found 
 that, for instance, freight for a given destination was 
 loaded in the same car with shipments destined to other 
 points and transferred at an intermediate junction, this 
 unloading, waiting for a car and loading again, con- 
 suming time. In many of such cases a railroad company 
 was induced to run a car — RQ, as it is termed, regard- 
 less of quantity of load — through to the place of destina- 
 tion, thereby avoiding the delay of transfer from one 
 car to another. The Association would notify its mem- 
 bers of the inauguration of such through car service 
 and ask them to endeavor to provide traffic sufficient to 
 justify its continuance. The merchants, thereupon, 
 would, for a period, concentrate the efforts of a number 
 of their traveling men in the region served by the 
 through car, their solicitation on the strength of the 
 improved service not infrequently resulting in additional 
 cars being placed in service. In the case of outlying cities 
 
Traffic Experts 323 
 
 and towns, each of which could be reached by two or 
 more routes, it was sometimes found that tonnage suf- 
 ficient to justify the maintenance of an especial through 
 car could be secured if the merchants would send all of 
 their shipments via one route. In cases where shipments 
 did not continue at a rate sufficient to justify the service 
 of an especial car every day, the railroads would agree 
 to provide such a car every second day or twice a week, 
 in rare instances even only once a week, the shippers 
 agreeing to forward their consignments on the days of 
 the special service. The consignees preferred such an 
 arrangement notwithstanding that their receipts were in- 
 termittent, it being to their advantage to have regular 
 days for receipt and that their shipments be not subject 
 to the handling necessitated by transfer. It sometimes 
 happened, in the case of a railroad receiving freight at 
 two or more stations, that an aggregate shipment, suf- 
 ficient to justify a special car to a destination of even 
 minor importance, could be obtained if the merchants 
 would concentrate their deliveries at one station. 
 
 It was sometimes found that consignees would fre- 
 quently report freight as being 24 or 48 hours late, 
 although the records of the railroads showed that it had 
 promptly reached its destination, it developing that the 
 fault was with a consignee's drayman, who had allowed 
 the freight to remain unnecessarily long at the station. 
 Other cases of delay were due to the inadequate indica- 
 tion of the address ; packages often being badly or im- 
 properly marked, or even not marked at all. Such dere- 
 lictions were brought to the attention of the members 
 of the Association, who explicitly instructed shipping 
 clerks to avoid repetition. 
 
 Both the merchants of the city and the railroads were 
 agreeably surprised at the results obtained from the im- 
 proved service, which owed its inauguration to the As- 
 sociation, their traffic with any one of several cities and 
 towns being increased from 50 to 600 per cent. These 
 results clearly indicated that whatever had been the short- 
 comings on the part of the railroads they pertained not 
 to rates, biit to service, which the railroads were only too 
 
324 Railroad Freight Rates 
 
 glad to improve when the directions in which improve- 
 ments could be made were indicated to them. 
 
 The work of the Association was directed, not only 
 toward the facilitating of outbound shipments, but to im- 
 provement in the handling of inbound shipments. It 
 co-operated with the railroads, who found that the freight 
 received at the local freight houses was often allowed to 
 remain an undue time on the platforms, the merchants 
 preferring to incur storage charges to taking it 
 promptly away. The attention of the merchants was 
 called to the fact that this resulted in freight being 
 piled up to a height of fifteen or sixteen feet, and that it 
 often had to be handled over and over again to obtain par- 
 ticular shipments in the bottom or middle of stacks, the 
 liability to damage thereby being increased and delay 
 caused to drays and wagons in waiting. The shippers 
 agreed to assist the railroads by taking their freight from 
 the stations promptly and also to aid them in the move- 
 ment of carload freight by giving prompt attention to 
 the loading and unloading of cars placed on team tracks 
 and industrial sidetracks. 
 
 One of the many advantages secured by the co-opera- 
 tion of the shippers in this Merchants' and Manufac- 
 turers' Association was the promotion of acquaintance- 
 ship among its members, many being brought into cor- 
 dial and helpful relationship who had been in business 
 for many years, often in the same neighborhood, with 
 but the barest acquaintance. 
 
 In earlier chapters has been indicated the relation 
 that the freight rates bear to the movement of the prin- 
 cipal raw materials, and have been outlined the regional 
 rate structures under which distribution is made through 
 the commercial centers of manufactured products and 
 merchandise in general. The attitude of each city to- 
 ward the freight rate adjustment, as it affects the in- 
 dustries and commerce of that city, is disclosed by the 
 results of a survey made during the period extending 
 from February, 1907, throughout October, 1^6$. 
 
CHAPTER XXII 
 THE COMMERCE OF THE CITIES 
 
 The commerce of a city, as well as of any other 
 traffic district, naturally divides into three classes: first, 
 that in the commodities which it produces for market 
 elsewhere ; second, that in the commodities which it 
 must bring from elsewhere for consumption within its 
 limits ; and third, that in the commodities for which it 
 is a distributing center, those which both come from 
 elsewhere and are marketed elsewhere. A fair con- 
 sideration of the eflfect of the freight rates upon the 
 commerce of a city must, therefore, take into account, 
 not simply the extent to which they facilitate or hinder 
 the movement of a fractional part of the traffic, but the 
 total effect of the rate adjustment upon the total com- 
 merce. 
 
 Of the three classes of traffic the first is the most im- 
 portant, for if a community cannot find adequate mar- 
 ket for that which it produces it will not be able to 
 purchase that which it needs. The first class is also 
 the most important, not only as affecting the prosperity 
 of a city, but as affecting the material welfare of the 
 nation, for a prime factor in that material welfare is 
 the facility with which the people of all communities 
 may obtain the products which they require. The sec^ 
 ond class of commerce is also of importance to the 
 nation, as a whole, for another prime factor in its ma- 
 terial welfare is the facility with which the products of 
 different communities find markets. In other words, that 
 articles of material need shall be produced is the first 
 consideration, and that they shall be conveyed to those 
 who need them is a consideration that is almost, if not 
 quite, as important as the first. The test of a system 
 of freight rates from the point of view of the entire 
 
 32s 
 
326 Railroad Freight Rates 
 
 nation is, therefore, the extent to which it affords 
 facility or hindrance to the production and consumption 
 of commodities on the part of the whole population, the 
 extent to which distribution is facilitated among the 
 people of the whole nation. Viewed in this broad aspect, 
 it makes little difference to the nation as a whole whether 
 the people of a given community make their purchases 
 from one or another retail merchant, or whether the 
 retail merchants of a certain area obtain their stocks 
 from one or another equally convenient and serviceable 
 wholesale center. It makes a vast difference, however, 
 to a retail merchant whether the residents of the com- 
 munity purchase their suppHes from him or from a rival, 
 and it makes a vast difference to the wholesale dealers 
 of a commercial center whether the retail merchants of 
 a considerable area obtain their stocks from them or 
 from the competing wholesale dealers of a rival dis- 
 tributing center. That is, while the requirements of 
 an extended population can be met as well, within 
 limits, through one as through another series of distribu- 
 ting centers, the merchants of each distributing center 
 are at all times desirous to increase their business and, 
 therefore, to extend the radius of their markets. When 
 the freight rate adjustment gives, or apparently gives, 
 the wholesale dealers of one city an advantage, or an 
 apparent advantage, over the competing wholesale deal- 
 ers of a rival city, pressure is brought to bear upon the 
 railroads for a readjustment of the rates. It has, there- 
 fore, often come about that the rate adjustment af- 
 fecting a city as a distributing center, — that is, in the 
 marketing of goods obtained from other places and sold 
 at other places which, from a broad economic standpoint, 
 is of less importance than either of the other two classes 
 of its commerce, — has subjected the freight rates to 
 the greatest stress because of the immediate importance 
 of that adjustment to its wholesale merchants. 
 
 As the railroads followed the westerly extending pop- 
 ulation, the great cities of the North Atlantic seaboard 
 
Commerce of the Cities 327 
 
 sought to retain the distributive function. As the rail- 
 roads were built beyond the western termini of the 
 Trunk Lines, those termini endeavored to prevent the 
 through shipment of merchandise that their dealers 
 might continue to profit by having it pass through their 
 warehouses. A most conspicuous example was at Erie, 
 where the citizens en masse endeavored to prevent phys- 
 ical connection between the tracks of the railroad con- 
 necting that city with the East and the railroad being 
 constructed from that city toward the West; the ensu- 
 ing riot, known as the Erie War, not being quelled until 
 there was the interposition of Federal power. Rivalry 
 between commercial centers and towns aspiring to be- 
 come commerical centers, as bitter in spirit although not 
 so forcible in manifestation, has followed the develop- 
 ment of the country step by step as it has progressed 
 beyond the Missouri River. This rivalry, through the 
 influences which it has brought to bear upon the rail- 
 roads, has been, as shown in the chapter devoted to the 
 regional rate structures, a prime factor in the moulding 
 of those structures. The manner in which the rate 
 structure of the region affects the commerce of each of 
 the principal industrial and commercial centers of that 
 region will now be considered. Where the relation of 
 the freight rates to the products brought into a city for 
 its consumption and to the products manufactured by a 
 city for market elsewhere have been indicated in pre- 
 vious chapters, reference to these classes of its com- 
 merce will be omitted here, and consideration given alone 
 to the rate adjustment as affecting its status as a dis- 
 tributing center. 
 
 THE NORTH ATLANTIC SEABOARD 
 
 The commerce of the City of Boston is fairly typical 
 of that of any one of the score or more of important 
 towns of southern New England. Under the rate struc- 
 ture which brings raw material to every one of these 
 
328 Railroad Freight Rates 
 
 towns at the same rate, and takes out manufactured prod- 
 ucts at the same rate to the consuming population west 
 of the Alleghany Mountains, placing the entire district 
 upon practically the same basis as to the charge to and 
 from these markets that applies to and from the com- 
 peting region of which New York and Philadelphia are 
 the focal centers, it would be singular if there were not 
 general satisfaction on the part of the manufacturers 
 and merchants with the rates of freight. That there is 
 such general satisfaction was disclosed by interviews 
 with leading men in every line of industry extending 
 over a period of three weeks. The only suggestion that 
 even savored of complaint was from a manufacturer of 
 rubber goods, who thought he should have a carload 
 rate to Chicago. This satisfaction does not apply to the 
 export grain rate, which is the same as to 'New York; 
 , the Boston grain dealers being much opposed to the dif- 
 'ferential rate enjoyed by Philadelphia and Baltimore, 
 which was fixed at its present status by arbitration of the 
 Interstate Commerce Commission. 
 
 To the extent that the freight rates of the railroads 
 affect their commerce in general, New York, Philadel- 
 phia and Baltimore, the other principal cities of the 
 North Atlantic seaboard, together with the thriving cities 
 and towns that are thick in the intervening territory, 
 have as little cause for complaint as Boston. These cities, 
 the Eastern termini from which extended the first 
 through lines toward the West, were the beneficiaries of 
 the competition that raged between the Trunk Lines and 
 resulted in giving them the lowest through rates on raw 
 material inbound and on manufactured products out- 
 bound that exist in the United States. The fact that 
 no one of these cities appears as a complainant against 
 the railroads during the period of the analysis of the 
 docket of the Interstate Commerce Commission set forth 
 in a previous chapter, indicates that their shippers are 
 aware of their favored status, and this was almost inva- 
 riably the testimony of the considerable number whose 
 expressions were sought. 
 
Commerce of the Cities 329 
 
 BUFFALO 
 
 The Great Lakes are navigable from the western 
 shores of Lake Superior to where the eastern flow is 
 over the Niagara precipice. Its location to the west of 
 this obstruction made Buffalo the most prominent lake 
 port in the State of New York, the city which the rail- 
 road lines from the metropolis sought to enter. Its 
 early prominence was as a place of reception and dis- 
 tribution for lumber brought down the lakes. Of later 
 years it has been the leading port through which grain 
 brought down the lakes has been transferred for further 
 shipment by the railroads or the Erie Canal; a port to 
 which ore is brought from the North by boats that take 
 anthracite and bituminous coal as return cargoes, as well 
 as vast quantities of the merchandise manufactured in 
 the industrial cities of the North Atlantic seaboard. The 
 fact that it has the advantage of water transportation, 
 and of rail rates adjusted thereto, on the staple food- 
 stuffs from the grain and grazing grounds of the West, 
 together with its proximity to the eastern manufactur- 
 ing centers, accounts for the fact that Buffalo enjoys 
 rates of freight on her articles of general consumption 
 averaging as low as those of any city in the United 
 States. 
 
 The water carriage of grain has led to this city becom- 
 ing a flour milling center, and to consequent rivalry with 
 Minneapolis. The millers at the head of the lakes nat- 
 urally desire the difference between the rates on wheat 
 and the rates on flour kept at a narrow margin to facili- 
 tate the distribution of flour from their mills; while the 
 millers of Buffalo likewise naturally are in favor of the 
 lowest rates on grain that they may obtain their raw ma- 
 terial at a cost that will enable them to sell flour at prices 
 that will secure its wide distribution in competition with 
 Minneapolis. The fact that the Trunk Lines endeavored 
 to increase the rate on flour from Buffalo to places of 
 eastern consumption by one or two cents per 100 
 pounds, while the western lines made no increase from 
 
330 Railroad Freight Rates 
 
 the northwestern mills to the same points, aroused com- 
 plaint of the Buffalo millers, in response to which the 
 Interstate Commerce Commission restored the rates pre- 
 viously in effect. 
 
 Beginning at about the time of the Pan-American Ex- 
 position, the commerce of Buffalo received a new stim- 
 ulus. The diffusion of knowledge as to the many 
 advantages of the city led to an increase in the popula- 
 tion; the utilization of the power of Niagara brought 
 industries. The eyes of iron masters opened to the fact 
 that the cheapness with which ore is brought by lake to 
 Buffalo, together with the low transportation charges on 
 limestone, give the city an advantage in the production 
 of iron and steel, notwithstanding that it is not so near 
 the coal fields as Pittsburg. Hence the erection of the 
 great plants at Buffalo, the population of the city from 
 this source alone having increased 50,000 or more in 
 half a dozen years. 
 
 Its industrial limits have extended far beyond the belt 
 lines that once encircled the city, upon which so many 
 establishments have located that a large portion of 
 the traffic is the movement from one to another mill 
 or factory upon the same belt line. This, as the rail- 
 roads point out, is not switching service, but a complete 
 transportation service that saves the industries long, 
 tedious and repeated hauling by team. In order that 
 their charges for this service should in some degree be 
 commensurate with its value, and especially as the cars 
 at present in use are of far greater capacity than those 
 of the time when the switching charges of these belt 
 lines were established, the railroads advanced these 
 charges, but so sharply as to create a good deal of feel- 
 ing on the part of the shippers, who took the matter to 
 the Public Service Commission of the State of New 
 Yodc. 
 
 This complaint as to the switching charges and the 
 complaint of the millers as to the rates on flour seem to 
 be the only ripples that have occurred in the Buffalo 
 rate adjustment for many years, and they have been 
 
Commerce of the Cities 331 
 
 straightened out. There is no question that the lack of 
 adequate yard and terminal facilities, which were evi- 
 dent throughout the country during the high traffic pres- 
 sure of the early years of the decade, was especially 
 marked at Buffalo, these facilities here being under un- 
 usual stress because the city is an important railroad 
 terminus, a place where large quantities of freight are 
 transferred to and fro between the vessels of the lakes 
 and the railroad cars, and also because of the acceler- 
 ated industrial development. The railroads are taking 
 steps to remedy the situation, but long-standing friction 
 between them and the city as to rights of way and loca- 
 tion of stations apparently impede the most satis- 
 factory solution. It would seem to be time for both the 
 citizens and the railroads to forget the past in that co- 
 operation which will effect the end desired by both. 
 
 PITTSBURG 
 
 Pittsburg owes its site to the juncture of the three 
 rivers that once were potent in the conveyance of her 
 commerce. When old Fort Duquesne was built on the 
 point of land where the Allegheny and Monongahela meet 
 and whence the Ohio takes its course, there was no por- 
 tent of the city that would spread over the hills, or of 
 the difficulties that would beset the development of the 
 channels of transportation that were destined soon to 
 outweigh by far the waterways in importance. When 
 the first railroad was constructed along the narrow val- 
 ley from the East, the only thought was to reach the 
 river's edge, where connection would be made with the 
 packets. When railroads were built toward the West, 
 one along the terrace on one side of the Ohio River and 
 the other along the terrace on the opposite side, there 
 was no thought but that these railroads, and those which 
 later were built along the rivers' shores, would suffice 
 for such traffic as would be offered for movement to and 
 from, as well as through the city. 
 
 But before many years the limited area that lies be- 
 
332 Railroad Freight Rates 
 
 tween the hills and the rivers was covered vi^ith build- 
 ings. The tonnage that originated in Pittsburg in- 
 creased, the tonnage that passed through Pittsburg in- 
 creased. The opening between the hills and the rivers was 
 as the narrow part of an hour-glass through which con- 
 verge trains from the East that radiate throughout the 
 West, and trains from the West that radiate throughout 
 the East. The mills absorbed enlarging quantities of 
 coal, coke, ore, limestone, sand, and gave forth increas- 
 ing quantities of bars, billets, blooms, rails, and glass. 
 These materials and products, coal from the adjacent 
 mines and oil from near-by refineries, pressed upon the 
 tracks through this narrow part of the hour-glass. The 
 circumscribed area of the city was more and more given 
 over to business, forcing residence beyond the hills, the 
 increasing- suburban traffic heightening the physical dif- 
 ficulties of the railroads. Indeed, the difficulties that 
 arose were without parallel, and the difficulties that re- 
 main are without parallel in any other leading city of 
 the world. The circumscribed area of lower New York 
 forces a large suburban traffic, but there is no such 
 heavy movement of freight. In Boston, Philadelphia, 
 Chicago, and St. Louis there is a greater or less vokime 
 of suburban passenger traffic, but no comparable move- 
 ment of heavy freight, and no such limitation of the 
 available area,, the level land permitting a network of 
 rails. In Pittsburg the heaviest freight tonnage, the 
 heaviest through passenger traffic, and the densest sub- 
 urban traffic press for movement upon the tracks be- 
 tween the hills of solid rock. The place of greatest 
 traffic pressure in the entire United States and of the 
 greatest natural resistance to traffic movement coincide. 
 A solution of the problem has been measurably attained 
 through the building of tracks around the city, over 
 which through traffic can pass from one railroad to 
 another without going through the city proper. Such 
 connecting tracks have been built from one railroad to 
 another, covering longer and longer reaches in an ex- 
 tending radius. The magnitude of the problem is dis- 
 
Commerce of the Cities 333 
 
 closed by the fact that the tonnage handled in Pittsburg 
 exceeds in quantity the combined tonnage of New York, 
 London, Liverpool, Hamburg and Antwerp. 
 
 Pittsburg does not produce food, but in the one year 
 of 1907 were brought for the consumption of the Pitts- 
 burg district 240,000,000 dozen eggs, aggregating at 20 
 cents per dozen a value of $48,000,000; 150,000 tons of 
 butter, aggregating a value of $45,000,000; 12,700 cars 
 of dressed meat, aggregating in value $16,192,000; and 
 1,762,770 head of livestock, aggregating in value $^2,- 
 387,000, as well as 30,000 cars of grain and grain prod- 
 ucts and 29,000 cars of vegetables and fruit. It is note- 
 worthy that the consumption of eggs is double that of 
 Greater New York, and of butter one and one-half 
 times greater. This consumption is that of the Pitts- 
 burg district, the region within a radius of 40 miles 
 from the Court House, which constitutes a definite traffic 
 area, the rates to and fro between any place within that 
 radius and any place beyond that radius being the same. 
 The great consumption of foodstuffs is doubtless ac- 
 counted for by the high wages earned by the workers 
 in the mills and mines, the need for abundant nutrition 
 caused by the exhausting nature of their work, and in 
 no small degree by the fact that their pleasures are 
 largely of the table. 
 
 Although vastly the greater proportion of the traffic 
 of Pittsburg, from seventy-five to ninety per cent., is of 
 the coarser raw materials and the heavier products of 
 manufacture, she is also a distributing center of general 
 merchandise, second neither to Buffalo, Cleveland nor 
 Cincinnati, her principal competitors in this respect for 
 the trade of western Pennsylvania, West Virginia, Ohio 
 and Indiana. 
 
 During the dozen or so years beginning in the early 
 seventies when the Trunk Lines were fighting bitterly for 
 the traffic between the North Atlantic seaboard and 
 Chicago and St. Louis, the competitive through rates 
 were often out of proportion to and sometimes actually 
 less than those applying to and from Pittsburg, and her 
 
334 Railroad Freight Rates 
 
 citizens were in a state of chronic indignation because 
 of the discrimination. That this status long ago ceased 
 is proved by the noteworthy fact that with all its vast 
 commerce not a case has been brought before the Inter- 
 state Commerce Commission growing out of a com- 
 plaint as to the freight rates aifecting the commerce of 
 this city. The only case before the Commission con- 
 cerning the city was that in which a railroad, whose sta- 
 tion was remote from that of a brewery, endeavored to 
 equalize its disadvantages in competition with a railroad 
 having a station nearer the brewery, by allowance for the 
 cartage of shipments, a practice condemned by the Com- 
 mission. 
 
 CLEVELAND AND COLUMBUS 
 
 The officers of the Chamber of Commerce of Cleve- 
 land, as well as the foremost merchants, say that that 
 city is practically without grievance against the railroads 
 because of the rates of freight, and has less reason for 
 lack of satisfaction with their facilities than many other 
 commercial centers. This does not mean that either 
 terminals or yards are all that they ought to be, but 
 each of the principal railroads has a large modern and 
 thoroughly equipped yard through which the movement 
 of traffic — exasperatingly slow as at times it may have 
 seemed — has been fairly expeditious even during periods 
 of great congestion in other cities. On hardware, gro- 
 ceries, dry goods and clothing, the great staples of which 
 Cleveland is a distributing center of importance, the 
 freight rates permit her to compete to the fullest extent 
 with her natural rivals, Buffalo, Pittsburg, Columbus, 
 Cincinnati, Indianapolis, Detroit and Chicago. The dia- 
 gram of the markets in the Chamber of Commerce shows 
 that her wares go almost to the very portals of each of 
 these cities. The rates on grain are so nicely adjusted 
 that the grain merchants unhesitatingly affirm that Cleve- 
 land receives, distributes and mills the full share which 
 logically should come to her. The provision industry 
 does not think that its rates on live animals from the 
 
Commerce of the Cities 335 
 
 west of Chicago, together with the rates on the animal 1 
 products to the East, are low enough to put that indus- ! 
 try on an exact parity in competition with Chicago for the 
 eastern and export trade. The railroads point out, how- 
 ever, that the Cleveland packers have an advantage over 
 Chicago in the case of livestock from Illinois, Indiana 
 and Ohio; and that Chicago, Omaha and Kansas City 
 are, for economic reasons, logically the packing centers 
 for the livestock of the West. The rates on iron ore 
 from the upper lake ports, and on the coal that moves 
 in the opposite direction, are so adjusted that the traffic 
 that comes through each of the Lake Erie ports, Erie, 
 Ashtabula, Fairport, Cleveland, Lorain, Sandusky and 
 Toledo, is determined by its facilities or the interests 
 of the shippers. 
 
 The adjustment of freight rates that is so favorable 
 to the commerce of Cleveland is quite paralleled by that 
 affecting the commerce of Columbus. There is scarcely 
 a market in the United States with which this city does 
 not have direct communication by rail, and it may be 
 stated on the authority of her citizens who are most fa- 
 miliar with traffic matters that in so far as railroad rates 
 are concerned the commerce of Columbus is without 
 impediment. Such commodities as are distributed 
 throughout the city, such commodities as are manufac- 
 tured in the city for market elsewhere, and such com- 
 modities as are brought from without for consumption 
 within the city, move at rates of freight of which her 
 merchants and manufacturers make no complaint. 
 
 THE SOUTHEASTERN RATES COMPLAINT 
 
 The cities of Chicago, St. Louis, Louisville and Cin- 
 cinnati have one common grievance as to freight rates 
 which is the subject of perennial complaint. It was this 
 complaint that was the basis of the Freight Bureau 
 Cases in 1896, and it recently has been presented anew 
 to the Interstate Commerce Commission. It is that the 
 railroads leading from the Ohio River into the South- 
 
336 Railroad Freight Rates 
 
 east do not accord as low rates of freight per ton mile 
 to certain of the southern cities as "are made to these 
 cities by the railroads extending thereto from New 
 York, Philadelphia, Baltimore and Richmond. The offi- 
 cers of these railroads say that the charges on the lines 
 from the eastern cities into the South are kept down 
 by the rates of the coast line steamers ; that if the rates 
 of these seaboard lines were advanced the traffic in in- 
 creasing proportion would go from the eastern seaports 
 by water ; that if the rates from the Ohio River into the 
 Southeast were reduced, revenue would be diminished 
 that even now is all too inadequate to enable the railroad 
 companies to properly maintain and to build up their 
 properties. Bearing upon the actual efifect upon the 
 commerce of these cities of the present adjustment of 
 the southern and southeastern rates, it is obvious that 
 much of the traffic into this region from the East is 
 without competition from these cities and the West, and 
 that much of the traffic into this region from these cities 
 and the West is without competition from the East. 
 The finer fabrics, the more delicate textiles, the smaller 
 and more intricate appliances and pieces of mechanism 
 are shipped almost exclusively from the New York and 
 New England districts. Grain and grain products, meat 
 and meat products, are shipped into the South almost 
 exclusively from the region to the north and west of 
 the Ohio River. The expensive and luxurious vehicles 
 find their way into the South largely from the East; 
 wagons and agricultural implement^ from the North and 
 West. The division of these traffic currents is caused 
 by geographical and physical conditions, and it is also 
 furthered by the long-standing endeavor of the southern 
 lines to prevent that circuitous competition which one 
 time ensued from the carrying of the eastern products 
 into the South by way of the Ohio River and western 
 products by way of the Atlantic seaboard. (See page 256.) 
 Woodworking machinery and woodenware of various 
 kinds, manufactured in the cities on the Ohio River and 
 
Commerce of the Cities 337 
 
 to its north and west, are sold throughout the South, and, 
 for that matter, all over the world, without let or hin- 
 drance from railroad rates. There is some competition 
 between the region to the north of the Ohio River and 
 the East on hand tools, but the freight rates enter so 
 slightly into their value that their sale throughout the 
 South from the northern and western places of manu- 
 facture is not hampered. On manufactured clothing of 
 all kinds, garments for both men and women, and on 
 shoes, Chicago, St. Louis, Cincinnati and Louisville are 
 in active competition with Baltimore, New York, and the 
 East generally, but here again the transportation charge 
 enters so slightly into the cost as not to circumscribe 
 the market from any place of production. In these and 
 in many other lines of merchandise the quality of the 
 goods, the excellence of workmanship, the organization 
 for securing business, the inteUigence and activity of 
 salesmen, are the controlling factors in the markets, and 
 not the freight rates. Indeed, the manufacturers and 
 the shippers of the East are lamenting the fact that so 
 much of their trade is passing to these interior cities. 
 That their fear is not without foundation finds illustra- 
 tion in the fact that a principal market for a leading shirt 
 manufacturing firm of Chicago is the State of Virginia. 
 To maintain and extend their business in the Southeast 
 the manufacturers and merchants of these cities in many 
 cases have to equalize the freight rates with their com- 
 petitors in the East. It is quite true that this equaliza- 
 tion, while of little consequence on any single consign- 
 ment, may mean a good many dollars in the course of 
 a year to each shipper, and a good many thousands of 
 dollars in the aggregate in the course of a year to the 
 railroads. The question is who needs the money the 
 more, the shippers or the railroads ? Would a reduction 
 in rates decrease the revenue of the railroads to the ex- 
 tent of hampering their service to the greater injury of 
 the shippers than the amount which the shippers have 
 to allow for the equalization of freight? 
 
338 Railroad Freight Rates 
 
 CINCINNATI 
 
 By common consent and general admission the freight 
 rates of the railroads extending east, west and north 
 from Cincinnati are satisfactory to her shippers. Pig- 
 iron from the southern furnaces, lumber from the 
 southern forests, whiskey from the southern stills, ma- 
 chinery of her manufacture and the wares of her whole- 
 sale merchants flow through Cincinnati to the markets 
 in these regions without hindrance from freight charge. 
 The northern lines likewise bring commodities to Cin- 
 cinnati from the New York and New England district 
 on the east; from Pennsylvania, Ohio, Indiana, Michi- 
 gan, Illinois and the vast regions beyond Chicago and 
 St. Louis, at rates of freight of which her merchants 
 make no complaint. The report of the Chamber of 
 Commerce for 1906 states that the rates of freight from 
 Cincinnati to the markets of the United States, and, 
 what is of more immediate importance, to the markets 
 within 600 miles, average less than the rates of freight 
 from Chicago, St. Louis or Minneapolis. Of the staple 
 commodities of general and daily need a vast propor- 
 tion are manufactured in the city. This is largely due 
 to the fact that coal of most excellent quality is brought 
 by river from Pittsburg, Ohio and Virginia fields at the 
 ' cheapest transportation rates known in the country, and 
 by rail from mines not so remote at rates correspond- 
 ingly low. 
 
 The access of the various factories to the different 
 railroads would be facilitated, and current disagreement 
 as to switching charges eliminated, were there a belt 
 line over which a factory located on one could easily 
 reach the tracks of another railroad. The construction 
 of such a line would be difficult because of the local 
 topography. 
 
 LOUISVILLE 
 
 Located where the currents of traffic from the South 
 meet the currents of traffic from the North, Louisville 
 
Commerce of the Cities 339 
 
 is naturally a distributing center for each region of the 
 products of the other. In the cheapness and variety of 
 lumber supply she is not second to any city of the coun- 
 try ; her furnaces are fed by the best of coal brought from 
 the Pittsburg and Ohio fields by the river tows and 
 from the Kentucky fields at low rates by rail. 
 
 To the total value of the shipments from Louisville 
 whiskey contributes over 20 per cent. Without let or 
 hindrance because of railroad rates, this whiskey goes - 
 throughout the entire United States. The dealers think 
 that perhaps the difference between the rates on whis- 
 key bottled or in cases, and on whiskey in barrels, is un- 
 duly great, but the railroads state that there is far greater 
 risk of damage to shipments in bottles, and that, as a 
 matter of fact, they have to pay heavy claims for dam- 
 ages to such shipments. Another foremost commodity 
 in the shipments from Louisville is tobacco. This, like- 
 wise, without let or hindrance from railroad rates, goes 
 not only all over the United States, but all over the world, 
 even to the interior of Africa, for the use of the far- 
 away cousins of the colored folk who assort it and pack 
 it in the hogsheads here. Louisville is conspicuous in 
 the manufacture of wagons and agricultural implements. 
 They have the sweep of the entire South, which buys 
 thousands of carloads every year, and in competition 
 with the great factories of Illinois they are sold through- 
 out the West, even on the Pacific Coast, the freight ! 
 charge in no case restricting their market. 
 
 In competition with St. Louis and Memphis, Louis- 
 ville distributes grain throughout the South and South- 
 east, and she mills wheat into flour which is likewise dis- 
 tributed throughout the South and Southeast on rates 
 that place her on a parity with these cities ; her packing 
 houses gather hogs from the near-by regions and supply 
 pork not only to the South, but export it to Europe, at 
 rates which, if anything, give her an advantage over the 
 great packing houses of Chicago, St. Louis and the 
 West. In common with the nation-wide trend in the 
 distribution of groceries and dry goods, her market for 
 
340 Railroad Freight Rates , 
 
 the great staples in these lines is within a narrower area ; 
 but her manufactured clothing goes over the country at 
 rates so low that the manufacturers do not take them 
 into consideration. Both specialties and staples of hard- 
 ware and plumber's supplies are marketed throughout 
 the South from the Carolinas and Southern Florida to 
 Texas. 
 
 In brief, the adjustment of railroad rates on the com- 
 modities that Louisville produces is such that they can 
 be sold anywhere in the United States, and they are sold 
 in the East, North and West, as well as throughout the 
 South. On the goods that she distributes to the Vir-' 
 ginias her rates are slightly higher than the rates from 
 Cincinnati. Her rates to the region from the Carolinas 
 to Alabama are the same. The rates to the Southeast 
 give Louisville an advantage over St. Louis, but to Ala- 
 bama the advantage is with St. Louis. On the great 
 bulk of merchandise, however, the difference in rates to 
 any part of the Southeast, South or Southwest is not suf- 
 ficient to keep Louisville out of the markets. The local 
 rates of the southern railroads are, owing to their scant 
 traffic, admittedly high, but they do not place either of 
 the Ohio River cities in any market at more than a 
 trifling disadvantage in relation to another. The won- 
 der is that with her geographical and physical advan- 
 tages and her extending communication by water and 
 rail, Louisville is not a greater city, especially a greater 
 manufacturing city. Whatever the retarding factors 
 may be, railroad rates are certainly not among them. 
 This affirmation rests upon the statements of a dozen or 
 more of the foremost shippers and foremost citizens. 
 
 CHICAGO 
 
 As a midway station in the channel of through east- 
 ern and western traffic Chicago is on a parity, in so far 
 as freight rates are concerned, with St. Louis, Kansas 
 City and Omaha, not only as a center of eastern distri- 
 bution for the grain and grain products, livestock and 
 
Commerce of the Cities 341 
 
 livestock products of the West, but in great reaches of 
 competitive territory as a center of interior and west- 
 ern distribution for the manufactured goods of the East. 
 
 The manufacturing activity of the city rests upon sure 
 foundations. Iron ore, the basic material of the impe- 
 rial industry, is brought by boats the length of Lake 
 Michigan from the finest ore beds in America to the fur- 
 naces at Chicago. This advantage and low freight rates 
 on coke and limestone have led to the erection of the 
 great plant of the United States Steel Corporation at 
 Gary. While there were yet abundant forests in the 
 adjacent States were laid the beginnings of the wood- 
 working industries which increase yearly. Chicago is 
 a focal market for the coal of the Danville, 111., field ; of 
 the Sullivan County, Ind., field; of the Springfield, Gi- 
 rard and Northern Illinois fields, and it annually con- 
 sumes hundreds of thousands of tons of both coal and 
 coke from the Ohio, West Virginia and Pittsburg fields. 
 It is no wonder, then, that the special census of manu- 
 factures for 1905 found within the city of Chicago more 
 than 8,000 factories with a capital of nearly $650,000,- 
 000, with over 280,000 names on their payrolls. These 
 returns do not include the industries of the surrounding 
 district, which industrially and commercially is part of 
 Chicago. The conspicuous products of these plants are 
 the heavy articles of commerce, the products of lumber, 
 machinery and agricultural implements. There is little 
 or no attempt at the manufacture of woolen goods, cot- 
 ton goods, or the smaller delicate and complicated ap- 
 pliances. 
 
 The difference between the carload and the less than 
 carload rate, that in some cases seems unduly wide, per- 
 mits the interior cities of Illinois, Wisconsin, Iowa, 
 Minnesota, and those located on and to the west of the 
 Missouri River, to do a jobbing business in groceries, 
 hardware and other staple commodities in the region 
 that a generation or so ago was supplied almost entirely 
 by the wholesale dealers of Chicago. In the higher 
 grades of merchandise, however, the freight rates do 
 
342 Railroad Freight Rates 
 
 not interfere with Chicago buying anywhere or seUing 
 anywhere in the United States. At her great furniture 
 sale exhibits are made by factories of all parts of the 
 country, and it is attended by buyers from every sec- 
 tion. Her fancy groceries are marketed in Arizona, 
 Montana, and even in New York; the principal dry- 
 goods house has seven solicitors in San Francisco. For 
 her manufactured specialties her market is the world. 
 
 The old-time rivalry between Chicago and St. Louis 
 for the trade of the western markets resulted in the 
 fixed differences estabhshed in the rates from the two 
 cities to certain competitive areas. Chicago has never 
 ceased to chafe because of the advantage accruing to 
 St. Louis on account of her rates into the Southwest, 
 and it also feels that the difference of but five per cent, 
 against the rate from St. Louis to St. Paul is not quite 
 equitable. The St. Louis-St. Paul rate, however, is the 
 result of a long established adjustment, and St. Louis 
 will probably never relinquish her advantage in the 
 Southwest unless overpowered by an armed force. 
 Therefore is equilibrium. 
 
 ST. LOUIS 
 
 A study of the commerce of St. Louis leads to a repe- 
 tition of the statement that applied to Chicago. As a 
 gateway for the distribution to the Eastern States and 
 the Atlantic seaboard of the grain and grain products, 
 livestock and livestock products of the West, St. Louis 
 is, so far as through rail rates are concerned, on a par- 
 ity with Kansas City, Omaha and Chicago. As a gate- 
 way for the distribution throughout the West of mer- 
 chandise from the manufacturing districts of New York 
 and New England, St. Louis has a very favorable basis 
 of rates that gives it a far-reaching advantage. There 
 is a vast area of the Southwest wherein the jobbers ob- 
 tain from the wholesale dealers of St. Louis the stocks 
 which these jobbers sell to the retailers. For the higher 
 grades of merchandise, drygoods, clothing, the lighter 
 
Commerce of the Cities 343 
 
 weight manufactures of all kinds, St. Louis can draw 
 from any part and sell in any part of the country, or, 
 indeed, of the world. This city is a large manufacturer 
 of shoes, furniture, enameled ware, stoves, all of which 
 are sold throughout the United States ; and as a distrib- 
 uting center for hardware, woodenware, and tobacco, 
 her fame is world-wide. 
 
 Aside from the complaint as to the rates into the 
 Southeast, which St. Louis shares with Chicago, Louis- 
 ville and Cincinnati, there is very little in the freight 
 rates to cause her merchants to demur. The adjustment 
 of competitive rates on grain with Kansas City and Lit- 
 tle Rock hangs in the balance, but here it is a contest be- 
 tween communities which the railroads would be glad 
 to have them settle for themselves. St. Louis and Kan- 
 sas City each desire to command Little Rock's market, 
 while that city would gladly be independent of either 
 and become a grain center herself. The carload rates 
 on potatoes, onions and cabbage, from the farms of Iowa 
 and Minnesota through to Texas by direct routes, are less 
 than reconsignment rates via St. Louis. These com- 
 modities, therefore, are shipped direct instead of paying 
 toll to the St. Louis warehouse men as in former years. 
 This naturally elicits their regret, but the St. Louis 
 commission merchants, through agents in the field, are 
 still in large measure the intermediary between the 
 northern grower .and the southern consumer, and like- 
 wise between the southern grower and the northern 
 consumer. 
 
 St. Louis long suffered from the error of a previous 
 generation through which the terminals of the eastern 
 lines were laid on the Illinois instead of the Missouri 
 side of the river. The arbitrary charge for transferring 
 across the Mississippi bridge, in addition to the through 
 rate, has been an incubus that has been almost abol- 
 ished, the Trunk Line Percentage rate from New York 
 being made 117 per cent, of the Chicago rate, including 
 the bridge toll ; this is far more favorable than the pre- 
 vious 116 per cent, to which the bridge arbitrary was 
 
344 Railroad Freight Rates 
 
 added. Within a radius of lOO miles of the city, the 
 bridge arbitrary still applies. From and to this area, 
 however, there passes but three-tenths of the traffic using 
 the bridge. Here remain struggles between the producers 
 and shippers of coal and other heavy commodities as to 
 the relative rates from place of production to place of 
 market within the radius. These matters, arising out of 
 friction between local competitors for the local mar- 
 kets, do not affect the broader area or the total volume 
 of the commerce of the city. 
 
 KANSAS CITY 
 
 The traveler from the East finds Kansas City on the 
 manufacturing frontier. The traveler from the West 
 finds Kansas City on the eastern boundary of the great 
 grain and grazing region, the larger portion of the sur- 
 plus grain and nearly all of the merchantable cattle being 
 produced to her west. Kansas City, therefore, is one of 
 the first of the receiving and distributing points for the 
 livestock and livestock products, grain and grain prod- 
 ucts, and in respect to the rates thereon there seems to 
 be general satisfaction as they apply from places of pro- 
 duction and to eastern and southern markets. Coal 
 from adjacent fields is brought to her confines at a 
 freight rate that does not exceed from 50 to 60 cents a 
 ton, even for distances so great as 150 miles; the lum- 
 ber rates are also entirely favorable, the tariff being 23 
 cents per 100 pounds from the yellow pine forests of 
 Louisiana; cement and brick are produced at kilns al- 
 most within the city, the freight rates forming an incon- 
 siderable fraction of the selling price. In regard to the 
 principal food supply, Kansas City is equally fortunate; 
 no city in the United States obtains grain and meat, the 
 basic foods, more cheaply; from the surrounding coun- 
 try come eggs and chickens, butter and cheese at rates 
 that give the railroads but a small fraction of a cent a 
 pound. Agricultural implements, the tools without 
 which the farmer's hand would be impotent, come to 
 
Commerce of the Cities 345 
 
 and through Kansas City in a flow that is entirely un- 
 impeded by freight rates. The rate on a one-horse 
 walking plow, that retails at $14 from the Illinois man- 
 ufacturing district to Kansas City is but 22 cents; and 
 on a sulky plow, that retails at $45, about 80 cents. 
 
 As to the rates from the East on the manufactured 
 merchandise, the lighter articles that are found on the 
 shelves and counters of the stores, there has been long- 
 standing friction between the wholesale dealers of Kan- 
 sas City and the railroads. When the writer entered 
 the office of a conspicuous wholesale drygoods establish- 
 ment and stated his errand to the senior member, that 
 gentleman, with the alert and vigorous action that char- 
 acterizes the progressive and successful western man 
 of business, called in the junior member of the firm and 
 the clerks in charge of traffic. He lined them up, intro- 
 duced the writer to them seriatim, and announced the 
 reason for the visit. He then waved his hand to a jun- 
 ior partner, saying with great emphasis, " You can tell 
 him all about the freight rates of Kansas City; you can 
 tell him what we have to contend against." The junior 
 partner with fervor asseverated that Kansas City was 
 the place most discriminated against in the way of freight 
 rates in the United States ; that the railroads apparently 
 had taken particular umbrage against the city, and the 
 shippers had endeavored to obtain relief without avail. 
 He asserted that if the railroads would not listen to a 
 final appeal, the citizens of Kansas City would rise en 
 masse and secure their rights. This was forcible, but 
 not definite, and an attempt was made to ascertain just 
 in what respect and upon what commodities the freight 
 rates bore oppressively. The gentleman soon admitted 
 that he was talking about the drygoods business alone; 
 that he was not informed as to the effects of the rates 
 upon other merchandise. He also admitted that he was 
 speaking only in regard to the wholesale drygoods busi- 
 ness. Further questioning elicited the nub of the griev- 
 ance to be that the rate on freight of the first class — 
 which includes drygoods — from New York to Kansas 
 
346 Railroad Freight Rates 
 
 City was $1.47, while from New York to St. Paul, a 
 similar distance, the rate was but $1.15. It was ad- 
 mitted that the wholesale merchants of St. Paul and 
 Minneapolis do not compete with the wholesale mer- 
 chants of Kansas City, except, perhaps, in a very limited 
 area. When it was asked what effect a reduction in the 
 rate to Kansas City would have upon the price of mer- 
 chandise of the first class, it was admitted that on cer- 
 tain staple cotton piece goods, for example, the reduc- 
 tion of 32 cents per 100 pounds in the freight would 
 make a difference of something like one-tenth of one per 
 cent, of their value. When it was asked if the drygoods 
 firm would give to the retail dealers the benefit of this 
 reduction of one-tenth of one per cent., it was frankly 
 admitted that it would not. The reduction would, how- 
 ever, make a difference of a great many dollars a year — 
 several thousands doubtless — in the freight bills of the 
 Kansas City wholesalers. 
 
 The rate of $1.47 to Kansas City is made by adding 
 to 87 cents, the first class rate from New York to 
 St. Louis, the first class rate from St. Louis to Kansas 
 City, which is 60 cents. The railroads claim that the 
 low rates from New York to Chicago and St. Louis are 
 the result of years of strife between the railroads extend- 
 ing from the East to those cities, and that they apply on 
 traffic that moves from the East to these cities in greater 
 volume than from either of them toward any mar- 
 ket to the west thereof; and point out that if the through 
 rate to Kansas City be reduced the wholesale merchants 
 of that city would obtain, what is evidently their desire, 
 an advantage over the wholesale dealers of Chicago and 
 St. Louis in much of the territory in which those three 
 cities are competitive. As was pointed out in the de- 
 scription of the rate structure of the trans-Mississippi 
 and trans-Missouri region, the rate between St. Louis 
 and Kansas City determines the through rate, by way of 
 all Mississippi River crossings, from St. Louis on the 
 south to Dubuque on the north, to all points on the Mis- 
 souri River from Kansas City on the south to Omaha 
 
Commerce of the Cities 347 
 
 and Sioux City on the north. A reduction in the through 
 rate from the East by way of St. Louis to Kansas City 
 would, therefore, reduce all of the rates from the East 
 via these various routes across the Mississippi River to 
 the various points specified on the Missouri River, and, 
 therefore, would reduce the through rates from the East 
 to the area between the Missouri River and the Rocky 
 Mountains. 
 
 The merchants of Kansas City, St. Joseph and Omaha 
 finally joined in a formal complaint to the Interstate 
 Commerce Commission. Sioux City intervened, asking 
 that whatever might be done for Omaha should also be 
 done for Sioux City. The business organizations of St. 
 Paul, Chicago, and St. Louis intervened, defending the 
 existent rate structure and opposing any modification 
 that would give the Missouri River cities an advantage 
 at their expense. The Commission decided that the Mis- 
 souri River cities are not entitled to the same rate from 
 the East as St. Paul and MinneapoHs, and made no 
 change in the established rates between the Mississippi 
 and Missouri Rivers as applying on local traffic, but it 
 did reduce those rates as applying on through traffic, 
 making such proportional rate 51 cents instead of 60 
 cents. Because of the far-reaching efifect of this reduc- 
 tion the railroads at once contested the decision through 
 the courts. 
 
 It will be perceived that the entire conflict is between 
 the competing wholesale dealers of rival cities ; that it 
 does not appreciably, if at all, affect the prices at which 
 retail merchants can obtain their stocks from one city 
 or another; nor does it affect the goods which the con- 
 sumer will purchase from the retail dealer in quality, 
 and to but a negligible extent, if at all, in price. It is 
 quite evident that the Kansas City wholesale merchants 
 are seeking an advantage over their competitors in Chi- 
 cago and St. Louis, which those competitors are resist- 
 ing as vigorously as Kansas City in turn is resisting the 
 growing ambition of Wichita and other cities to her 
 west to conduct and extend a wholesale business. The 
 
34B Railroad Freight Rates 
 
 reduction ordered by the Commission was apparently 
 on the ground that as the railroads between the Missis- 
 sippi and Missouri Rivers carry traffic to and fro be- 
 tween the East and the Pacific Coast for lower compen- 
 sation, they can afford the reduction on the traffic mov- 
 ing from the East to the Missouri River, although the 
 conditions attending that traffic are radically different 
 from those which force the extraordinarily low rates 
 on the transcontinental movement. 
 
 ST. PAUL AND MINNEAPOLIS 
 
 St. Paul owes its development primarily to the fact 
 that it is at the head of navigation on the Mississippi 
 River. This, in addition to the proximity of Lake Su- 
 perior, by reason of which it obtains low through rates 
 from the East, and that it is the starting point of rail- 
 roads leading throughout the Dakotas to the far North- 
 west, have given it command of a distributive trade in 
 that region. It has, moreover, always been the policy 
 of the lines leading from St. Paul to the far Northwest 
 to so adjust rates that neither Chicago, nor any other 
 city to the East, can have any advantage over the St; 
 Paul jobbers in the northwestern territory on traffic 
 that passes through St. Paul, the rate from St. Paul 
 even to Utah, for example, being as low as the rate 
 from Chicago to Utah. The Mississippi River is an 
 active factor in the commerce between St. Paul and St. 
 Louis, and therefore forces the rail rate between these 
 cities to a lower level than that applying in this region 
 generally. If there are any grievances as to the rail- 
 road rates affecting the commerce of St. Paul, they are 
 but of minor importance, affecting individual shippers, 
 the kind of inequalities which the railroads are willing 
 to remove if possible. 
 
 Minneapolis, a newer city especially devoted to the 
 milling interests, is as yet but an indifferent rival of St. 
 Paul as a wholesale center, and is therefore rather in- 
 clined to be radical in seeking readjustments of rates 
 
Commerce of the Cities 349 
 
 in order that her jobbers may extend the area of their 
 markets. For instance, to places in southern Minnesota 
 and the Dakotas directly penetrated by through lines 
 from Chicago that extend to the south of the Twin 
 Cities, the rates give the wholesalers of Chicago some- 
 thing of an advantage over those of the Twin Cities. 
 This advantage St. Paul does not contest, thinking it 
 logical that Chicago should have it. Minneapolis, how- 
 ever, is striving for a readjustment. It is even sug- 
 gested in Minneapolis that the rail rate to that city from 
 the East should be as low as to St. Louis, because the 
 lake and rail distance from New York to Minneapolis 
 is less than the lake and rail distance from New York 
 to St. Louis. 
 
 The rates in which Minneapolis has the most interest 
 are those on flour. On flour that goes from Minneapolis 
 via Duluth and lake to Buffalo the vessels obtain seven 
 cents per loo pounds, while they carry grain for one 
 cent and upwards per bushel, the seasonal average being 
 about three cents. Although grain can be loaded in bulk 
 and the expense of loading and unloading is much less 
 than that of flour, the milling companies think that this 
 difference, which materially favors the competing mill- 
 ers of Bufifalo, is so wide as to be unjustifiable. The all- 
 rail rate on flour from Minneapolis to New York is 25 
 cents per 100 pounds, and up to 1898 the rate by lake 
 and rail averaged 20 cents. The difiference of 5 cents 
 per 100 pounds, amounting to 10 cents a barrel, gave 
 an advantage to the Minneapolis mills over those of 
 other northwestern cities that can not so readily avail 
 of the lake route. In 1898, through the lake and rail 
 rate being increased by two cents, the difference was re- 
 duced to three cents, and in 1900, through the lake and rail 
 rate being increased another one cent per 100 pounds, 
 the difference was reduced to two cents. These published 
 rates did not for a time particularly concern the millers, 
 as they made special contracts with the railroads for 
 low rates. The possibility of such arrangements having 
 come to an end, the Minneapolis millers are seeking 
 
350 Railroad Freight Rates 
 
 concessions that will tend to restore their former ad- 
 vantage. 
 
 DENVER 
 
 It is easy to forget that Denver but a generation or 
 so ago was no more than a health resort on the Colo- 
 rado plateau. The purity of the air, excellence of the 
 climate, fertility of the contiguous soil, and the wealth 
 of the ore deposits in the near-by mountains, attracted 
 a population which, in line with that progress charac- 
 teristic of a developing city, established retail stores, 
 then certain lines of manufacture, and then sought to 
 extend the area of distribution, and incidentally, through 
 the tireless efforts of one of her energetic business men, 
 acquired a reputation throughout the country as being 
 peculiarly the victim of an iniquitous conspiracy entered 
 into by the railroads to burden her citizens and hamper 
 her development. It was really, therefore, a matter of 
 exceeding surprise for a dispassionate investigation to 
 disclose that Denver, by the admission of the officers 
 of her business organizations and her principal shippers, 
 has very little grievance against the railroads as to 
 freight rates. The peculiar location of the city midway 
 between the Mississippi Valley and the Pacific slope, in 
 proximity to vast areas that are being reclaimed by irri- 
 gation, gives to the commerce of Denver and of Colo- 
 rado Springs, Pueblo and Trinidad, the other of the 
 Colorado common points, peculiar characteristics that 
 justify more extended reference than has been given to 
 other of the cities. The channels of traffic to and from 
 Denver are those of the great West, and the develop- 
 ment of her freight rates has necessarily been in adapta- 
 tion to those channels. 
 
 In so far as her food supply is concerned, Denver cer- 
 tainly is not hampered by rates of freight. The trans- 
 portation charge on fresh meat and other products ob- 
 tained from the packing houses within her limits is neg- 
 ligible, and even when she draws on the packing houses 
 of Omaha the rate is but three-fifths of a cent per 
 
Commerce of the Cities 351 
 
 pound for fresh meat and one-half cent per pound for 
 packing house products, the retail price being the same 
 whether the meat has been prepared in Omaha, Kansas ^ 
 City or Denver. The rates of freight from Denver allow 
 her to supply South Dakota with fresh meat in compe- 
 tition with Omaha; she also supplies not only western 
 and southern Colorado, but New Mexico and much of 
 Texas. 
 
 Wheat comes from the Cache Valley for consump- 
 tion in Denver at 35 cents per 100 pounds. It may be 
 turned into flour in Denver, and sent through on the 
 milling in transit privilege at an aggregate rate from 
 the Cache Valley of 50 cents to the Missouri River, to 
 be sold in large quantities in the Southeastern States in 
 competition with Kansas City, Omaha, and Minneap- 
 olis. It furnishes a large portion of the supply of 
 Texas, even along the Mexican frontier, 1,200 miles 
 away. 
 
 Butter comes from Kansas and Nebraska in refrig- 
 erator cars at a trifle less than one cent a pound, and 
 chickens, likewise in refrigerator cars, at a trifle more 
 than one cent, the transportation charge not affecting 
 the retail price. Eggs come from Kansas at an average 
 freight rate of a trifle over one cent a dozen, cheese 
 from the Colorado dairies at about one-third of a cent 
 a pound. A ten-pound package of coffee from New 
 York will have paid the railroads 7.9 cents ; ten pounds 
 of sugar from northern Colorado one cent, or loaf 
 sugar from New York 8.1 cents, or from California 6 
 cents. The railroads have made rates on the beet sugar 
 of Colorado that encourage its shipment to the widest 
 markets, the rate to the Missouri River being 25 cents, 
 to the Mississippi River 30 cents, and to Chicago 35 
 cents, per 100 pounds. Tea is brought from China to 
 Denver and the entire region to its east at i^ cents per 
 pound; rice from Japan to Denver at 65 cents per 100 
 pounds. 
 
 Potatoes come from northern Colorado at a freight 
 rate of 12 cents per 100 pounds. This cannot be called 
 
352 Railroad Freight Rates 
 
 low, but some consideration must be given to the fact 
 that to enable this region to supply Kansas and Ne- 
 braska with potatoes it.is accorded a rate of 35 cents to 
 the Missouri River. The supply of potatoes for Okla- 
 homa and Texas moves from the Colorado field at rates 
 that vary from 51 to 54 cents. New potatoes in the early 
 spring are brought from California to Denver at 75 
 cents per 100 pounds; the other fresh vegetables come 
 from near-by truck farms at freight rates that make no 
 difference one way or the other to the consumer, and do 
 not burden the producer. Celery is shipped to both 
 Chicago and New Orleans. Peaches, pears, and apples 
 are shipped from the Colorado orchards to Chicago, St. 
 Paul and the interior generally at $1 per 100 pounds. 
 Dried fruits, raisins, prunes, and figs move on this rate 
 of $1 from Grand Junction to the same regions. The 
 canned goods of Colorado also penetrate to the eastern 
 markets, Colorado peas being a delicacy on bills of fare 
 as far as Boston. These canned peas and canned small 
 fruits, such as red raspberries, cherries and gooseberries, 
 pay a rate of 35 cents per 100 pounds to the Missouri 
 River, 50 cents to the Mississippi River, and 55 cents to 
 St. Paul — rates that permit them to be sold in competi- 
 tion with the canned goods of any other locality. Five 
 years ago the canned tomatoes consumed in Colorado 
 were imported from Wisconsin, Indiana and Baltimore. 
 Now the State not only cans almost all of the tomatoes 
 consumed within her limits, but supplies Montana, Utah, 
 New Mexico, and Texas. 
 
 New household furniture will likely come from Chi- 
 cago, whence it pays a freight rate of $1.10 per 100 
 pounds. That is, a bed weighing 200 pounds will have 
 paid the railroads $2.20; a dining-room suite of table, 
 four chairs and a sideboard, weighing 700 pounds, $7.70, 
 and a parlor suite of sofa, table, and four chairs, weigh- 
 ing 500 pounds, $5.50. Furniture of the incoming set- 
 tler, however, whether new or old, is brought from Chi- 
 cago as immigrant movables at 47^ cents per 100 
 pounds. 
 
Commerce of the Cities 353 
 
 The coal used in the city of Denver for domestic pur- 
 poses comes largely from coal fields within 18 or 20 
 miles of the city at freight rates of 80 cents per ton on 
 lump coal, and 60 cents a ton on slack coal. These are 
 undeniably high rates, but no more is charged from the 
 fields 50 or 60 miles away, and the rate on coal for 
 steam and manufacturing purposes from fields 200 miles 
 away is $1.60 per ton. The brick used in Denver is 
 made in the city. Portland cement made at Portland, 
 Colorado, comes at 6 cents per 100 pounds or from 
 lola, Kansas, a distance of 530 miles, at 15 cents per 100 
 pounds. Yellow pine lumber comes from Louisiana at 
 from 34 to 40 cents per loo pounds ; cedar, fir, and beech 
 from Oregon, Washington, and Idaho, at from 50 to 60 
 cents; hickory and oak from Mississippi, Missouri, and 
 Tennessee, at rates ranging from 32^ to 40 cents. Build- 
 ing stone is right at hand on every side, and is shipped 
 throughout Kansas and Nebraska, the rates to the Mis- 
 souri River being but 20 cents. 
 
 Clothing, generally speaking, is sold at prices that do 
 not range a great deal higher than those of the cities 
 to the east. The freight rate is $2.30 per 100 pounds 
 from New York, a suit of clothes weighing 8 pounds, 
 therefore, having paid the railroads 18 cents, which is 
 but 6 cents more than it would have paid at Kansas 
 City. A pair of shoes will, perhaps, have paid 3 or 4 
 cents. The rate on cotton piece goods is $1.53 per 100 
 pounds from New York, the transportation charge on 
 10 pounds — which approximates 60 yards of cotton 
 sheeting — therefore, being a trifle over 3 cents. It is 
 fairly well authenticated that a customer once said to a 
 Denver haberdasher that a necktie for which he was 
 asking $1 could be purchased in Chicago for 50 cents, 
 to which the dealer replied, " But look at the freight 
 rate ! " It happened that this customer was the traffic 
 manager of one of the western railroads who knew that 
 the freight rate on that necktie from New York was 
 not more than one-third of a cent. 
 
 Colorado is nearly self-sufficient in the production of 
 
354 Railroad Freight Rates 
 
 machinery. She makes her own rails, rolls, castings, 
 cores, wire nails, and bar iron. She not only makes the 
 mine cars and hoisting machinery used in her mines, 
 but ships mining machinery- to Mexico, South Africa, 
 Japan, Russia^ and Australia. The cost of production 
 of this machinery is somewhat greater than in the east- 
 ern factories because of the higher transportation charge 
 on the raw material, which is brought from greater dis- 
 tances, but this does not seem to restrict the markets. 
 That the mineral products of Colorado move to the 
 widest markets without impediment from transportation 
 charge is beyond question. 
 
 In short, Denver enjoys a freight rate adjustment 
 that permits the sale in wide markets of the products of 
 Colorado, whether of the soil or manufacture, and that 
 brings to her citizens the commodities of daily need at 
 a transportation charge so low that their prices in the 
 majority of cases, for any effect of the freight rates, 
 need be advanced but little, if at all, above the prices at 
 the places of production. 
 
 The relation of the freight rate adjustment to the 
 wholesaling of products of eastern manufacture, or to 
 the bringing from the East of raw material to be manu- 
 factured in Denver in competition with eastern factories 
 is another matter. As her merchants wanted their rates 
 adjusted to enable them to reach a wider area, the rail- 
 roads, knowing that the people of the adjoining States 
 and territories would be supplied with merchandise from 
 the eastern factories, whether jobbed from Chicago or 
 St. Louis or the Missouri River, and knowing that any 
 concession accorded to Denver that would militate 
 against shippers of Chicago, St. Louis, Kansas City or 
 Omaha would be bitterly contested by the merchants 
 and manufacturers of those cities, did not hasten to 
 give the merchants of Denver what they wanted just 
 because they wanted it. One of the concessions which 
 the Denver Chamber of Commerce asks of the rail- 
 roads is that Denver be made a "basing point," that 
 Colorado common points be placed on a " basing line." 
 
Commerce of the Cities 355 
 
 To ask that Denver be made a basing point in general 
 without bringing to bear upon the railroads any con- 
 siderations in the way of increased traffic or increased 
 revenue is, of course, a different proposition from pre- 
 senting to the railroads such irresistible arguments of 
 particular rates on particular commodities which Den- 
 ver can wholesale with advantage to the railroads as 
 well as to herself. This latter procedure has gained and 
 is gaining many readjustments of benefit to her dealers, 
 the traffic expert in their employ having in but a year 
 and a half obtained reductions in rates throughout Ari- 
 zona and Texas ; into the Black Hills ; to stations in 
 Wyoming, Idaho, and Montana ; to stations in western 
 Nebraska, Nevada, and Mexico. These reductions in 
 many instances give the Denver shippers an advan- 
 tage over those of the Missouri River cities, and in 
 other instances place them upon a parity with those 
 shippers. 
 
 This development, which tends more and more to bring 
 the freight rates affecting the commerce of Denver into 
 the closest adaptation to the needs of that commerce, is 
 fairly typical of the development in the freight rate ad- 
 justments that affect Cheyenne, Albuquerque, El Paso, 
 and other growing centers of the Rocky Mountain re- 
 gion. It is significant that the wholesale merchants of 
 Denver think that the freight rates favor Salt Lake 
 City, while the latter thinks that the rates favor Denver. 
 The fact is that rates have been made the same from 
 both cities throughout a considerable area of Idaho and 
 Wyoming. 
 
 To the smaller settlements in the interior of the as 
 yet sparsely populated Rock Mountain district, espe- 
 cially over branch railroads built and maintained through 
 mountainous regions at great expense, the local rates 
 are higher than in other portions of the country, enter- 
 ing to a greater extent into the price paid for merchan- 
 dise by the consumers. 
 
356 Railroad Freight Rates 
 
 HELENA AND BUTTE 
 
 Butte is another city whose merchants desire to enter 
 the wholesale field. Heretofore, as is always the case in 
 mining towns, where money is easily made and easily 
 spent, little consideration has been given to the rates of 
 freight. The merchants have purchased what their cus- 
 tomers wanted and paid the freight. Their customers 
 have purchased to meet their requirements at prices 
 willingly paid, and which have yielded high profits to 
 the dealers. But the city is now outgrowing the swad- 
 dling clothes of a western mining camp under the stim- 
 ulus of a movement to give it rank as a municipality 
 of organized enterprise. One feature of this is the scru- 
 tiny of the freight rates to ascertain their relation to 
 potential wider markets. 
 
 Helena, however, will not easily relinquish her pres- 
 tige as a distributing center, the retail dealers of Mon- 
 tana, who do not purchase their supplies at St. Paul, 
 usually patronizing the jobbers of this city, which is 
 contiguous not only to a developed mining region, but 
 to ranches on which cattle and sheep are still grown by 
 the thousands. Wheat is also raised in the Gallatin 
 Valley, which, however, does not produce sufficient for 
 the adjacent mills. This has led the farmers to form 
 " Societies of Equity," through which it is attempted 
 to obtain from these mills a price equal to that which the 
 millers have to pay for wheat of other sections, plus 
 the freight rate therefrom to the mills. 
 
 THE SOUTH AND SOUTHEAST 
 
 The traditions of the South are those of a country 
 devoted to agriculture. Although the industrial agents 
 of the railroads during recent years have attracted many 
 manufacturing establishments to the territory penetrated 
 by their lines, there are not as yet many kinds of prod- 
 ucts that are sold in widespread markets. The cotton 
 mills of the Carolinas produce fabrics that compete with 
 
Commerce of the Cities 357 
 
 those of New England throughout the country gener- 
 ally, and in foreign markets with those from the mills 
 of any country; the furnaces and iron mills in Ala- 
 bama sell their surplus products north of the Ohio and 
 west of the Mississippi Rivers; and the furniture fac- 
 tories of various localities are sending the grades which 
 they make to both northern and western markets. 
 Aside from the carrying of these products to markets 
 the transportation lines of the South, with few excep- 
 tions, are especially concerned with the conveyance of 
 the products of the soil to the markets where the fruits 
 and vegetables are consumed, and the raw material con- 
 verted into forms of use; and with the distribution 
 throughout the South of the foodstuffs of the West and 
 the manufactured merchandise of the East, and of the 
 cities on and to the north of the Ohio River. 
 
 When, however, it is stated that the South has not 
 attained to manufacturing in varied degree, an excep- 
 tion must be made of Richmond, Va., which has been 
 transformed in but little more than a dozen years into 
 a conspicuous manufacturing as well as a prominent 
 distributing center. This city has the benefit of the 
 same low Trunk Line rates from the West as Balti- 
 more, and, therefore, can obtain raw material of various 
 kinds as cheaply as the industrial cities of the North 
 Atlantic seaboard. It has the advantage of water trans- 
 portation, and correspondingly low rail rates to and 
 from these cities, therefore being able to obtain their 
 products at freight rates that are held to the lowest 
 level. It has the benefit of water communication and 
 correspondingly low rail rates with the southern At- 
 lantic ports, and the interior tributary thereto, through 
 which it is therefore enabled to distribute the products 
 of its own manufacture, as well as those secured from 
 other sections, at rates that are at a low level. The mer- 
 chants and manufacturers of Richmond are well aware 
 of their blessings in this respect. This city, supplied 
 with water power by her rivers, is the seat of extensive 
 tobacco manufacture; makes a large proportion of the 
 
358 Railroad Freight Rates 
 
 nails and horseshoes used in the South; by far the 
 greater proportion of the blotting paper used in the 
 United States, and is making progress in other lines of 
 manufacture that may lead to her becoming no mean 
 rival of the older industrial centers to her north. As a 
 commercial center she contests the supremacy of Balti- 
 more throughout Virginia, a large portion of the Caro- 
 linas, and competes with Cincinnati and Louisville in 
 eastern Kentucky and Tennessee. 
 
 The freight rates permit Wilmington, N. C, to draw 
 cotton from the interior in competition even with Savan- 
 nah. Her merchants buy this cotton on the plantation, 
 put it through their own compresses and export it in 
 vessels which they have chartered, their enterprise mak- 
 ing Wilmington a port of consequence in the export of 
 cotton, as it is in the shipment of naval stores, the resin 
 and turpentine from the Carolinian forests. 
 
 After the Civil War, Charleston was slow to resume 
 the export of cotton largely because of the estabhshment 
 of cotton mills in the interior, which largely absorb the 
 cotton from the plantations formerly and logically tribu- 
 tary to Charleston. This city is the largest market for sea- 
 island cotton, the center of the fertilizer industry and 
 of a developing region of truck farms. Of recent years 
 the railroads have made adjustments in the rates in the 
 interior country in which Charleston merchants may nat- 
 urally expect to conduct a wholesale trade, and have 
 accorded as low rates on the western foodstufifs, for 
 export traffic, from Chicago, as from Chicago to Nor- 
 folk, the distance being about the same. 
 
 Savannah is in a condition of happy content with the 
 freight rates. They permit her to draw from vast areas 
 cotton and lumber, which are carried by great lines of 
 steamboats to foreign ports. Merchandise from the 
 East is brought to her stores and warehouses almost 
 entirely by the coastwise steamers and distributed 
 throughout a wholesale area extending into Florida and 
 Alabama as well as throughout Georgia. 
 
 The merchants and manufacturers of Atlanta, the 
 
Commerce of the Cities 359 
 
 great interior distributing center of the South, have no 
 complaint of consequence in regard to freight rates. 
 They are so adjusted that she can obtain the materials 
 and the products of the West, the North and the East, 
 and can distribute them throughout a wide area. 
 The city does not have the milling in transit privilege 
 on wheat enjoyed by the competing city of Nashville. 
 This was accorded Nashville long ago, and the railroads 
 say they cannot abolish it now because the mills of that 
 city have been established and are largely sustained by 
 the privilege which, however, the railroads do not care 
 to extend. 
 
 Memphis, the largest inland cotton center of the 
 United States, is the natural point of concentration for 
 the cotton of southern Missouri and Arkansas, part of 
 Louisiana and Texas, and of northern Mississippi and 
 western Tennessee. It is shipped to the Atlantic sea- 
 ports, to the mills of New England, and for export to 
 the Gulf at rates that have been established through 
 years of adjustment, and are not the subject of com- 
 plaint. Memphis is also the greatest hardwood lumber 
 market in the world, being the natural point of concen- 
 tration for logs and lumber from vast areas of the tim- 
 ber lands to its west and southwest. The rates on this 
 commodity do not impede its shipment to any logical 
 markets. Memphis is also a principal gateway for the 
 distribution of the foodstuffs of the West throughout 
 the Southeast, and a center for the distribution of gen- 
 eral merchandise throughout an extended area of Mis- 
 souri, Arkansas, Kentucky, Tennessee, Mississippi, and 
 Louisiana, being a strong competitor of St. Louis for 
 the trade of a great part of this region. 
 
 The merchants of Montgomery, Ala., complained to 
 the Interstate Commerce Commission because the rates 
 on certain merchandise from the North are lower to 
 Mobile and Pensacola than to that city. This is a case 
 of charging less for the long than for the short haul, 
 which the railroads say is justifiable because of the water 
 transportation down the Mississippi to New Orleans, 
 
360 Railroad Freight Rates 
 
 and thence to Mobile and Pensacola. The Commission 
 upheld this contention, but ordered a reduction in cer- 
 tain rates that were higher to Montgomery than the 
 rate to the Gulf, plus the rate from the Gulf back to 
 Montgomery. 
 
 Mobile and New Orleans obtain high class merchan- 
 dise from the North Atlantic seaboard by water. Their 
 grain and grain products^ meat and meat products and 
 many manufactured articles from Chicago, St. Louis 
 and Memphis are brought down at low rates because of 
 the water transportation made possible by the Missis- 
 sippi and the Gulf. The rates are the same from these 
 cities to Mobile and to New Orleans, the competing 
 railroads extending down the Mississippi Valley to the 
 respective ports insisting that the freight rates be no 
 greater to one than to the other. 
 
 Each of these cities thinks the other has certain ad- 
 vantages in the way of rates that restrict the markets 
 of its wholesale merchants in competition with the 
 wholesale merchants of the other. There is no com- 
 plaint, however, as to the rates on the commodities that 
 flow to and through these cities in great volume; that 
 is, none that are serious. Certain of the dealers in New 
 Orleans rather think that instead of meat and meat prod- 
 ucts being exported over her wharves at through rates 
 made from the packing houses in the North and West, 
 the rates should be so adjusted that these products can 
 be handled by, and pay toll to, the dealers in New Or- 
 leans. The growers of rice now and then contend that 
 as their products in a measure come into competition 
 with flour, the rates ought to be as low as those on flour. 
 As they are, however, the distributive rates on rice 
 are but slightly higher than the rates on flour, a com- 
 modity which forms a far greater proportion of the total 
 volume of traffic, and are generally satisfactory. New 
 Orleans and New York are the chief receiving ports 
 and distributing centers for the sugar of the West Indies 
 and the coffee of South America, which move upon 
 
Commerce of the Cities 361 
 
 rates that are the source of complaint only in excep- 
 tional and negligible instances. 
 
 OKLAHOMA 
 
 When Oklahoma was opened to settlement the rail- 
 roads scrambled to cover it with their tracks in very 
 much the same way that the settlers scrambled to take 
 possession of the homesteads, with the result that the 
 tracks at first laid had little or no ballast, and the roads 
 generally were not in good condition. This was doubt- 
 less a factor in the marked antagonism to the railroads 
 which led to extraordinary powers being given that 
 State's Public Corporation Commission. The chairman- 
 ship of this body was conferred upon a cattle man of 
 admitted physical prowess, the hero of many character- 
 istically western adventures. He once manifested the 
 playfulness of his disposition by marching a barber, who 
 had not pleased him, up and down the streets of the 
 town with a revolver at the point of his nose. The senti- 
 ment of the State was so very radical that its business 
 men formed an organization for the purpose of bringing 
 about a more conservative tone, and fair play for the 
 railroads, whom they generally admit had not been 
 flagrantly aggressive. This movement has had good ef- 
 fect even upon the redoubtable chairman of the Public 
 Corporation Commission, who is reported to have said 
 to a party of railroad officers, " We are all men together ; 
 we are willing to spread out a blanket and sit down on it 
 with you and talk things over any time." 
 
 In the eighteen years of its existence Oklahoma City 
 has attained a population of 60,000, and its physical 
 characteristics are those of an entirely modern munici- 
 pality. The wholesale merchants sell groceries within a 
 radius of 50 or 60 miles; hardware, agricultural im- 
 plements and drugs throughout the State, as well as 
 into the Pan Handle of Texas. The rate on merchan- 
 dise of the first class from New York by vessel to the 
 
362 Railroad Freight Rates 
 
 Gulf ports and thence by rail to Oklahoma City is $1.25 
 per 100 pounds, which permits a certain wholesale dis- 
 tribution of the high grade merchandise. Agricultural 
 implements come principally from St. Louis, a two-horse 
 walking plow, weighing 300 pounds and retailing for 
 $24, having paid a rate of $1.80 from that city. 
 
 Oklahoma City mills grain which it draws largely 
 from Oklahoma and Kansas, distributing the product 
 throughout the State, in Texas, Arkansas and Louisiana, 
 and to a limited extent east of the Mississippi River and 
 in Mexico. Rates throughout the State on grain and 
 grain products are adjusted on a mileage scale which 
 is about as low as that applicable in Illinois. To places 
 outside of the State these shipments are handled under 
 the milling in transit privilege. In Oklahoma the rail- 
 roads have taken the side of the millers in that conflict 
 which is quite general between the rates on wheat and 
 rates on flour. Notwithstanding that grain can be more 
 readily carried and a car be loaded to its capacity of 
 wheat, while it will not carry more than 24,000 to 30,000 
 pounds of flour, the rate on flour has been made the same 
 as on wheat. An exception is made on shipments to 
 Texas, which insists upon the interstate railroads mak- 
 ing their rates into that State 5 cents lower on wheat 
 than on flour: this is because there are numerous mills 
 in Texas, but the State does not produce enough grain 
 to keep them actively employed. The Texas Railroad 
 Commission thus protects the Texas millers who are at 
 the consuming end of the rate, at the expense of the 
 millers in other States who are at the producing end of 
 the rate, this difference of 5 cents just about placing 
 the distant on a parity with the nearer mill. It is ad- 
 mitted that no other item of commerce of Oklahoma is 
 so well taken care of as the grain and grain products. 
 
 There is even now a small packing house in Okla- 
 homa, and the industry will doubtless grow because that 
 portion of the State which constituted Indian Terri- 
 tority raises corn and hogs, while the region that con- 
 stituted Oklahoma Territory is largely devoted to the 
 
Commerce of the Cities 363 
 
 growing of wheat. At this time hogs from Oklahoma 
 are a considerable factor in the supply of the packing 
 houses at Fort Worth and Kansas City. As the State 
 becomes more thickly settled and the farmers more in- 
 tensively cultivate their homesteads, they will naturally 
 raise more of both hogs and beeves. This will accelerate 
 the development of the packing industry of Oklahoma 
 City, bringing still more favorable adjustments of the 
 freight rates which are now fairly equitable. 
 
 Oklahoma produces oil, as do Kansas, Colorado, and 
 Texas. The producers of each State desire to market 
 both crude and refined oil in the cities of the other 
 States, while from their respective intrastate markets 
 they desire to keep away the oil of the other States. The 
 oil consumers, however, of each State desire to have the 
 benefit of the competition of the oil from each of the 
 other States. The railroads have, therefore, been be- 
 sieged to reduce their rates from Colorado, and then 
 the rates into that State from the wells of Kansas and 
 Oklahoma, because those rates are too high compared 
 with rates from Colorado; then Oklahoma applied for 
 lower rates into Texas, and both Kansas and Texas for 
 lower rates into Oklahoma. A pipe line carries crude 
 oil from Oklahoma to the Texas refineries, and the Pub- 
 lic Corporation Commission has made low rates on the 
 refined oil marketed throughout the State. 
 
 Manufacture has begun in Oklahoma with the mak- 
 ing of Cottonwood into egg crates, butter boxes and fruit 
 boxes, which are sold throughout the South and South- 
 east. The city also manufactures wire chicken coops, 
 which are distributed throughout the western poultry 
 region. 
 
 TEXAS 
 
 Under the Texas Common Point System of freight 
 rates, which has been described at some length in a pre- 
 vious chapter, the freight rate adjustment affecting the 
 commerce of one is so nearly like that affecting the 
 commerce of another city that there is little occasion 
 
364 Railroad Freight Rates 
 
 for reference to the traffic of individual commercial 
 centers. 
 
 A modification of the Texas Common Point System has 
 been made to allow the merchants of Dallas to compete 
 with those of Texarkana. That place was given rates 
 from New Orleans and other cities but slightly higher 
 than those which were applied to the neighboring city 
 of Shreveport because of the steamboats that formerly 
 reached that city via the Red River. The rates made 
 by the State Commission of Arkansas also enabled Tex- 
 arkana to obtain merchandise at low rates from Mem- 
 phis. These adjustments so affected the trade of Dallas 
 that it was granted rates less than those applying 
 throughout Texas in general that its merchants might 
 compete with those of Texarkana in the northwestern 
 corner of Texas and its vicinity. The rates of Paris, 
 also a rival commercial center, were likewise adjusted to 
 enable it to compete with both Texarkana and Dallas. 
 These and other adjustments have extended to their 
 general satisfaction the area reached by the Dallas 
 wholesale dealers: a dozen years ago its radius was but 
 forty or fifty miles, while it is now one hundred or more. 
 
 The millers of Ft. Worth were at some disadvantage 
 while the elevation privilege was accorded to Kansas 
 City, but its cancellation makes their grain rates en- 
 tirely satisfactory. This city now sells agricultural im- 
 plements in New Mexico and Arizona under rates that 
 have been reduced to enable the dealers of Texas to com- 
 pete in this region with those of Kansas City. 
 
 The city of Galveston, for several years, bitterly con- 
 tested the specific differences in freight rates applying 
 between that city and Houston, urging that Galveston 
 be made an initial point of application of the scale of 
 intrastate rates that is general throughout Texas. It 
 finally brought suit for the abolition of the difference 
 as applied to the line leading from Galveston to the 
 Southwest without passing through Houston, and ob- 
 tained a favorable verdict in the District Court, which 
 was sustained by the Court of Appeals. Appeal was 
 
Commerce of the Cities 365 
 
 thence taken to the Supreme Court of the State, which 
 has enjoined the collection of this difference on traffic 
 from Galveston that goes over this line. As Galveston and 
 New Orleans are both ports on the Gulf of Mexico, 
 through either of which traffic may be consigned from 
 a considerable area of the interior, there has been an 
 equalization of the rates on some commodities to these 
 ports. For example, the maximum rate on rice from the 
 Texas rice fields to Galveston, as fixed by the Texas 
 Railroad Commission, is 19 cents, and the same rate 
 applies to New Orleans. (See page 131.) 
 
 THE PACIFIC COAST 
 
 The commerce of the cities of the Pacific slope has 
 been fairly indicated in the description of the freight 
 rate structures applying to the transcontinental traffic. 
 As there stated, the rates under which the products of 
 California are distributed throughout the East are, as a 
 rule, satisfactory to her producers. This is also the case 
 in the far Northwest, with the exception of the lumber 
 rates. 
 
 As the various Pacific ports from San Diego to Seattle 
 receive merchandise from the East at rates that are the 
 same to each port, the wholesale merchants of the vari- 
 ous terminal cities are on an exact equality in so far as 
 the inbound rates are concerned. Their competition, 
 therefore, is in the distribution to the markets of the in- 
 terior. Broadly speaking, the seaports of importance are 
 separated by such long distances that the wholesale 
 merchants of each city make distribution throughout 
 a fairly well defined area that is recognized as tribu- 
 tary to it. 
 
 The disaster which overwhelmed San Francisco gave 
 an exceptional stimulus during the period of its recuper- 
 ation to the trade of Los Angeles, and this city is now 
 endeavoring to have the freight rates to places in the 
 San Joaquin Valley so adjusted that it can compete with 
 the older city for the trade of that section. The railroad 
 
366 Railroad Freight Rates 
 
 companies state that the lower rates apply from San 
 Francisco because of the haul along level tracks, while 
 the higher rates from Los Angeles are necessitated by 
 the expensive movement over the mountains. They like- 
 wise decline to antagonize the long established whole- 
 sale interests of San Francisco as well as to suffer a re- 
 duction in their revenue by reducing the rates from Los 
 Angeles. This latter city is also endeavoring to obtain 
 the trade of the Nevada gold regions, which has been 
 with the older city. 
 
 The fact that San Francisco retains its prestige as 
 the commercial metropolis of the central and southern 
 reaches of the Pacific slope is strikingly manifested in 
 that it is still the headquarters of the salmon shippers, 
 although Seattle has been striving to wrest the suprem- 
 acy. The vessel owners obtain their outfits in San Fran- 
 cisco in April and May, and embark then for the Colum- 
 bia River with the Chinese laborers, the material for 
 boxes, the fishing implements and provisions sufficient 
 for the entire season. After spending the summer in 
 the fishing waters and at the canneries, they return in 
 the latter part of August, or in September, with the 
 canned fish, which is shipped from San Francisco to 
 England, and by rail throughout the Eastern States. 
 
 The practice of the transcontinental railroads in mak- 
 ing rates from the East to interior cities and towns on 
 the Pacific slope the sum of the rate to the Pacific termi- 
 nal plus the rate from the Pacific terminal to the interior 
 town, provided that the rate so made be less than the 
 rate made on the normal basis from the East to such 
 interior towns, in the past years has been the source of 
 much complaint on the part of these interior towns. 
 This complaint, however, was largely stilled by the rul- 
 ing of the Supreme Court of the United States that 
 the basis is justifiable. The fact is that it gives these 
 interior towns the full benefit of water competition. 
 Their rates are less than they would be if the existence 
 of the ocean did not lower the level of the Pacific termi- 
 nal rates. Their rates are just what they would be if, 
 
Commerce of the Cities 367 
 
 instead of their being served by the railroads extending 
 across the continent, they were obliged to rely upon the 
 service of a railroad extending into the interior from the 
 Pacific terminal. This situation has become fairly well 
 understood by the residents of the Californian interior, 
 and is no longer the subject of general complaint. 
 
 The city of Spokane, however, has never been sat- 
 isfied with its status in this respect, largely because of 
 other factors which have complicated the conditions 
 affecting that city. It was a complainant before the 
 Interstate Commerce Commission during the earlier 
 period of that body's existence, and the renewal of its 
 complaint was the first case to appear upon the docket 
 of the Commission after the Hepburn law became effect- 
 ive. Spokane, however, although on the western slope, 
 is not simply a town of the Pacific interior, as that des- 
 ignation ordinarily indicates. The surrounding country 
 throughout a vast area is of such fertility that it is known 
 as the Inland Empire. That it may fulfill its logical 
 function as a distributing center for this region, rates 
 lower than those applying to the Pacific terminals have 
 been made to Spokane on merchandise from the Missouri 
 and Mississippi Valleys and other sections of the interior 
 that are not immediately served by vessel lines to the 
 Pacific Coast, as is the Atlantic seaboard. It is interest- 
 ing to find that while the wholesale merchants of Spokane 
 insist that they should be accorded lower than Pacific 
 terminal rates on all merchandise from the East, in 
 order that they can compete with Seattle toward the 
 West, the wholesale merchants of Seattle insist upon 
 the justice of the application from the East to Spokane 
 of the rates that are constituted by adding to the rate to 
 the Pacific terminal the rate therefrom to Spokkne. 
 This adjustment, of course, gives the Seattle wholesale 
 dealer an advantage over his competitor at Spokane in 
 the intermediate territory. It has been modified by the 
 decision of the Commission that although water com- 
 petition modifies the rates from the Atlantic seaboard 
 to Seattle it does not affect the rates from Chicago and 
 
368 Railroad Freight Rates' 
 
 St. Paul to Spokane. The reductions ordered in both 
 classes and commodity rates from these cities will en- 
 hance the importance of Spokane as a distributing center. 
 
 THE SITUATION AT INDIANAPOLIS 
 
 As has been shown by the complaints made to the In- 
 terstate Commerce Commission, and by the survey of 
 the commerce of the cities, the results of which have 
 been embodied in the preceding pages, the communities 
 that, as a rule, are dissatisfied with the freight rate ad- 
 justments are not those whose natural advantage of 
 location and whose economic strength have led to their 
 becoming established commercial centers. When com- 
 plaints have come from such centers they have not, at 
 least in recent years, been in regard to the rate structure 
 affecting the commerce of the city in general, but of 
 certain particular rates. The list of community com- 
 plaints on page 296 contains the name of no town or 
 city of New England, none in the Trunk Line territory, 
 and but one in the Central Traffic territory. The com- 
 plaints, both from the South and from the West, are 
 mostly from inconspicuous towns that are without any 
 considerable degree of economic strength. That mould- 
 ing of the freight rate structures which are, on the 
 whole, admirably adapted to facilitate the flow of traffic, 
 has been under economic influences which have acted 
 upon the railroads with far greater power than the 
 railroads have reacted upon them. As we have learned, 
 however, there are certain lines of cleavage between the 
 sections in which the regional rate structures respec- 
 tively apply — and there is undeniable inconvenience in 
 the adjustment of rates on inter-regional traffic that 
 necessitates the use of different and divergent classi- 
 fications. It is evident that were every conceivable dis- 
 turbing element a factor in the rate adjustment applying 
 to the commerce of any one city, the merchants and 
 manufacturers of that city would doubtless consider 
 themselves aggrieved. That these factors do focus with 
 
Gommerce of the Cities 369 
 
 perturbing effect upon a particular city is quite true, and 
 it would seem to be the irony of fate that it is one of 
 the fairest in the land. 
 
 That city, however, does not owe its location to any 
 industrial or commercial advantages. When it was 
 sought to establish a capital for the newly admitted State 
 of Indiana, a site was selected almost exactly in the 
 center of the State. The " Governor's Mansion " was 
 erected in a circular plot in the center of the settle- 
 ment, and a plan of streets staked out, the thoroughfares 
 six squares from the circle in each direction being des- 
 ignated as East Street, West Street, North Street and 
 South Street, to indicate the extreme limits to which un- 
 der the fondest hopes then entertained the city might 
 reach. Because of its central location the railroads be- 
 tween Chicago and Cincinnati and Louisville, and be- 
 tween St. Louis and the East, naturally intersected at 
 Indianapolis, which therefore became a railroad center, 
 and, hence, a distributing point for the towns and vil- 
 lages of the surrounding counties. 
 
 There' was no material in Indiana for manufactures, 
 unless coal from the fields in the southwestern counties 
 be so designated. But from time to time the industry 
 and the ambition of one and now another of her resi- 
 dents led to the development of an artisan's shop into a 
 factory. The products naturally and necessarily were 
 not such as grow out of the assemblage of vast quan- 
 tities of raw material, but those dependent upon ingenu- 
 ity and skill of workmanship. Thus developed the man- 
 ufacture of vehicles, saws and other tools, and of cer- 
 tain high grade machinery; and the growth of livestock 
 in the adjacent regions led to the establishment of a 
 packing house. The products of these establishments, 
 and other articles, found markets in Indiana and else- 
 where, the freight rates not being given particular con- 
 sideration, as they did not measurably restrict their sale. 
 
 Fifteen or more years ago, however, after the dis- 
 covery of natural gas in central Indiana, glass and tin 
 plate factories were erected in the natural gas belt; the 
 
370 Railroad Freight Rates 
 
 State progressed in manufacture and in ambition. The 
 manufacturing establishments of IndianapoHs did not 
 radically increase in number, but the existing concerns 
 vastly increased in extent and output. They sought to 
 widen the area of their markets even in competition with 
 Chicago and St. Louis, and the wholesale merchants 
 were no longer content with the patronage of customers 
 of the surrounding towns. 
 
 This led to a scrutiny of the freight rates, develop- 
 ing many cases in which the rates per ton per mile from 
 Indianapolis to distant markets are higher than for sim- 
 ilar distances from other long-established manufactur- 
 ing and distributing centers that originate great volumes 
 of traffic. This can be partly and broadly accounted 
 for by the fact that Indianapolis is not served by any 
 navigable waterway, as are its overshadowing neighbors, 
 Chicago, Cincinnati, Louisville and St. Louis. It can 
 be accounted for partly by the fact that Chicago, Cin- 
 cinnati, Louisville and St. Louis are each an initial 
 point of lines leading to the West and leading to the 
 South upon which the manufacturers and merchants of 
 these cities bring pressure to bear for rates that will 
 inure to the benefit of their trade. The commercially 
 and industrially weaker city of Indianapolis, pocketed 
 between these communities that were of established 
 might while she was yet but the capital town of an in- 
 terior State, can exert no such economic demand. 
 
 Its shippers are subjected to annoyance growing out 
 of the fact that although the city is in the territory in 
 which the Official Classification applies, it is so near 
 the dividing lines that its shipments to the West have 
 to be made under the Western Classification, and to the 
 South under the Southern Classification. 
 
 The railroads do not attempt to contest the obvious 
 facts, but broadly claim that the freight rates to Indian- 
 apolis permit her shipments to go to all logical markets, 
 saying that if she desires to sell vehicles in the South in 
 competition with Louisville and Cincinnati, or products 
 of whatever kind in the West in competition with Chi- 
 
Commerce of the Cities 371 
 
 cago and St. Louis, and to do so is obliged to absorb the 
 difference in the freight rates, which at the most are but 
 a small item in the marketing of such products as she 
 makes — she only does what other cities have to do to 
 overcome their handicaps, what they naturally ought to 
 do in order to enter markets already served by competi- 
 tors of greater economic strength. They call attention to 
 the fact that Indianapolis benefits by the Trunk Line Per- 
 centage System on East and West bound traffic, and that 
 to change its percentage of the New York-Chicago rate 
 would disturb other rates. 
 
 The railroads point out that the commodities which 
 Indianapolis needs to bring from other places, for the 
 use and consumption of her citizens, are carried to her 
 portals at rates relatively as low as to any of the cities 
 of the traffic region in which she is located; that in so 
 far as the transportation charge is concerned, the retail 
 merchants of Indianapolis do not need to ask higher 
 prices on wearing apparel, foodstuffs, furniture, or on 
 the appliances of general use than the retail merchants 
 of even Chicago or St. Louis or Cincinnati. 
 
 In this connection, however, the wholesale grocers of 
 Indianapolis state that while the railroads charge 17 
 cents per 100 pounds for carrying sugar 710 miles from 
 New Orleans to St. Louis, 17 cents for the 700 miles 
 to Evansville, 17 cents for the 811 miles to Louisville, 
 and 25 cents for the 922 miles to Chicago, they charge 
 25 cents for the 838 miles to Indianapolis. They state 
 that sugar is the foremost item of a wholesale grocer's 
 stock, that it is sold at little or no profit at the best, but 
 that it is the main staple which attracts trade, retail 
 grocers purchasing other merchandise where they obtain 
 sugar. These wholesale grocers of Indianapolis are 
 especially incensed because rates were increased on sugar 
 to their city, while no increases were made to the other 
 river cities named, whose wholesale dealers are thereby 
 given an increased advantage over their rivals at In- 
 dianapolis for the trade of the competitive area. The 
 railroads point out that the sugar rates cannot be made 
 
372 Railroad Freight Rates 
 
 higher to the cities on the Mississippi and Ohio Rivers, 
 as they are now at the limit above which the boats 
 would take the traffic, and that in the absence of this 
 water competition they are not compelled to continue 
 this low level to Indianapolis to which the present rate 
 is not unreasonable, being one cent less for the 838 miles 
 from New Orleans than for the 825 miles from New 
 lYork. 
 
 The situation at Indianapolis is aggravated by local 
 complications. One railroad system, extending through- 
 out Ohio into Indiana, has made effective over its lines 
 to the east and south of Indianapolis the scale of local 
 rates decreed for Ohio by the legislature of that State. 
 Other of the Indiana lines adhere to the older scales 
 under which rates are somewhat higher, except that on 
 that portion of their lines east of Indianapolis they have 
 met the rates of the line that applied the Ohio scale as 
 far as that city. As even the railroad system carrying 
 the Ohio rates as far as Indianapolis has not applied 
 those rates to such of its lines as extend from Indian- 
 apolis to St. Louis, there are at least two scales of local 
 rates effective in Indiana. A wholesale dealer of Indian- 
 apolis, therefore, finds his freight charge, for example, 
 for thirty-five miles in one direction higher than for 
 forty miles in another direction. While it is quite true 
 that the same rates apply over the different lines to a 
 point east of the city, and that the rates are the same by 
 the different lines to a point west of the city, it is difficult 
 for a shipper to see why there should be the different 
 scales. The railroads of Indiana, aware that if some 
 uniform and satisfactory adjustment is not made of 
 these intrastate rates the legislature will likely, as the 
 State Railroad Commission has already attempted, de- 
 cree still lower rates than any now in effect, have en- 
 deavored to come to an agreement. Certain of the rail- 
 roads of the State, whose lines are not in the great 
 traffic channels, are, however, not inclined to reduce 
 their local rates to the level of those of the great systems 
 
Commerce of the Cities 373 
 
 carrying a large volume of through in addition to their 
 local traffic. 
 
 Another phase of the situation is also vexatious to 
 the wholesale merchants and the manufacturers of this 
 city. Because of the- river communication between both 
 Cincinnati and Louisville and St. Louis, the direct rail 
 lines between those cities have been obliged to make 
 rates that will enable them to secure traffic in competi- 
 tion with the boats. If the lines between either Cin- 
 cinnati or Louisville and St. Louis by way of Indian- 
 apolis desire to carry any of this traffic, they must do so 
 at the water- forced rates in effect by the direct line, and 
 these in some cases are lower than the rates from In- 
 dianapolis to St. Louis. This naturally gives an advan- 
 tage over Indianapolis to the shippers of Cincinnati and 
 Louisville who send merchandise to St. Louis. The 
 railroads, however, say that the rates from Indianapolis 
 to St. Louis are not unreasonable; that the fact that 
 lower rates are in effect from Cincinnati and Louisville 
 is because of the geologic forces that determined the 
 course of the rivers ; that inasmuch as such of this traffic 
 as they can obtain at competitive rates more than pays 
 the immediate outlay because of such traffic, it is good 
 business for them to take it. The continuance of the 
 Indianapolis lines in this traffic does not hurt that city: 
 their retirement from that traffic would not help that 
 city. 
 
CHAPTER XXIII 
 
 A COMPARISON OF THE RAILROADS WITH 
 THE AGRICULTURAL AND MANU- 
 FACTURING INDUSTRIES 
 
 The foregoing chapters have treated principally of 
 the freight rates of the railroads from the exterior view- 
 point of their effect upon the commerce of the country: 
 that is, in their service to the industrial and commercial 
 agencies. It remains to consider the freight rates as a 
 factor in the revenue derived by the railroads from the 
 performance of transportation and the relation borne 
 by this revenue to the maintenance and extension of the 
 railroads; that is, from the interior view point of the 
 effect of the service of the industrial and commercial 
 agencies to the railroads. 
 
 The three material functions that are vital and essen- 
 tial to the social organization are those of agriculture, 
 manufacture, and transportation. They are as vital and 
 essential to the social organism as are the heart, the 
 stomach and the lungs to the processes of the body. It 
 is imperative that the nourishment absorbed by the body, 
 as a whole, be distributed to the heart, the lungs and 
 the stomach to renew their tissue and to maintain the 
 energy with which each contributes to the welfare of the 
 body, as a whole. So also is the national welfare pro- 
 moted by each industry under justly economical adminis- 
 tration obtaining adequate return over expenditures to 
 provide for its effective maintenance and operation, and 
 to attract capital sufficient for its continuance. 
 
 One test of the efficiency of the railroads as a factor in 
 the social organism is that gained by a comparison of the 
 relative parts performed in the material activity of this 
 country by agriculture, manufacture and the railroads. 
 At first glance, there would seem to be difficulty in the 
 
 374 
 
Comparison of the Railroads 375 
 
 way of obtaining a comparison adequate for effective 
 deduction. As, however, the foot is the unit of measure 
 of length and the pound the unit of measure of weight, 
 so also in this country the dollar is the unit of measure 
 of value. In every industry — in agriculture, manufac- 
 ture and transportation — there must be capital and capi- 
 tal is measured by dollars. There must be expenditure, 
 and expenditure is measured by dollars. There must be 
 gross earnings and net returns, and the gross earnings 
 and the net returns are measured by dollars. There 
 must be workers in each industry, and their salaries and 
 wages are measured by dollars. With the dollar is meas- 
 ured the value of such dissimilar things as a ton of iron, 
 and a physician's visit. That is, if the price of one is 
 twenty dollars, and the fee for the other two dollars, 
 their relative value is ten to one. Likewise with the 
 dollar can be measured the diverse elements that enter 
 into the industries of manufacture, agriculture and trans- 
 portation, which may not be so radically diverse as they 
 may seem at first. Although the dollar may not be 
 as inflexible a unit throughout time as the foot or the 
 pound, it is a definite and exact unit of measure of value 
 at any specified time. 
 
 The following tables express the measurement by dol- 
 lars of the value of the intake and the outgo of these 
 three branches of industry. The amounts for the rail- 
 roads have been ascertained from the reports of the In- 
 terstate Commerce Commission for the years 1905, 1900 
 and 1890; for manufactures, from the census of 1900, 
 the census of 1890, and the special census of manufac- 
 tures for 1905 ; for agriculture, from the census of 1900, 
 the census of 1890, and the reports in the year book of 
 the Department of Agriculture for 1905. These latter 
 reports have been analyzed and criticised by statisticians 
 of the Division of Agriculture of the United States 
 Census and subjected to certain modifications in accord- 
 ance with estimates made by them. In the comparisons 
 based on these tables, the returns for 1890 are not used, 
 as the census figures for that year are admittedly in- 
 
376 Railroad Freight Rates 
 
 complete and the statistics of the Interstate Commerce 
 Commission are not so highly developed as for later 
 years. 
 
 MANUFACTURES 
 
 1905 1900 1S90 
 
 Capital $13,872,035,371 $9,817,434,799 $6,525,136,486 
 
 Number of salary and 
 
 wage-earners 6,718,618 5.705.165 4,712,622 
 
 Gross value of products.. 16,866,706,985 13,004,400,143 9,372,437.283 
 
 Cost of materials used 9,497,619,851 7.345.4i3.65i 5.162,044,076 
 
 Total salaries and wages.. 3,623,589,623 2,726,045,110 2,283,216,529 
 
 Miscellaneous expenses.... 1,651,603,535 1.027,755,778 631,225,035 
 
 Net returns from products. 2,093,893,976 1,905,185,604 1,295.951.643 
 
 RAILROADS 
 
 Capitalization $13,805,258,121 $11,491,034,960 $9,437,343,420 
 
 Number of salary and 
 
 wage-earners 1,382,196 1,017,653 749. 301 
 
 Gross earnings 2,082,482,406 1,487,044,814 1,051,877,632 
 
 Cost of materials used... 550,657,472 384,163,670 
 
 Total salaries and wages.. 839,944,680 577,264,841 692,093,971 
 
 Miscellaneous expenses.... 75.538,597 53,765,267 
 
 Net earnings 616,341,657 471,851,036 359.783.661 
 
 AGRICULTURE 
 
 Capital $30,043,000,000 $22,939,901,164 $18,082,267,689 
 
 Number of farmers and 
 
 farm laborers 10,900,000 10,381,765 8,565,926 
 
 Value of product 5,738,850,000 4,311,372,177 2,933,985,914 
 
 Wages paid labor 393,690,000 357,391,930 257,450,387 
 
 Fertilizer 61,366,300 53,430,910 38,469,598 
 
 Taxes 225,322,500 172,049,257 135,617,007 
 
 Interest on capital at 
 
 7 per cent 2,103,010,000 1,605,793,081 1,265,758,738 
 
 Net return to farm owners 2,945,461,20a 2,122,706,999 1,236,690,184 
 
 Because of the lack of absolute returns in the case of 
 manufactures and agriculture, deductions cannot be 
 made from the foregoing premises that will be of the 
 clear cut and exact nature required by an accountant 
 in making up a balance sheet. The figures in the fol- 
 lowing comparisons, therefore, in the case of manu- 
 factures and agriculture are not to be considered as defi- 
 nite calculations, but rather as indications so veiled with 
 mist that the clear-cut outlines are obscured, but yet 
 allowing sufficient perception of form and mass to guide 
 the pilot. 
 
 From the standpoint of the investor, the standpoint 
 of the man whose money is in a business, the prime 
 consideration is always what is the rate of return on the 
 capital in that business? From the standpoint of the 
 consumer, of the purchaser of commodities and services, 
 
Comparison of the Railroads 377 
 
 a prime consideration is the greatest satisfaction that 
 can be obtained for the lowest price. The interest of the 
 nation, as a whole, is that its citizens should obtain a 
 fair return for their efforts, and should obtain at fair 
 prices the commodities and services which they need. 
 To revert to the simile used in a previous paragraph, 
 if the equilibrium of the functions of the body be dis- 
 turbed, if ovemutrition of one organ lead to the im- 
 poverishment of another, if the unduly accelerated func- 
 tions of one lead to an impairment in the performance 
 of another, there will, if such a condition continue, ulti- 
 mately result the prostration of the body as a whole. 
 So also it is with the social organism, the body politic. 
 From the foregoing table we ascertain the following 
 to be the 
 
 NET RETURNS PER EACH $1,000 OF CAPITAL 
 
 I90S 1900 
 
 Manufactures $151 $194 
 
 Railroads 44 41 
 
 Agriculture 98 92 
 
 The most extreme modification of the tables conse- 
 quent upon the completest information would not in all 
 probability alter the conspicuous deduction from this 
 comparison ; that is, the investor looking for the greatest 
 immediate profit in either 1900 or 1905 would have 
 turned first to manufacture, then to agriculture, and 
 lastly to the railroads. The tremendous development of 
 manufactures and the enormous prosperity of the farm- 
 ing regions of the West confirm this deduction. If it 
 be claimed that the low net returns to the railroads is 
 because of their inflated capitalization the reply is made 
 that the actual capitalization of the American railroads, 
 including all cases of inflation, is only about $52,000 a 
 mile, which is far less than that of the railroads of any 
 other country. Recent reports of the actual expenditure 
 for construction show that it costs in this country to 
 build one mile of railroad from $25,000 over level coun- 
 try, where there are no obstacles, to over $100,000 in 
 
378 Railroad Freight Rates 
 
 places of dense population and where construction is 
 difficult. This does not include buildings or equipment. 
 If it be claimed that the capitalization of the railroads 
 is inflated, cognizance should be taken of various lines 
 of the manufacturing industry whose capitalization was 
 multiplied again and again at the time of the industrial 
 amalgamations succeeding the depression that termi- 
 nated in 1898, and of the fact that the values at which 
 farming and timber lands are held in many parts of the 
 country have doubled and quadrupled since that time. 
 
 The net returns are what remain of the gross returns 
 after the payment of all expenses. The ratio of these 
 gross returns and expenditures to capital is shown in 
 the following table: 
 
 GROSS RETURNS PER $1,000 OF CAPITAL 
 
 1905 1900 
 
 Manufactures $1,216 $1,324 
 
 Railroads 150 128 
 
 Agriculture 191 187 
 
 The excessive amount in the case of manufacture is 
 largely due to the fact that in selling a manufactured 
 product the manufacturer has to be reimbursed for the 
 cost of all the elements that enter into that product, and 
 these elements in large degree consist of commodities 
 which, although raw material to the final manufac- 
 turer, may be the finished products of intermediate 
 manufacture. For example, boots and shoes are a prod- 
 uct of which manufactured leather is the raw material, 
 manufactured leather is a product of which tanned 
 hides are the raw material, and raw hides are the raw 
 material of the tanner. 
 
 TOTAL EXPENDITURES PER EACH $1,000 OF CAPITAL 
 
 1905 1900 
 
 Manufactures' $1,065 $1,130 
 
 Railroads 106 87 
 
 Agriculture 75 77 
 
 In the case of manufactures these expenditures are 
 88 per cent, of the gross returns, the high ratio being 
 
Comparison of the Railroads 379 
 
 caused by the high value of the products of intermediate 
 manufacture that are included as raw material. The 
 deduction of the value of such partly manufactured 
 products from the gross value of the manufactured 
 products eliminates duplication. That is, the value of 
 manufactured leather, which appears in the gross value 
 of products as an output of the leather factory, disap- 
 pears from the net returns of the boot and shoe factory 
 when the value of the raw material used by the boot 
 and shoe factory is deducted from the value of its 
 products. 
 
 In the case of agriculture, the expenditures are but 
 39 per cent, of the gross returns. This is due in part 
 to the fact that the farmer's payments for raw material 
 are low ; and in part to the fact that the sun and the rain, 
 for which he does not pay, are the farmer's most efifect- 
 ive instruments. 
 
 The expenditure of the railroads is 71 per cent, of 
 the gross returns, 32 points higher than the expendi- 
 ture of agriculture and but 17 points below the expend- 
 iture of manufactures, even although the expenditure 
 account of the railroads for material contains no items 
 similar to the partly manufactured products of manu- 
 factures. 
 
 Although the labor cost is not the total cost of any 
 industry, it is a most important factor in that total cost, 
 and in the analysis of any business is subject to rigid 
 scrutiny. On nearly every farm the farmer himself is 
 an active worker, but the census returns do not show 
 separately the farmers and the farm laborers. There- 
 fore, the labor cost in the case of agriculture is omitted 
 from the following tables : 
 
 TOTAL SALARY-WAGE FOR EACH $1,000 OF CAPITAL 
 
 1905 1900 
 
 Manufactures $261 $277 
 
 Railroads 61 50 
 
 In the case of manufactures, labor received 'jz P^r 
 cent, greater return than capital ; in the case of the rail- 
 
3S0 Railroad Freight Rates 
 
 roads, labor received 38 per cent, greater return than 
 capital. The ratio of labor cost to capital for the rail- 
 roads was but 23 per cent, of that for manufacture, 
 while the labor charge of the railroads per dollar of net 
 returns was but 78 per cent, of that for manufacture. 
 The labor of the railroads, however, is applied through 
 machinery to a far greater degree than the labor of 
 either manufactures or agriculture, the horse-power of 
 the machinery of the railroads exceeding the horse- 
 power of the machinery of manufactures and agricul- 
 ture combined. It is, moreover, disclosed by the first of 
 these comparative statements that the capital of manu- 
 factures received a net return of 107 points higher, or 
 243 per cent, greater, than that of the railroads. That 
 is, it required to produce one dollar of net returns, $6.62 
 of capital in the case of manufactures, $9.44 in the case 
 of agriculture, while it requires $22,40 of capital in the 
 case of the railroads. 
 
 AVERAGE SALARY-WAGE PER WORKER 
 
 I90S 1900 
 
 Manufactures $539 $477 
 
 Railroads 607 567 
 
 TOTAL SALARY-WAGE PER EACH $1,000 OP EXPENDITURE 
 
 I9OS 1900 
 
 Manufactures $245 $245 
 
 Railroads 572 568 
 
 TOTAL SALARY-WAGE PER $1,000 NET RETURNS 
 
 I9OS 1900 
 
 Manufactures $i,730 $i,430 
 
 Railroads 1,362 1,223 
 
 The average salary-wage paid by the railroads was 
 12.6 greater than the average paid by the manufacturers. 
 Notwithstanding this, manufactures paid 27 per cent, 
 more salary-wage to produce $1,000 net returns than 
 the railroads. The salary-wage required to produce 
 $1,000 in net returns increased in five years 21 per cent. 
 
Comparison of the Railroads 381 
 
 for manufactures and 11 per cent, for the railroads. 
 That the high average salary-wage for the railroads is 
 not caused by the heavy salaries of the administrative 
 officers is shown by the fact that of the $839,944,680 
 paid in 1905 by the railroads in salaries and wages, but 
 $15,155,278, or 1.8 per cent, went to the general offi- 
 cers. In the aggregate, the high salaries of the presi- 
 dents are insignificant. 
 
 In comparison with the salaries paid the executive 
 officers of the great industrial corporations of this day, 
 the salaries of the railroad presidents are no longer ex- 
 traordinary. It is conspicuous and significant that of 
 the total expenditure of manufactures but 24 per centi 
 was for salary-wage, while of the total expenditure of 
 the railroads 57 per cent, was for salary-wage. 
 
 The tables that are given next cast further light upon 
 the relation of labor to each of the three branches of 
 industry. 
 
 NUMBER OF WORKERS PER $100,000 OF CAPITAL 
 
 I9OS 1900 
 
 Manufactures 48 58 
 
 Railroads 10 9 
 
 Agriculture 36 4S 
 
 That is, for each $100,000 of capital, manufactures 
 give employment to 380 per cent, more workers than the 
 railroads, agriculture to 260 per cent. more. 
 
 NUMBER OF WORKERS PER $100,000 NET RETURNS 
 
 I9OS 1900 
 
 Manufactures 320 291 
 
 Railroads 224 215 
 
 Agriculture 37° 489 
 
 That is, to produce $100,000 of net returns, manufac- 
 tures require 43 per cent, more workers than the rail- 
 roads, and agriculture 65 per cent. more. Not only is 
 the ratio "of labor charge to capital less in the case of 
 the railroads, but the number of workers per given 
 amount of capital is vastly less. Although their work- 
 
382 Railroad Freight Rates 
 
 ers receive a higher average wage, a given amount 
 of net returns is produced by the railroads with 70 per 
 cent, of the number of workers required in manufac- 
 tures, and 60 per cent, of the number required in agri- 
 culture. 
 
 The comparisons brought out by the preceding tables 
 and the deductions therefrom show that while the ad- 
 ministration of the railroads is far more economical 
 than that of either manufactures or agriculture, the re- 
 turns to capital are far less. This would indicate that 
 the prices for the product of the railroads — that is the 
 rates for transportation — are relatively lower than the 
 prices for the products of manufacture and for the 
 products of agriculture. This deduction is borne out by 
 figures which also are obtained from publications of the 
 United States Government. 
 
 Bulletin No. 65 of the Bureau of Labor, issued July, 
 
 1906, contains the results of an investigation into the 
 wages and hours of labor in the manufacturing indus- 
 tries from 1890 to 1905, and of an investigation of the 
 retail prices of food from 1890 to 1905. It states : 
 
 " The average wages per hour in igos were i8.g per cent, 
 higher than the average for the ten-year period from 1890 to 
 1899, inclusive. The average earnings per week were 14 per 
 cent, higher, and the average hours of labor per week were 4.I 
 per cent, lower." 
 
 The same report says: 
 
 " The average prices of wheat, bread, butter, cheese, chickens, 
 cornmeal, eggs, fresh fish, salt fish, milk, mutton and veal were 
 higher in 1905 than in any other year of the sixteen-year period. 
 The advance in bacon since 1896 has been 43.5 per cent. ; the 
 advance in Irish potatoes, 43.1 per cent. ; the advance in eggs, 
 41.8 per cent. ; the advance in dry or pickled pork, 31.9 per cent. ; 
 the advance in fresh pork, 30 per cent. ; the advance in flour, 29.3 
 per cent. ; the advance in cornmeal, 28.6 per cent. The advance 
 in food, . . . according to its consumption in the family of 
 the workingman, has been . . . 12.4 per cent., when compared 
 with the average for the ten-year period 1890 to 1899." 
 
 Bulletin No. 69 of the Bureau of Labor, issued March, 
 
 1907, contains a record of wholesale prices of all com- 
 
Comparison of the Railroads 383 
 
 modities from 1890. Taking the average wholesale 
 price from 1890 to 1899 as 100 per cent., this record 
 shows that wholesale prices increased as follows for 
 1905 : farm products, 24.2 per cent. ; food, etc., 8.7 per 
 cent ; cloths and clothing, 12 per cent. ; fuel and light- 
 ing, 28.8 per cent. ; metals and implements, 22.5 per 
 cent. ; lumber and building materials, 27.7 per cent. ; 
 drugs and chemicals, 9.1 per cent.; miscellaneous, 12.8 
 per cent; all commodities, 15.9 per cent. 
 
 Turning to the reports of the Interstate Commerce 
 Commission we find that the average rate per ton per 
 mile for 1890 was .941 cents — that is, nine hundred 
 and forty-one one-thousandths of a cent; for 1900, .729 
 cents, and for 1905, .766 cents. Although the average 
 rate per ton per mile for 1905 increased one-half of one 
 per cent, over the average rate for 1900, the average 
 rate for 1905 was but 91.2 per cent, of the average for 
 the period from 1890 to 1899. That is, the average for 
 1905 was 8.8 per cent, lower than the average for the 
 ten-year period. 
 
CHAPTER XXIV 
 
 THE PROGRESSIVE ACHIEVEMENT OF THE 
 RAILROADS 
 
 Another viewpoint from which to j"udge the height- 
 ening efficiency of the railroads of this country is af- 
 forded by a comparison for different periods of the 
 various phases of their status and of their performance. 
 
 The principal factors through which the record of a 
 railroad is brought to test, are: 
 
 (i) The operating revenues, which depend on the 
 rates and the volume of traffic. Traffic is measured by 
 ton miles, the unit being one ton of freight carried one 
 mile; and by passenger miles, the unit being one pas- 
 senger carried one mile. The sum of ton miles and 
 passenger miles may, for the purposes of this presenta- 
 tion, be considered as the number of traffic units, al- 
 though the two units differ in many respects. 
 
 (2) The operating expenses, which depend upon the 
 facilities for operation, modified, however, by the volume 
 of traffic and the peculiar requirements of particular 
 traffic. Facilities are measured by miles of line, miles of 
 track, number and tractive power of locomotives, num- 
 ber and capacity of freight cars, and number of em- 
 ployees of the various grades. Efficiency of operation 
 is measured, other things being equal, by the ratio be- 
 tween the units of operation and the units of traffic ; and, 
 also, other things being equal, by the ratio between the 
 gross earnings and the expense of operation. Units of 
 operation are freight-train miles and passenger-train 
 miles. The greater the ratio of tons to freight-train 
 miles and the greater the ratio of passengers to passen- 
 ger-train miles, the greater, other things equal, is the 
 efficiency of operation. The lower the ratio of operating 
 expense to gross earnings, other things equal, the greater 
 is the efficiency of operation. 
 
 384 
 
Achievement of the Railroads 385 
 
 (3) The operating income, what is left of the operating 
 revenues after the operating expenses and taxes have 
 been paid. This remainder, plus the income from sources 
 other than operating, constitutes the fund from which 
 interest on funded debt and the dividends are payable, 
 and from which contribution is made to the surplus. 
 
 (4) The capitalization, the amount upon which the 
 bondholders and stockholders expect returns. 
 
 The relation borne by these various factors one to 
 another, in the progressive performance of the railroads 
 of this country, is shown by the following tables of per- 
 centages. As publication of collected statistics of the 
 railroads of this country did not begin until a number 
 of years after the close of the Civil War, and as the 
 comprehensive presentations of the present day were 
 attained only by gradual development, no one of these 
 tables is based on information for any part of the period 
 prior to 1871, and for many of the headings informa- 
 tion is obtainable only for more recent years. Data for 
 the years prior to 1889 has been compiled from Poor's 
 Manual; for 1889 and subsequent years, from the sta- 
 tistics of the Interstate Commerce Commission. 
 
 During the decade from 1875 to 1885, the comparative 
 increases in the different phases of railroad activity were 
 as follows: 
 
 FACILITIES 
 
 Increase (per cent.) 
 
 Miles of line 72.38 
 
 Locomotives 67.09 
 
 Freight cars II3-8S 
 
 Passenger cars 23.32 
 
 FINANCE 
 
 Capitalization 77-6i 
 
 Gross earnings 5357 
 
 Net earnings 45-27 
 
 Operating expenses 58.42 
 
 Interest and dividends 57-93 
 
 This decade of rapid extension of the railroads im- 
 mediately followed the uniting of small roads, serving a 
 local traffic, into through lines. These through lines 
 
386 Railroad Freight Rates 
 
 were extended in advance of traffic, and new railroads 
 were built into undeveloped regions. With the exten- 
 sion of the through lines was inaugurated the competi- 
 tion for long-distance traffic. Rate wars and rebates 
 were at their height during the early years of the dec- 
 ade; then, owing to the steadying efifect of the traffic 
 associations, dividends increased until the volume of 
 traffic fell with the minor depression of 1884. Of the 
 increase in capitalization, about two-thirds is accounted 
 for by the cash value of new line and new equipment, 
 leaving about one-third, or about $1,200,000,000, to be 
 accounted for by buildings and other structures, fran- 
 chises, and other assets^ and the natural increase in the 
 value of the properties in general with whatever there 
 may have been of " water." 
 
 The ratios of increase from 1885 to 1895 are as fol- 
 lows : 
 
 FACILITIES 
 
 Increase (per cent.) 
 
 Miles of line 41-45 
 
 Miles of track 47-Si 
 
 Locomotives 38.46 
 
 Freight cars 47-34 
 
 Passenger cars 9I-5I 
 
 TRAFFIC 
 
 Ton miles 73-39 
 
 Passenger miles 33-44 
 
 Traffic units 66.00 
 
 FINANCES 
 
 Capitalization 21.34 
 
 Gross earnings 39-19 
 
 Net earnings 29.74 
 
 Operating expenses 44-25 
 
 Interest and dividends 27.42 
 
 That during this decade there was more of intensive 
 
 than of extensive growth is shown by the fact that the 
 
 percentage of new line was little more than half as 
 
 great as during the previous decade, and was six per 
 
 \ cent, less than the ratio of increase of miles of track. 
 
 \ 
 \ 
 
Achievement of the Railroads 387 
 
 Miles of line, miles of track, supply of locomotives, and 
 freight cars, all increased in practically double the ratio 
 of the increase in capitalization. It was toward the 
 close of this decade that new and powerful locomotives 
 and the new and enlarged freight cars came into serv- 
 ice, the increase in power per locomotive and in ca- 
 pacity per freight car making the actual increase in 
 equipment far greater than that indicated by the increase 
 in number. There was a marked increase in the number 
 of passenger cars. The cost of additional track and equip- 
 ment acquired during this decade exceeded the increase in 
 capitalization, a fact which indicates that the cost was 
 met in great measure from the earnings. The low ratio 
 of increase indicates a hardening-down of capitalization 
 caused by this placing of earnings back into the proper- 
 ties, and also by the scaling down through receiverships 
 and reorganizations following the panic of 1893. The 
 earnings for the decade as a whole did not gain in pro- 
 portion to the increase in facilities. The last year of the 
 decade, however, was one of severe industrial depres- 
 sion, gross and net earnings each falling about twelve 
 per cent, below the amounts of 1893. 
 
 The ratios of increase from 1895 to 1905 are as fol- 
 lows: 
 
 FACILITIES 
 
 Increase (per cent.) 
 
 Miles of line 20.72 
 
 Miles of track 29.29 
 
 Locomotives 35-46 
 
 Freight cars 44-76 
 
 Passenger cars 22.96 
 
 TRAFFIC 
 
 Ton miles "8.78 
 
 Passenger miles 95-26 
 
 Traffic units iiS-84 
 
 FINANCES 
 
 Capitalization 17-34 
 
 Gross earnings 93-65 
 
 Net earnings 98-45 
 
 Operating expenses 91.62 
 
 Interest and dividends 62.4a 
 
388 Railroad Freight Rates 
 
 This decade also exhibits a greater proportion of in- 
 tensive than of extensive growth, miles of track, supply 
 of locomotives and freight cars, all increasing in far 
 greater ratio than miles of line. The extraordinary in- 
 crease in the number of passenger cars during the pre- 
 ceding decade explains the low ratio of increase in this 
 decade. The cost of the additions to facilities again 
 exceeds the increase in capitalization. Indeed, the pro- 
 portion of the earnings of the American railroads that 
 was being turned back into the properties excited such 
 apprehension in foreign countries that the English in- 
 vestors sent over an expert to examine into this dispo- 
 .sition of the earnings to ascertain if there were justifi- 
 cation for it. He reported that the maintenance of the 
 railroads and their development to meet the extraordi- 
 nary increase of traffic that began with 1898 made 
 imperative the expenditure of vast sums upon improve- 
 ments and extensions. These expenditures for improve- 
 ments out of earnings tended still further to solidify 
 the capitalization. This naturally elicited complaints 
 from the stockholders whose dividends were not aug- 
 mented to an extent at all commensurate with the 
 increases in traffic or in earnings. 
 
 The pressure for lower rates, the steady increase in 
 taxes of all kinds, the rapidly increasing wages and the 
 mounting prices of all material used by the railroads, 
 forced great economies in methods of operation. These 
 were made possible largely by the powerful locomotives 
 and the capacious freight cars. The traffic units carried 
 per dollar of capitalization, which had increased 38 per 
 cent, from 1885 to 1895, increased 91 per cent, from 1895 
 to 1905. The number of traffic units carried per mile of 
 track increased 13 per cent, from 1885 to 1895, and 66 
 per cent, from 1895 to 1905. The number of traffic 
 units carried per locomotive increased 21 per cent, from 
 1885 to 1895, and 59 per cent, from 1895 to 1905. The 
 number of traffic units carried per employee increased 
 22.59 per cent, from 1895 to 1905. This greater per- 
 formance per unit of plant is also reflected in the ratio 
 
Achievement of the Railroads 389 
 
 of the capitalization to the earnings. In 1885 it took 
 $10.15 of capitalization to produce one dollar of gross 
 earnings; in 1895, $8.84; in 1905, but $5.36. The capi- 
 talization per unit of traffic was 13.4 cents in 1885, 9.7 
 cents in 1895, and but 5.3 in 1905. This result was at- 
 tained notwithstanding that the average rate per ton per 
 mile in 20 years had decreased 27.5 per cent. 
 
 The progressive efficiency of the American railroads, 
 the progressive increase, both relative and absolute, in 
 their contribution to the activity of the nation, are shown 
 by the fact that the rate of increase in traffic carried 
 was persistently greater than the rate of increase in cap- 
 italization or in earnings, notwithstanding the decreas- 
 ing charge for transportation. These results are sum- 
 marized in the following tabulation: 
 
 187s 1885 1895 
 to 1885 to 189s to 1905 
 
 I 
 
 Keturn to capital: increase (.per cent.; 
 Rate per ton per mile : decrease (per 
 
 cent.) 20.00 8.70 
 
 to I885 to 189s to 1905 
 
 Traffic units: increase (per cent.) 66.00 115.84 
 
 Capitalization: increase (per cent.).. 77.61 21.34 17-34 
 
 Gross earnings : increase (per cent.) 53-57 39.19 93-65 
 
 Net earnings: increase (per cent.).. 45.27 29.74 98-45 
 
 Return to capital: increase (per cent.) 27.42 62.40 
 
 Ratp Tipr tnn npr mile r Herrease ^ner 
 
 In the vociferous discussions of recent years so much 
 has been said about the " fictitious " capitalization, the 
 " over " capitalization, the " wind and water " in the 
 capitalization of the railroads of the United States that 
 the statement that the capitalization per mile has been 
 gradually diminishing will doubtless be received with 
 incredulity. Yet, that is the exact truth as shown by 
 the statistics published by the Interstate Commerce 
 Commission. In connection with the tables of capital- 
 ization published in its volume of statistics for 1905, the 
 Commission states that in so far as the given amount of 
 capitalization includes bonds or stocks of railroads which 
 are owned by other railroads, the total represents a 
 duplication. For example, the Northwestern Ohio 
 Railway Company and the Pittsburg, Fort Wayne and 
 Chicago Railway Company have each issued stock, which. 
 
390 Railroad Freight Rates 
 
 however, is owned principally by the Pennsylvania Com- 
 pany. The Pennsylvania Company has issued stock 
 which is in large measure supported by these under- 
 lying issues of the Northwestern Ohio Railway Com- 
 pany and the Pittsburg, Fort Wayne and Chicago Rail- 
 way Company. All the stock of the Pennsylvania Com- 
 pany is in turn owned by the Pennsylvania Railroad 
 Company. It is, therefore, manifestly a duplication to 
 include the stock issues of the subsidiary companies, as 
 well as the total stock issue of the Pennsylvania Rail- 
 road Company. For another example, a majority of 
 the stock of the Mobile and Ohio Railroad Company is 
 owned by the Southern Railway Company, and is, there- 
 fore, covered by the stock of the latter company. It is, 
 therefore, a duplication to list the entire stock of the 
 Mobile and Ohio, as well as the entire stock of the 
 Southern in a table giving the capitalization of the 
 American railroads. This, however, notwithstanding 
 the statement just referred to, is what the Commission 
 does, making the average capitalization $65,926 per mile 
 for 1905. If from the total capitalization, as given in 
 the tables of the Commission, we deduct the amounts of 
 duplicated capitalization, as given in the statistics of the 
 Commission, the average capitalization per mile for 1905 
 is found to be $51,201* instead of over $65,000. The 
 average capitalization per mile for 1895 was $52,676 ; for 
 1885, $61,400; for 1875, $59,593- 
 
 In 1875 there was very little ownership of the issues 
 of one railroad company by another, and in 1885 the 
 proportion was still small. This period of promotion 
 and rapid extension doubtless knew more or less of 
 
 * The Special Report, No. I, of the Interstate Commerce 
 Commission on Intercorporate Relationships of Railways, as of 
 June 30, 1906, shows the net capitalization per mile to be 
 $36,173 of bonded debt, and $21,877 of stock, a total of $58,050. 
 The compiler of this report states that : " It is probable that 
 this net amount will be further reduced by a later and still 
 more exhaustive investigation." Therefore, the calculations in 
 this chapter, which was written prior to the publication of this 
 report, and based upon the Interstate Commerce Commission's 
 Statistics for 1905, have not been revised. 
 
Achievement of the Railroads 391 
 
 watered capitalization; that is, if the capitalization be 
 considered at par. It was the custom, however, to issue 
 large amounts of stock as a bonus to induce investors 
 to place their money in bonds, and these issues of stock, 
 dependent upon future development for whatever value 
 they might have, sold far below par. The receiverships 
 and reorganizations following 1893 reduced the average 
 capitalization to $52,676 in 1895. In the following dec- 
 ade the development of the " community of interests " 
 led to very large purchases by this company and that 
 company of the stocks and bonds of other companies, 
 and one effect was that the average capitalization per 
 mile, in 1905, was but $51,201 at par. This low aver- 
 age is also in part accounted for by the extensions made 
 out of earnings. In 1890, for every $295 of gross earn- 
 ings, one dollar was spent for permanent improvements. 
 In 1895, the ratio was one dollar for improvements to 
 every $320 of gross earnings; in 1900 one dollar for 
 every $66; in 1905, one dollar for every $63, and in 
 1906, one dollar for every $49. 
 
 The relative decrease in capitalization, together with 
 the tremendous increase in facilities and in improve- 
 ments in operation, accounts for the fact that the ratio 
 of the value of plant to a given amount of traffic de- 
 creased 28 per cent, from 1885 to 1895, and 25 per 
 cent, from 1895 to 1905. In view of these facts, it 
 seems impossible that there can at this time be any sub- 
 stantial amount of water in the capitalization of the rail- 
 roads of the United States. Such over-capitalization 
 as still exists is sporadic, and where water is still to be 
 found, it is being forced out by the receiverships and 
 the reorganizations that occur from time to time, just 
 as the healthy body forces deleterious elements in the 
 blood to the surface, and then ejects them from the 
 system. 
 
 For the decade ending in 1905, the railroads carried 
 115.84 per cent, more traffic for 93.65 per cent, more 
 money, the volume of traffic, therefore, increasing 22.19 
 per cent, more rapidly than the compensation for carry- 
 
392 Railroad Freight Rates 
 
 ing it. The employees, dealers in supplies, and others 
 concerned in the operation, received 91.62 per cent, more 
 compensation, while capital received but 62.4 per cent, 
 greater returns. The disposition by the railroads of 
 the United States of their income, dollar by dollar, for 
 the year 1907 is indicated by the following exhibit 
 of one of the trunk lines; for salaries and wages, 38.2 
 cents ; to dealers for supplies, etc., 30.8 cents ; for taxes, 
 3.1 cents; for interest and rentals, 17.8 cents; for div- 
 idends, 9.7 cents; for surplus .4 cents. 
 
 The facts brought to light by this scrutiny — ^that the 
 railroads have moved a greatly increased traffic at lower 
 rates, that they have vastly increased their facilities with 
 a relatively decreasing capitalization, and yet that their 
 expenses for operation have increased about 50 per 
 cent, faster than the returns on their capital — demon- 
 strate a progressive economy of administration from 
 which their employees and the public have derived a 
 far greater proportion of benefit than the bondholders 
 and stockholders. 
 
 Another question of foremost importance is what has 
 been the effect of this economy upon the railroads? 
 Although the record of their performance, as disclosed 
 by these statistics, is that of constantly increasing 
 achievement, everyone knows that during the period 
 from 1898 to 1907 the railroads of this country had to 
 face increasing criticism and execration, and a seem- 
 ingly universal hostility. Shippers were not supplied 
 with as many cars as they desired, nor as promptly as 
 they desired them. Shipments were subjected to long 
 delays in transit, and there was one disastrous wreck 
 after another. The popular antagonism found vent in 
 laws enacted by Congress, and by many of the State 
 legislatures — many of these laws increasingly impeding 
 the operation of the already overburdened railroads. 
 There were few to believe that the officers of the rail- 
 roads, the men who in reality were accomplishing the 
 magnificent results here placed in evidence, were doing 
 the best that they could do. There were few to believe 
 
Achievement of the Railroads 393 
 
 even their simple statement that if any one would show 
 them how to produce better results under the limita- 
 tions that bound them, they would be only too willing 
 to avail themselves of suggestions. 
 
 The truth is that the- railroad employees, from gen- 
 eral managers down to section men, were struggling 
 with an ever-rising tide of traffic that threatened to 
 overwhelm them. The figures tell the story. In ten 
 years the traffic increased 115 per cent. This was 
 double, or more than double, the increase in facilities 
 and about seven times the increase in capitalization. 
 Had it not been for the panic of 1893 the ton miles 
 for the decade ending 1895 would have increased at 
 least 100 per cent. They did increase 73.39 per cent., 
 and for the decade ending 1905 they increased 118.78 
 per cent. Speaking broadly, the freight traffic of this 
 country increases about 100 per cent, every ten years, 
 and there is every likelihood that it will increase 100 
 per cent, or more in the next ten years, a period of de- 
 pression being more than made up by a return of pros- 
 perity. 
 
 Twenty years ago the traffic units were eighty billions 
 a year, and preparation for a one hundred per cent, in- 
 crease meant provision for an additional eighty billions. 
 Now the traffic units are over two hundred and fifty 
 billions a year, and preparation for a one hundred per 
 cent, increase means preparation for an additional two 
 hundred and fifty billions. It is not likely that it will 
 be possible during the next ten years to reduce the ratio 
 of the value of plant to unit of traffic in any such pro- 
 portion as during the last ten years. Freight cars cannot 
 be built any higher without a change in the standard 
 of overhead clearances throughout the country. They 
 cannot be made any wider, for they will not pass on a 
 double track. They cannot be made any longer, for 
 they are now standardized in length to fit the loading and 
 unloading facilities at elevators, warehouses and ore 
 docks; and are as long as the curvatures on the leading 
 railroads of the country will permit. Likewise the 
 
394 Railroad Freight Rates 
 
 power of the locomotives cannot be increased except 
 through intensive improvements. Therefore, provision 
 for a one hundred per cent, increase in traffic will more 
 nearly approximate a one hundred per cent, increase in 
 facilities than heretofore. There must be extensive pur- 
 chases of real estate for enlargement of yards and ter- 
 minals. 
 
 If provision for a one hundred per cent, increase of 
 traffic were to mean an increase of one hundred per 
 cent, in facilities, the existing railroad plant of the 
 United States would have to be doubled within ten years. 
 Let us assume, however, that the traffic increased by 
 one hundred per cent, can be handled with facilities in- 
 creased by eighty per cent. Taking the cost of main 
 line track at $30,000 per mile, other track at $15,000 
 per mile, locomotives at $15,000 each, freight cars at 
 $1,000 each, and passenger cars at $5,000 each, it will 
 be found that an eighty per cent, increase in the track 
 and equipment of 1905 would cost over eight and one- 
 half billion dollars. The requisite real estate would 
 probably cost another half billion dollars, bringing the 
 total expenditure necessary to provide for the traffic of 
 the decade ending with 1915 to an average annual in- 
 vestment of nine hundred millions of dollars. 
 
 If this expenditure is made on capital account, the 
 capitalization of the railroads of the United States will 
 have to be increased to over twenty billion dollars. In 
 1885 the total return to the capitalization of the rail- 
 roads was but 3.38 per cent., in 1895 but 3.55 per cent. 
 In 1905, on the capitalization as given by the Inter- 
 state Commerce Commission, the return was 4.4 per 
 cent. ; on the net capitalization, as given in this chapter, 
 it was 4.9 per cent. For that year, moreover, 62.84 per 
 cent, of the total railway stock paid no dividends at all, 
 and the average rate of dividends that were paid was 
 less than six per cent. Of the total funded debt 78 
 per cent, reaped a return which averaged less than six 
 per cent. The entire surplus of all of the railroads of 
 the United States was less than one-tenth of the an- 
 
Achievement of the Railroads 395 
 
 nual expenditure that will be needed to keep them 
 abreast of the traffic. 
 
 As shown in the previous chapter, the net return to 
 the capital invested in manufactures averaged 15.1 per 
 cent, for the year 1905, the net return to the capital 
 invested in agriculture 9.8 per cent, for that year. Into 
 these two branches of our national industry, particularly 
 into the manufacturing and the allied mining industry, 
 capital was unhesitatingly poured. When, however, the 
 overburdened condition of the railroads, as a whole, 
 had become apparent to everyone, and they entered 
 the market with propositions for hundreds of millions 
 of dollars of new capital, the nation stood aghast at 
 their temerity. When even the clogged and the con- 
 gested Pennsylvania Railroad sought to parallel its 
 facilities between Pittsburg and New York, voices were 
 not lacking to criticise what was called its rashness. 
 The truth is that the railroads did not begin to ask for 
 new capital soon enough nor in amounts large enough. 
 Had their requisitions begun with the resumption of 
 business activity in 1898 and 1899, fewer mills and sky- 
 scrapers might, perhaps, have been built in the next 
 half dozen years, but the facilities of the railroads might 
 have been kept well ahead of the demand. When they 
 did ask, what did they receive? Bond issues even of 
 stable companies could be sold only at a discount, and 
 in many cases only at a heavy discount. 
 
 It is a condition and not a theory that confronts the 
 railroads. They must make ends meet, and they must 
 provide for the future. Not only must they make returns 
 on the capital in the existing plant, but they must dem- 
 onstrate the possibility of making returns that will enlist 
 capital in the doubling of that plant. This must be 
 done, not merely that the investment of capital may be 
 profitable, but that the transportation needs of the coun- 
 try may be met. 
 
 To whatever extent the waterways may be developed, 
 they cannot supplant the railroads upon which the 
 greater portion of the burden of transportation now 
 
39^ Railroad Freight Rates 
 
 falls, and of necessity will continue to fall. In sub- 
 stantiation of this statement it is necessary only to re- 
 flect that, particularly in the busier Northern States, 
 canals and rivers are frozen over throughout a consid- 
 erable portion of the year. It is necessary only to look 
 at the network of railroad lines on the map of any of 
 the States of developed commerce, and to consider what 
 would have to be done before waterways could even 
 fractionally take their place. Holland would no longer 
 be the typical land of dykes and ditches. How could 
 canals supplant the service now rendered to mills and 
 warehouses into which the tracks of the railroads pene- 
 trate? 
 
CHAPTER XXV 
 CONCLUSION 
 
 In all of the web of condition and circumstance, out 
 of which has developed the freight rate structure of 
 the railroads of the United States, was not woven one 
 thread of effective precedent. There was entire absence 
 of that experience of the past which serves as a guide for 
 the future. The concerted use of steam and rails revo- 
 lutionized transportation, not only its physical mechan- 
 ism, but its economic relations. The charges of the 
 canal boat and the wagoner were no adequate criterion 
 by which to fix the charges of the railroads. The man- 
 ner in which they were used indicates that they were 
 little more than a starting point from which to make a 
 guess, it being necessary, of course, that the charges 
 of the railroads be lower than those of the antecedent 
 agencies, or that their service be better. Both of these 
 desiderata were attained within a generation, and that 
 attainment firmly established the railroads as the domi- 
 nant instrument in this country for the conveyance of 
 passengers and freight. 
 
 Another salient feature is that the introduction of the 
 railroads in the United States was not into a developed 
 and settled nation. Their services and their rates had to 
 be progressively adapted to the needs of a population 
 that was irregularly extending over the vast areas of 
 the national domain, forming communities at points of 
 natural advantage whose location was not in the least 
 determined by intervals of distance. 
 
 The beginnings of the railroads, moreover, were when 
 the processes of industry were being revolutionized by 
 the use of steam in no less degree than the methods of 
 transportation. Coincident with the growth of popula- 
 tion was the increasing use of a greater variety of the 
 
 397 
 
398 Railroad Freight Rates 
 
 materials of nature and a continual multiplying of the 
 kinds of products wrought from these materials. There 
 has been a continual multiplying of the sources whence 
 raw material is obtained, of the places where it is manu- 
 factured, and as the population has extended far and 
 wide a ramifying of the channels of distribution. 
 
 It must also be borne in mind that with but few excep- 
 tions the railroads of the United States have not been 
 State owned institutions. There were, especially in the 
 earlier years, subscriptions by States, cities and towns, 
 and there were grants by the national government of 
 large tracts of land ; but in the main the capital by which 
 the railroads have been built has been subscribed by 
 individuals, as has been private capital in other enter- 
 prises. In the earlier years the first aim was often to 
 have a railroad, and capital was expended in its con- 
 struction with little or no regard to the likelihood of 
 profit from its operation. In later periods the return 
 on capital has been the foremost consideration, and as 
 a rule money has not been invested unless there has been 
 prospect of return. That is, as an avenue for invest- 
 ment the railroads have had to compete with other ave- 
 nues for investment; their success in the eyes of the 
 investor has meant pecuniary success. At all times the 
 railroads of the United States have been dependent upon 
 their earnings for their operation and their maintenance. 
 
 Judgment passed upon the freight rate structures of 
 the railroads of the United States must be posited on 
 these premises. It must be considered how completely 
 they have been adjusted to meet the requirements of 
 an irregularly extending and rapidly growing popula- 
 tion, of the rapidly extending and developing processes 
 of industry and commerce, to what extent they have met 
 the requirements of investors for return on their capital. 
 
 That period prior to the Civil War, when each rail- 
 road served only the local needs of the territory which it 
 traversed, has left no record that the rates of the rail- 
 roads were not satisfactory to their patrons. The in- 
 auguration of through service in the period immediately 
 
Conclusion 399 
 
 succeeding the War, the rapid extension of the railroads, 
 the growing competition for both short distance and 
 long distance traffic, the increasing effect of the rates 
 of the waterways upon the fates of the railroads, the 
 building of the railroads in advance of traffic, led to 
 that buffeting of the waves through which it was nec- 
 essary for both railroads and shippers to gain the ex- 
 perience that has enabled the steering of an evener 
 course, and to problems whose solution has been slowly 
 working out. Widespread and radical differences of 
 opinion between the railroads and their patrons, and 
 mutual misunderstandings equally widespread, culmi- 
 nated in the report made by the Cullom Committee to 
 the United States Senate in 1886. That report listed 
 eighteen causes of complaint against the railroad sys- 
 tem. Inasmuch as these complaints then expressed have 
 been the basis of nearly if not quite all of the accusa- 
 tions bearing directly or indirectly . against the trans- 
 portation charge that have been made since that time, 
 probably no more clear understanding can be gained of 
 the present status than by contrasting the conditions 
 exhibited by that list of complaints formulated twenty- 
 three years ago with the conditions that exist to-day. 
 This list of complaints, although embodied in a previ- 
 ous chapter, is repeated here for this purpose. 
 
 THE COMPLAINTS OF THE CONDITION AT 
 
 1886 PRESENT 
 
 I. That local rates are un- i- Local rates are still of 
 
 reasonably high, compared varying levels, and are usually 
 with through rates. higher per ton per mile than 
 
 through rates, but complamts 
 upon these specific bases are 
 nowadays seldom made. It 
 has been recognized by both 
 the Interstate Commerce Com- 
 mission and the Courts 
 that the lower through rate 
 per ton per mile is not a 
 criterion by which to meas- 
 ure the reasonableness of the 
 higher local rate. 
 
400 
 
 Railroad Freight Rates 
 
 Complaints of 1886 
 (Continued) 
 
 2. That both local and 
 through rates are unreason- 
 ably high at non-competing 
 points, either from the ab- 
 sence of competition or in con- 
 sequence of pooling agree- 
 ments that restrict its opera- 
 tion. 
 
 3. That rates are established 
 without apparent regard to the 
 actual cost of the service per- 
 formed, and are based largely 
 on "What the traffic will 
 bear." 
 
 4. That unjustifiable dis- 
 criminations are constantly 
 made between individuals in 
 the rates charged for like ser- 
 vice under similar circum- 
 stances 
 
 5. That improper discrimi- 
 nations are made between ar- 
 ticles of freight and branches 
 of business of a like charac- 
 ter, and between different 
 quantities of the same class 
 of freight. 
 
 6. That unreasonable dis- 
 criminations are made between 
 localities similarly situated. 
 
 Condition at Present 
 (Continued) 
 
 2. Complaints as to unrea- 
 sonably high rates at non-com- 
 peting points are now infre- 
 quent. Effective mechanism 
 exists for the correction of any 
 such rates that may be found. 
 
 3. That " What the traffic 
 will bear," or as it is more ac- 
 curately expressed, " Not what 
 the traffic will not bear," is the 
 only equitable basis for the ad- 
 justment of rates is the opin- 
 ion of the highest authorities 
 whether in the field of eco- 
 nomic theory or in that of 
 railroad practice. 
 
 4. These discriminations were 
 prohibited under, but in prac- 
 tice not abolished by, the orig- 
 inal Interstate Commerce Law. 
 Since the enactment of the 
 Elkins law and the Hepburn 
 law, and the enforcement of 
 their provisions, they have ad- 
 mittedly ceased to exist. 
 
 5. While, with constantly 
 changing commercial condi- 
 tions, instances now and then 
 occur of rates not being prop- 
 erly adjusted on similar arti- 
 cles, and for similar branches 
 of business, no general com- 
 plaint of this nature exists at 
 this time. It is generally con- 
 ceded that rates on small ship- 
 ments should in general be 
 higher than rates on carload 
 lots. 
 
 6. The adjustment of rates 
 between competing localities in 
 a manner that will satisfy all 
 of the contending interests re- 
 mains one of the most per- 
 plexing problems with which 
 the railroads and the Commis- 
 sion have to deal. Many 
 
Conclusion 
 
 401 
 
 Complaints of 1886 
 (Continued) 
 
 ^. That the effect of the pre 
 vailing policy of railroad 
 management is by an elaborate 
 system of special rates, re- 
 bates, drawbacks, and conces- 
 sions to foster monopoly, to 
 enrich favored shippers, and 
 to prevent free competition in 
 manjr lines of trade in which 
 the item of transportation is 
 an important factor. 
 
 8. That such favoritism and 
 secrecy introduce an element of 
 uncertainty into legitimate 
 business that greatly retards 
 the development of our in- 
 dustries and commerce. 
 
 Condition at Present 
 (Continued) 
 
 cases of discrimination that 
 seem unjust to a surface view 
 have been found not to be un- 
 reasonable by the Interstate 
 Commerce Commission ; other 
 cases seemingly unreasonable 
 and condemned by it have been 
 upheld as reasonable by the 
 Supreme Court of the United 
 States after broad considera- 
 tion of the effect upon the en- 
 tire population. 
 
 7- The statement set against 
 complaint Number 4 applies to 
 this complaint, Number 7. 
 Until recently it would have 
 held good in regard to the di- 
 visions of through rates al- 
 lowed " industrial roads " and 
 " tap lines," and by the pay- 
 ment of " elevation and trans- 
 fer charges." But these prac- 
 tices have been condemned, 
 and are now in one or another 
 stage of elimination. Their 
 abolition will leave, perhaps, 
 the only fields for secret con- 
 cessions to be in the abuse of 
 the " reconsignment " and 
 " milling in transit " privileges, 
 and the possibilities afforded 
 by so-called "reciprocal de- 
 murrage." ' 
 
 8. That _ these practices 
 hampered individual shippers 
 in competition with their 
 shrewder and more aggres- 
 sive rivals is unquestionable, 
 but it is not demonstrated that 
 they retarded the industry and 
 commerce of the country, 
 which expanded with great 
 rapidity during the entire 
 period of rebates and discrimi- 
 nations. The shrewder and 
 the more aggressive still trans- 
 act the greater volume of 
 business, although now with- 
 out concessions from the rail- 
 roads. 
 
402 
 
 Railroad Freight Rates 
 
 Complaints of 1886 
 (Continued) 
 
 9. That secret cutting of 
 rates and the sudden fluctua- 
 tions that constantly take place 
 are demoralizing to all busi- 
 ness except that of a purely 
 speculative character, and fre- 
 quently occasion great injustice 
 and heavy losses. 
 
 10. That in the absence of 
 national and uniform legisla- 
 tion, the railroads are able by 
 various devices to avoid their 
 responsibility as carriers, es- 
 pecially on shipments over 
 more than one road, or from 
 one State to another, and that 
 shippers find great difficulty in 
 recovering damages for the 
 loss of property or for injury 
 thereto. 
 
 II. That railroads refuse to 
 be bound by their own con- 
 tracts, and arbitrarily collect 
 large sums in the shape of 
 overcharges in addition to the 
 rates agreed upon at the time 
 of shipment. 
 
 Condition at Present 
 (Continued) 
 
 9. Legislation against the 
 secret cutting of rates and 
 their rapid fluctuation is as 
 drastic as against rebates and 
 secret discriminations. 
 
 10. There is not now any 
 lack of national legislation, but 
 the enactments of the various 
 States are sadly lacking an 
 uniformity. Competition, espe- 
 cially since the abolition of 
 secret _ concessions, has forced 
 the railroads to give more care 
 to the settlement of claims for 
 loss and damage in order that 
 they may retain the business 
 of the claimant. Indeed, ficti- 
 tious claims — which are ob- 
 viously equivalent to rebates — 
 have been paid for this pur- 
 pose. 
 
 II and 12. During the two 
 years' survey that has resulted 
 in the preparation of this book 
 no such complaints have come 
 to the writer's attention. 
 
 12. That railroads often re- 
 fuse to recognize or be re- 
 sponsible for the acts of dis- 
 honest agents acting under 
 their authority. 
 
 13. That the common law 
 fails to afford a remedy for 
 such grievances, and that in 
 cases of dispute the shipper is 
 compelled to submit to the de- 
 cision of the railroad man- 
 ager or pool commissioner, or 
 run the risk of incurring fur- 
 ther losses by greater dis- 
 criminations. 
 
 13. _ Certainly no such ac- 
 cusation is made at this time 
 of abundant Federal legislation 
 and superabundant State legis- 
 lation. 
 
Conclusion 
 
 403 
 
 Complaints of 1886 
 (Continued) 
 
 14. That the difference in 
 the classifications in use in 
 various parts of the country, 
 and sometimes for shipments 
 over the same roads in differ- 
 ent directions are a fruitful 
 source of misunderstanding, 
 and are often made a means of 
 extortion. 
 
 15. That a privileged class is 
 created by the granting of 
 passes, and that the cost of 
 the passenger service is largely 
 increased by the extent of this 
 abuse. 
 
 16. That the capitalization 
 and bonded indebtedness of the 
 roads largely exceed the ac- 
 tual cost of their construction 
 or their present value, and 
 that unreasonable rates are 
 charged in the effort to pay 
 dividends on watered stock 
 and interest on bonds improp- 
 erly issued. 
 
 17. That railroad corpora- 
 tions have improperly engaged 
 in lines of business entirely 
 distinct from that of trans- 
 portation, and that undue ad- 
 vantages have been afforded to 
 business enterprises in which 
 railroad officials were inter- 
 ested. 
 
 Condition at Present 
 (Continued) 
 
 14. Instead of the hundreds 
 of different classifications in 
 effect at the time this com- 
 plaint was drafted, there are 
 now but three promulgated by 
 the railroads, which are earn- 
 estly endeavoring to merge 
 these into one that will apply 
 throughout the country. The 
 various classifications and 
 modified classifications issued 
 by separate States are a large 
 factor in the confusion that 
 still exists. 
 
 15. The granting of passes 
 has been prohibited by the 
 Congress, and by various 
 States, except for certain 
 specified charitable purposes, 
 and to the employees of rail- 
 road companies. 
 
 16. That the first clause of 
 this complaint holds good as 
 to the entire railroad system 
 of the United States is vigor- 
 ously contested, not only by 
 officers of the railroads, but 
 by eminent economists. In any 
 event, rates are not and can- 
 not be determined by or based 
 upon capitalization. Over- 
 capitalization and financial 
 manipulation, where they exist, 
 may have the effect of impair- 
 ing the physical condition and 
 the service of a railroad. They 
 injure the investor, but do not 
 affect the rates of the shipper. 
 
 17. That clause of the Hep- 
 burn law forbidding railroad 
 companies to carry on a com- 
 mercial business in commod- 
 ities owned and transported by 
 them has been declared uncon- 
 stitutional by the Circuit 
 Court of the United States for 
 the Eastern District of Penn- 
 sylvania, as being an invasion 
 of property rights. The ques- 
 
404 
 
 Railroad Freight Rates 
 
 Complaints of 1886 
 (Continued) 
 
 Condition at Present 
 (Continued) 
 
 tion is now before the Su- 
 preme Court of the United 
 States for final decision. 
 The Interstate Commerce 
 Commission has full power to 
 prevent any abuses in the 
 transportation charge that 
 might arise from the continu- 
 ance of the railroads in dealing 
 in such commodities. 
 
 18. That the managernent of 
 the railroad business is ex- 
 travagant and wasteful, and 
 that a needless tax is imposed 
 upon the shipping and travel- 
 ing public by the unnecessary 
 expenditure of large sums in 
 the maintenance of a costly 
 force of agents engaged in a 
 reckless strife for competitive 
 business. 
 
 18. Statistics based upon re- 
 turns published by the Inter- 
 state Commerce Commission, 
 the Census Bureau, and the 
 Department of Agriculture, 
 show that while the average 
 wage paid by the railroads is 
 greater than that paid in the 
 agricultural industry or the 
 manufacturing industry, the 
 railroads produce a far greater 
 return measured per employee 
 and have far fewer employees 
 in proportion to capital; but 
 that notwithstanding this their 
 net return averages less than 
 one-half of that in agriculture, 
 and is far less than one-third 
 of that obtained in the man- 
 ufacturing industry. In the 
 eyes of the investor they are, 
 therefore, at a disadvantage in 
 comparison with either of 
 these principal fields of 
 activity. 
 
 A serious abuse not specified in the list of complaints 
 formulated by the Cullom Committee is that economic 
 waste, to which attention has been called of late years, 
 caused by the carrying of traffic by long and circuitous 
 routes in competition with direct routes. This is being 
 reduced to a minimum by the abolition of rebates, and 
 other secret concessions, it standing to reason that a 
 shipper having any regard for the time his wares spend 
 in transit, or for their liability ta injury from repeated 
 
Conclusion 405 
 
 handlingf, will not send a consignment over a long 
 and roundabout route when he can send it over a 
 shorter and more direct route at the same rate. 
 
 It is apparent from the foregoing comparison that 
 since the report made by the Cullom Committee, in 1886, 
 the conduct of transportation by the railroads of this 
 country has undergone a radical and comprehensive ref- 
 ormation, brought about in part by the working of 
 economic law, and in part by legislation. It is essential 
 that following this revolution there should be a period 
 of calm during which the railroads and the shippers 
 may have the opportunity to adjust themselves to the 
 new conditions and solve the new problems. 
 
 Because of the irregular extension of the population 
 of the United States, the varying geographical and eco- 
 nomic conditions that have led to the unsymmetrical de- 
 velopment of industry and commerce, and, therefore, 
 to necessarily irregular and unsymmetrical channels of 
 trafi&c, it follows that the development of the freight 
 rate structure necessarily has been likewise irregular 
 and unsymmetrical. That this development has been in 
 accord with the needs of industry and commerce would 
 seem beyond question, and that the moulding to which 
 it is continually subjected is adapting it the more closely 
 to those needs has abundant demonstration. Any radi- 
 cal or abrupt modification of the existing rate structure, 
 or any attempt to substitute for it another scheme of 
 rates of apparent mathematical symmetry, could not but 
 react injuriously, not only upon the railroads, but upon 
 industry and commerce, and, therefore, militate against 
 the national welfare. 
 
INDEX 
 
 Abuses, in privileges, 401 ; Pri- 
 vate Car Line, 187; Traffic 
 Associations and Railroad, 
 171. 
 
 Accounting, Association of 
 Railway Accounting Officers, 
 302, 303 ; Diversities in, 301 ; 
 Interstate Commerce Com- 
 mission and forms of, 278, 
 302; Systems, 301-304; Uni- 
 formity in, 302. 
 
 Act to Regulate Commerce, 
 1887, 248. 
 
 Adams, Charles Francis, and 
 Railroad regulation in Mas- 
 sachusetts, 242. 
 
 Adjustments in rates. Con- 
 serving equilibrium in mar- 
 kets, 138-143. 325-327, 354; 
 Conserving equilibrium in 
 places of production, 138; 
 Conserving manufactures, 
 69, 289; in Cotton, 31; Texas 
 Commission and, 102; in 
 Southeastern district, 89 ; 
 Traffic Associations and, 171 ; 
 Varying influences of, 148; 
 Intertwining of railroads 
 and, 315, 316. 
 
 Administration and equipment, 
 cost of, 218. 
 
 Advisory Railroad Commis- 
 sions, 242. 
 
 Agriculture, Capital employed 
 in, 1890, 1900, 1905, 376; in- 
 terest on, zi(>'> Colonial, 4; 
 Expenditures in, 378; for 
 fertilizers, 376; for Taxes, 
 
 407 
 
 376; Machinery in, 16; rail- 
 road revenue on implements 
 of, 230; Production, 1890, 
 1900, 1905, 376; increased 
 cost to consumer, 382; 
 Schools and Experiments 
 stations, 15, 36; Railroads 
 and, 14, 374-383; Labor, 
 numbers, 376, wages, 376; 
 Rotation of crops in, 22; 
 Department of, work of, 26, 
 34, 36. 
 
 Alabama, Coal fields, 12; cot- 
 ton mills, 10; iron and steel 
 industry, 11; Truck farm- 
 ing, 22. 
 
 Alfalfa, Cattle food, 17; Rail- 
 way revenue per ton-mile 
 from, 229; Sheep food, 19. 
 
 Altoona, Consignment to stor- 
 age at, 193, 194. 
 
 Amalgamation, Railroad, 251, 
 269. 
 
 Amarillo, Texas, Complaints 
 before Interstate Commerce 
 Commission, 296. 
 
 American Economic Associa- 
 tion, Transportation Com- 
 mittee on the Railroads, 247. 
 
 American Railway Associa- 
 tion, 215. 
 
 Animal Foods, Complaints to 
 Interstate Commerce Com- 
 mission on rates, 290, 291, 
 298. 
 
 Animal Products, Railway rev- 
 enue per ton-mile from, 229. 
 
 Annual Reports, Interstate 
 Commerce Commission to 
 Congress, 277; Carriers, 278. 
 
4o8 Index 
 
 Anthracite coal, Railway rev- 
 enue per ton-mile from, 229. 
 
 Anti-Trust Law, 1890, 263. \ 
 
 Appeals, Supreme Court, 278, 
 280. 
 
 Apple, American, at Paris Ex- 
 position, 1900, 24; European 
 origin, 22; export, 23, 24; 
 Industry, 29; Supremacy of, 
 23, 24. 
 
 Arizona, Coal fields, 12. 
 
 Arkansas, Apple crop, 23; 
 Peach crop, 24; egg ship- 
 ments from, 9. 
 
 Asphaltum, Railway revenue 
 per ton-mile from, 230. 
 
 Association of General Freight 
 Agents, 206. 
 
 Atlanta, Commerce of as af- 
 fected by rates, 359; Prices 
 and rates, flour, 54, sugar, 
 55 ; Rate, 91. 92- 
 
 Atlantic Seaboard, Apple crop, 
 23; Cotton mills, 10; Early 
 European traffic, 4; Early 
 inland traffic, in agricultural 
 products, 4; Importation of 
 Sicilian lemon, 26; Looms, 
 10; Importation of Salmon, 
 20; Truck Farms, 9. 
 
 Axes, rates and prices, St. 
 Louis, Kansas City, Denver, 
 SI. 
 
 B 
 
 Back Traffic, California prod- 
 ucts, 109-111; Wheat, 120. 
 
 Bacon, American, in English 
 markets, 18. 
 
 Bahia, Brazil, Navel Orange 
 importation, 25. 
 
 Baldwin, Loanii, and apple 
 culture, 23. 
 
 Baltimore, Competition with 
 New York and Philadelphia, 
 70; Differential, 74, 76, 77, 
 118, 119; Fish- and oyster- 
 
 trains, 9; Group rate, 77; 
 Railroad connection with 
 Ohio, s; Trade of food 
 products for European man- 
 ufactures, colonial, 4. 
 
 Baltimore and Ohio Railroad, 
 Charter, 70; Chesapeake and 
 Ohio Canal and, 235; En- 
 trance to New York, 73. 
 
 Bananas, price of, and trans- 
 portation charge, 56. 
 
 Bankruptcy, railroad, 232; pe- 
 culiar character of, 169. 
 
 Bar and sheet metal. Railway 
 revenue from, per ton-mile, 
 230. 
 
 Barley, Railway revenue per 
 ton-mile from, 229. 
 
 Barrels and kegs, empty, rail- 
 way revenue per ton-mile, 
 230. 
 
 Bartlett pear, 24. 
 
 Basing points. Southeastern 
 district, effect on commerce 
 in, 89, erected by distribut- 
 ing centers, 88 ; in the Trunk 
 Line Percentage system, 74; 
 Water points and, 87; the 
 Junction and the evolution 
 of, 160. 
 
 Beans, Dried, Railway fevenue 
 per ton-mile from, 229. 
 
 Bedsteads, rates and prices, 31. 
 
 Beef, Corn crop and, 16; Feed- 
 ing cattle for, 17; Rates and 
 prices. New York, 49; West- 
 ward movement of source of 
 supply, 27. 
 
 Beer, Complaints on rates. In- 
 terstate Commerce Commis- 
 sion, 286; railway revenue 
 per ton-mile from, 230. 
 
 Beet, refuse as sheep food, 19; 
 sugar, markets, 42, sources 
 of supply, 13, 42, 103 ; Sugar 
 beets, railway revenue per 
 ton-mile from, 229. 
 
 "Belt" lines, Pittsburg, 332; 
 
Index 
 
 409 
 
 switching charge, 176, 177, 
 Buffalo, 330. 
 
 Betterments, earnings and, 
 388; English Capital and ex- 
 penditures for, 388; Capital- 
 ization and, 387, 388, 394. 
 
 Bill of lading, through, 188- 
 190, 237; evolution cf, 161, 
 166; responsibility of initial 
 carrier on, 278, 279; Trunk 
 Line Association and uni- 
 formity in, 189. 
 
 Biscuits, rates and prices, 58. 
 
 Bituminous coal. Railway rev- 
 enue per ton-mile from, 229. 
 
 Blanchard, Geo. R., and Fed- 
 eral legislation, 248. 
 
 Blue Line Through Freight, 
 164. 
 
 Boards of Trade and rates af- 
 fecting cities, 316, 317. 
 
 Bookkeeping and statistics, 
 
 303, 304- 
 
 Boots and shoes. Complaints 
 before Interstate Commerce 
 Commission, 288; New Eng- 
 land and manufacture of, 68. 
 
 Borax, Railway revenue per 
 ton-mile from, 229. 
 
 Boston, Commerce, colonial, 
 4, 6; as affected by rates, 
 328; Copper smelting, de- 
 cline in, 67; Differentials 
 and, 118, 119; Iron manufac- 
 tures, decline in, 67; Rail- 
 road connections, western, 
 68; Ship-building interests, 
 decline in, 67; Water-forced 
 rates to Portland, 70; Wheat 
 export, decline in, 119; 
 Wooden manufactures, de- 
 cline in, dT. 
 
 Box Shooks, Timber and Lum- 
 ber, railway revenue per ton- 
 mile, 230. 
 
 Brandy and Wine, railway 
 revenue per ton-mile from, 
 230. 
 
 Breakfast foods, machinery in 
 preparation of, 16. 
 
 Brick, areas of supply, 12; 
 Railway revenue per ton- 
 mile from, 230, 287; Rates, 
 complaints before Interstate 
 Commerce Commission, 287, 
 288; Prices and rates, 52. 
 
 Bridge Arbitrary, St. Louis, 
 344. 
 
 Bridge and structural iron, 
 railway revenue per ton- 
 mile from, 230. 
 
 Brokers, in distribution of cot- 
 ton, iron ore, coal, and petro- 
 leum, 40; in manufactured 
 products, 43, 44. 
 
 Broom corn, railway revenue 
 per ton-mile from, 229. 
 
 Broom cotton, complaints be- 
 fore Interstate Commerce 
 Commission on rates, 286. 
 
 Brown, vs. Walker, and com- 
 pelling of testimony, 265. 
 
 Buffalo, Early base of sup- 
 plies, 4; Commerce of, as af- 
 fected by rates, 329-331; 
 Foodstuffs complaint, In- 
 terstate Commerce Commis- 
 sion, 285; Iron and steel in- 
 dustry, 330; Milling indus- 
 try, 329; Niagara water 
 power and, 330; Lumber 
 trade, 133; Packing house 
 industry, 127; Prices and 
 rates, flour, 127. 
 
 Building materials, local areas 
 of supply, 12. 
 
 Bulk, transportation of wheat 
 in, 16; developed into Clas- 
 sification, 150. 
 
 Bullion, Railway revenue per 
 ton-mile from, 229. 
 
 Bureau of explosives, 215. 
 
 Burlington group rates, 83. 
 
 Business Men's Leagues and 
 rates affecting cities, 316,. 
 317- 
 
4IO 
 
 Index 
 
 Butte, commerce of, as affected 
 by rates, 356. 
 
 Butter, Rates and prices, Den- 
 ver, 351 ; Channels of move- 
 ment, 9; Effect of rates on 
 New York prices, 48; Ex- 
 tent of area of supply, 9, 21 ; 
 Pittsburg consumption, 333; 
 Refrigerator cars and trans- 
 portation of, 32. 
 
 Cabbage, A general crop, 22. 
 Cakes, Rates and prices, 58. 
 Calico, Effect of rates on prices 
 
 of, 54- 
 
 California, First railroad, Sac- 
 ramento to Folsom, 104. 
 
 California, Apple crop, 23; 
 Beet sugar supply, 13, 42, 
 103 ; Canning industry, 27 ; 
 Cantaloup, 25 ; Deciduous 
 fruits of, 13, 102; Fruit 
 growers' exchange, 30 ; 
 Grapes, 25 ; Lemons, 26, 27 ; 
 Lumber supply of, 11, 103; 
 Navel orange, 26; Peach 
 crop, 24 ; Petroleum oil, 103 ; 
 Seed farms, 22; Tanneries 
 of, 10; Truck farm products 
 of, 9, 102; Wheat, 102; 
 Wines, 103; Wool, supply 
 of, 10. 
 
 Calves and cattle. Railway 
 revenue per ton-mile from, 
 229. 
 
 Canada, Grain rates, 124; Pa- 
 per pulp supply from, 42. 
 
 Canals, vs. Railroads, 1830- 
 1860, S, 23s ; Erie Canal and 
 building of the Penn. R. R., 
 70; Erie and Baltimore & 
 Ohio R. R., 70. 
 
 Cane sugar, effect of rates on 
 prices of refined product, 55 ; 
 sources of supply, 13; Rail- 
 way revenue per ton-mile 
 from, 229. 
 
 Canned Goods, Complaints be- 
 fore Interstate Commerce 
 Commission, 286 ; Industry, 
 variety of goods and location 
 of factories, 27; Railway 
 revenue per ton-mile from, 
 meats and fish, fruits, vege- 
 tables, 229; Colorado rates, 
 352 ; Transcontinental rates 
 on. III. 
 
 Cantaloup, crop, 25; rates and 
 prices, New York, 50. 
 
 Cape Cod Ship Canal Project, 
 probable revenue and feasi- 
 bility, 231, 232. 
 
 Cape Horn Route, 8, 104, 105. 
 
 Capital, Employed in Agricul- 
 ture, Manufacture, 376, com- 
 pared with that in Railroads, 
 Z17, 378; Railroad, 246, 378. 
 385, increase in, 385, 386, 
 387, 388, 389-391, and mile- 
 age. 390. 403, and rates, 231- 
 
 234. 403. 
 
 Car distribution, complaints 
 before Interstate Commerce 
 Commission, 293, coal, 293, 
 citrus fruits, 293, difficul- 
 ties of, ZT. 
 
 Car shortage, 1899, 271, 392; 
 and storage pending con- 
 signment, 194, 195. 
 
 Carload lots, and carload rates. 
 Complaints before Interstate 
 Commerce Commission, 294; 
 eggs, 9; in distribution of 
 manufactures, 44; less than, 
 173; ratings, increase in 
 number of, 203 ; rates, de- 
 velopment of, 151, 153 ; less 
 than, 200-205, 400; livestock 
 and lumber, and develop- 
 ment of the hundredweight 
 basis, 201. 
 
 Carding mills, 10. 
 
 Carnegie Steel Company, and 
 rebates, 270. 
 
 Carolinas, Cantaloup, 25 ; Cot- 
 
Index 
 
 411 
 
 ton mills of, 10, 131 ; Fur- 
 niture factories of, 10; To- 
 bacco supply, 13, 41; Truck 
 farming, 22. 
 
 " Carrier " means " common 
 carrier," 276. 
 
 Carriers and transportation 
 subject to Interstate Com- 
 merce Law, 276. 
 
 Carriers' Liability on original 
 bill of lading, 189. 
 
 Cars, Demonstration, 2^, 209; 
 Empty, on own wheels, Rail- 
 way revenue from, per ton- 
 mile, 230; Freight, number, 
 13, 384, 386, 387, 388, En- 
 largement of, 65, 154, 201, 
 Improper use of, 182, 191- 
 192, 272; Passenger, number 
 of, 38s, 386, 387; Private 
 ownership of, 183-187. 
 
 Cartage allowance case, Pitts- 
 burg, and Interstate Com- 
 merce Commission, 334. 
 
 Cassatt, A. J., and rebates, 
 269. 
 
 Castings and machinery, rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Cattle, fattening, 16-17; Prices 
 at stockyards, 49; Rates, 
 eastern and western on, 308, 
 and " transportation on the 
 hoof," 127, and prices, 129, 
 130; Railway revenue per 
 ton-mile from, 229. 
 
 Cement, areas of supply, 12; 
 rate structure, 141 ; railway 
 revenue per ton-mile from, 
 230. 
 
 Central Traffic Association, 
 7Z, 78; Rate-cutting in ter- 
 ritory, 7Z. 
 
 Chain stores, 205. 
 
 Chambers of Commerce and 
 rates affecting cities, 316. 
 
 Change of station location, 
 complamts before Interstate 
 
 Commerce Commission, 292, 
 293- 
 
 Channels of traffic, early, 6; 
 Erosion of, by exchange of 
 food for manufactured prod- 
 ucts, 7-8; Interstate, 4-14, 
 309-310; Secondary, 45, 
 309; Train-load character of 
 movements over, 45; Com- 
 modities of, and percentage 
 system rates, yy. 
 
 Charges, complaints before In- 
 terstate Commerce Commis- 
 sion, reconsignment and 
 switching services, 292, 293. 
 
 Charleston, Commerce of as 
 affected by rates, 358; early 
 European trade, 4; fertilizer 
 industry, 358; Prices and 
 rates, bananas, 56. 
 
 Chesapeake and Ohio Canal 
 and Baltimore and Ohio 
 Railway, 235. 
 
 Chicago, Commerce of as af- 
 fected by rates, 340-342; cold 
 storage facilities, 33; Car- 
 load " spread " and, 203 ; as 
 determining line of traffic 
 territory division, 114; 
 " Belt " line switching, 176 ; 
 early interior supply base, 4; 
 Furniture manufacture, 11; 
 Grain trade, Milwaukee and, 
 120; Importance to Trunk 
 lines, 71 ; industries of, 341 ; 
 Packing houses, 127; Rail- 
 road connection, i860, west- 
 ern construction and, Bos- 
 ton capital and, 68; Rate 
 basis. New York, Dressed 
 meats and livestock rate, 
 130, wheat rate, 119, and 
 Trunk Line percentage sys- 
 tem, 74; western rates, 79, 
 80; Rates, fixed differences 
 with St. Louis, 342. 
 
 Chickens, Export of, 20; Feed- 
 ing, 20; Importation of, 19. 
 
412 
 
 Index 
 
 Cincinnati, Commerce of as 
 affected by rates, 338; early 
 interior base of supplies, 4; 
 as Western gateway, impor- 
 tance to Trunk lines, 71 ; 
 Packing house industry, 127; 
 Primary market for tobacco, 
 41 ; Railroad connections, 
 i860, S- 
 
 Cincinnati rates. Differential 
 on Chicago to Virginia 
 Cities, 88. 
 
 Cities, Commerce of, 325-373; 
 Traffic representatives, 316, 
 
 317. 
 
 Citrus Fruits, California 
 Fruit Growers' Exchange, 
 30; Car distribution, com- 
 plaints of, 293; Crop, 26, 27; 
 European origin, 26; Move- 
 ment of from California, 13; 
 Railway revenue per ton- 
 mile, transcontinental from, 
 229. 
 
 Civil war and railroad con- 
 struction, 5-6, i6s; Inter- 
 ruption to commerce, 6. 
 
 Claims, freight, 213, 214, 246, 
 402. 
 
 Classification, Complaints be- 
 fore Interstate Commerce 
 Commission on, 298; Basis 
 of, 150, 152, 222, 223; Dif- 
 ferences in, evils of, 307, 
 Indianapolis and, 370; diffi- 
 culties due to staples and re- ' 
 gions, 306; Dairy Products, 
 306, 307; Rates, early devel- 
 opment of, 152, number of, 
 152, on high and low grade 
 freight, 222; South Carolina 
 Railroad, 150; Traffic Asso- 
 ciations and questions of, 
 171; Uniformity in, 304-309, 
 403- 
 
 Clay, Railway revenue per ton- 
 mile from, 230. 
 
 Cleveland, Commerce of as af- 
 
 fected by rates, 334-335; 
 early base of supplies, 4; 
 Packing house products, 127, 
 335 ; Rate, ^(s■, staple prod- 
 ucts of, 334. 
 
 Clipper Ships and Transcon- 
 tinental rates, 104, 105. 
 
 Cloth, Effect of rates on prices 
 of, 53- 
 
 Clothespins, Effect of rates on 
 prices of at St. Louis, 51. 
 
 Clothing, Prices, as affected by 
 rates, 52; Denver, 353. 
 
 Coal, Abundance of and pros- 
 perity, 12; Anthracite, rail- 
 way revenue per ton-mile 
 from, 229; Area of supply, 
 12; Boats, source of lumber 
 for, 133; Bituminous, rail- 
 way revenue per ton-mile 
 from, 229; Channels of 
 movement of, 12; Car distri- 
 bution, complaints before 
 Interstate Commerce Com- 
 mission, 293; F.O.B. vessel 
 delivery, 178; Elimination of 
 broker in distribution of, 40; 
 Railroad consumption of, 
 218 ; Rates, 60, through, com- 
 plaints before Interstate 
 Commerce Commission on, 
 290, 291, special, to conserve 
 Indiana industries, 289, rate 
 structure and equilibrium in 
 common markets, 139, 
 Prices and, Denver, 353 ; 
 Routes, complaints before 
 Interstate Commerce Com- 
 mission on, 290, 291 ; Recon- 
 signment, 195 ; Gondolas, 185. 
 
 Coffee, Channels of movement 
 of, 13. 
 
 Coke, through routes and rates 
 on, Complaints before Inter- 
 state Commerce Commission 
 on Hepburn bill, 290, 291 ; 
 Railway Revenue per ton- 
 mile from, 229. 
 
Index 
 
 413 
 
 Cold Storage, 31; Chicago fa- 
 cilities for, 33 ; Effect of, on 
 quality of food, 33. 
 
 Colorado, Apple crop, 23; Beet 
 sugar supply, 13, 42, rates, 
 351; Cattle feeding, 17; Can- 
 taloup, Rocky Ford, 25; 
 Coal fields of, 12; Common 
 Points Rates, Common 
 through rates to Chicago 
 and St. Louis, 84; Iron and 
 steel mills, 11 ; Manufacture 
 of machinery, 354; Sheep 
 grazing, 19. 
 
 Columbus, Commerce of, 334- 
 33S. 
 
 Combination rates, Chicago- 
 Omaha, 81 ; On Interregional 
 traflSc, 115-116; On Missouri 
 river, 83; On Texas Com- 
 mon points, 94; On Virginia 
 Cities' rate, 88. 
 
 Commerce, of the cities, 325- 
 373, Rivalries in, 327, Traf- 
 fic Bureaus and, 316, 317; 
 Conditions and rates, 76, 89; 
 Dependence of railroads on, 
 14; Early, with Europe, 4; 
 Influence of transportation 
 charge on, 47-66; Interrup- 
 tion to, by Civil War, 6; 
 Transportation and develop- 
 ment of, 2, 172. 
 
 Commission and Rebates, 260. 
 
 Commission Man, Dishonest 
 methods with growers, 29; 
 Distribution of tobacco, 41 ; 
 In distribution of foodstuffs, 
 29. 
 
 Commodities, competition of 
 and rates, 143; rate struc- 
 tures, 1 17-147, on cotton, 
 130-133, Grain and grain 
 products, 1 17-126, Livestock 
 and dressed meats, 126- 130, 
 Lumber, 133-138, on import 
 and export trafljc, I43-I47, 
 Types of, 138-143; Rates, 
 
 South Carolina Railroad, 
 1855, 150, determined by 
 character of commodity, 153 ; 
 Shifting sources of and ef- 
 fect on rates, 143; Trans- 
 portation of, and Railroad 
 ownership of, 277, 403, 404. 
 
 " Common carriers," compa- 
 nies included as, in Hepburn 
 Bill, 276. 
 
 Common points, and decentral- 
 ization of distribution, 99- 
 100; Baltimore group, 77; 
 Colorado, 84; In transcon- 
 tinental traffic, 107, 108; 
 Mississippi River, 81; Mon- 
 tana, 84; New England, 6g, 
 70; Philadelphia group, 77; 
 Texas, 94, 95, 97, 98, 99. 
 
 Community complaints before 
 Interstate Commerce Com- 
 mission, 295, 296, 297. 
 
 " Community of Interests," 
 and Anthracite and Bitumi- 
 nous coal rates, 139, 140; 
 and Capitalization, 391 ; and 
 obliteration of rebates, 269; 
 effect on legislation, 276. 
 
 Competition, Commercial, of 
 cities, 347, 348, 360; of mar- 
 kets, as developed by junc- 
 tion points, 156, as affected 
 by rates, 65, 66, 400, as af- 
 fecting transcontinental rate, 
 104, as affecting wheat rates 
 and prices, 125, 126; Rate 
 structures and, 66, 117; rate 
 fixing and, Atlantic Sea- 
 board-Texas traffic, 96; Un- 
 restrained, evils of, 208, 
 209, 227, 262. 
 
 Complaints, against Railroads, 
 1886, 245-247, 1886 and 1909, 
 399-402 ; before Interstate 
 Commerce Commission, num- 
 ber of and treatment, 275, 
 281, 290, 295-300, on animal 
 foods, 281, 290, from Com- 
 
414 
 
 Index 
 
 munities, 196, 295, 297, food- 
 stuffs, 286, Incidental serv- 
 ice, 292, 293, 294, Lumber, 
 coal, and oil, 288, 289, 291, 
 miscellaneous manufactures, 
 286, 295, miscellaneous law 
 materials, 286, 295, through 
 routes and rates, 290. 
 
 Compress fee, paid by Texas 
 railroads, 132. 
 
 Compressing in transit, cotton, 
 132. 
 
 Congestion of traific, 1899, 
 271, 392, 293- 
 
 Connecticut, Canning industry, 
 27, manufacturing, 68. 
 
 Connecting tracks, complaints 
 of service before Interstate 
 Commerce Commission, 292. 
 
 Consignment, storage pending, 
 
 194- 
 
 Construction, railroad, 217; 
 evils of too rapid, 236, 238. 
 
 Consumer and the transporta- 
 tion charge, 47-66. 
 
 " Contract plan," and evolu- 
 tion of transcontinental rate, 
 106. 
 
 Conveyance and secondary 
 services, 174-187. 
 
 Cooley, T. M., and the differ- 
 entials, 119; on large and 
 small shipment rates, 258 
 
 Copper, Rates on ore as af- 
 fecting price of, 58; Smelt- 
 ing and refining companies, 
 and direct supply of ores of, 
 42; Sources of supply, 11. 
 
 Copper wire. Railway revenue 
 per ton-mile from, 229; 
 Texas special rate on, loi, 
 102. 
 
 Cord Wood, Railway revenue 
 per ton-mile from, 230. 
 
 Corn, Broom, Railway revenue 
 per ton-mile from, 229; Can- 
 ning of, 27; Effect of rates 
 on prices of. New York, 49; 
 
 Production of, 16; Railway 
 revenue per ton-mile from, 
 229; Selection and cultiva- 
 tion of, 16; Small export of, 
 15 ; transformed into beef 
 and pork, 15. 
 
 Corporations liable to convic- 
 tion, under Elkins Act, 266; 
 under Hepburn Bill, 277. 
 
 Cost of construction, 217, 377. 
 
 Cost of operation, 384; and 
 rates, 172; increase, 1875- 
 1885, 38s; Railroad, and 
 cost of road hauling, 38; 
 earnings, as indicated in Sen- 
 ate Document, 257, 274. 
 
 Cost of Transportation, 219, 
 220, 221, 228. 
 
 Cotton, Area of production, 10, 
 Memphis, 359, careless han- 
 dling, 133 ; Channels of move- 
 ment, 10; Commodity rate 
 structure, 130-133 ; Complaints 
 before Interstate Commerce 
 Commission, 286, 287; Bro- 
 kers, 40; Compression, com- 
 plaints before Interstate 
 Commerce Commission, 292; 
 Mining, Carolina, 131, North 
 Atlantic seaboard, 10; Grow- 
 er's Associations, 40; Piece 
 Goods, complaints before 
 Interstate Commerce Com- 
 mission, 288, rate and prices 
 of, 54, New England manu- 
 facture, 68; Plantation meth- 
 ods of handling, 40; Cotton 
 seed, complaints, rates and 
 practices, 286, railway reve- 
 nue per ton-mile from prod- 
 ucts, 229, effect of excessive 
 use in cattle feed, 17; Rail- 
 way revenue from, per ton- 
 mile, 229; Rates and prices, 
 59 ; Transportation charge 
 and effect on prices of cot- 
 ton goods, S4; Texas rates, 
 131; Warehousing, 182. 
 
Index 
 
 415 
 
 Courts and the Commission, 
 provisions of Interstate Com- 
 merce law, 251. 
 
 Crackers, rates and prices, 58. 
 
 Creameries, 21 ; and long dis- 
 tance rates, 285. 
 
 Criminal provisions, Hepburn 
 Bill, 277. 
 
 Cross-fertilization, wheat, oats, 
 and barley, 15. 
 
 CuUom, S. M., on Interstate 
 Commerce law and rate- 
 making power, 252; Cullom 
 Report, 1886, 244, 247, 248, 
 399- 
 
 Customs duties and import 
 rates, 147. 
 
 D 
 
 Dairy products, Area of sup- 
 ply, 9; Complaints before 
 Interstate Commerce Com- 
 mission, 28s, 286; Move- 
 ments of, 9; Railway reve- 
 nue per ton-mile from, 229; 
 Rates of different classifica- 
 tions, 306, 307; State 
 Schools, 36. 
 
 Dakotas, Cattle feeding, 17; 
 Egg shipments from, 9; 
 Grain routes from, 8. 
 
 Dallas, Texas, Commerce of, 
 as affected by rates, 364; 
 Complaints before Interstate 
 Commerce Commission, 296. 
 
 Damages, money, award of by 
 Commission, 278. 
 
 Danville Case, and discrimina- 
 tions between localities, 254. 
 
 Decentralization of distribu- 
 tion, 203, 204; Texas, effect 
 on limitation of stocks, 99, 
 100. 
 
 Deciduous Fruits, Channels of 
 movement of, 13; Railway 
 revenue per ton-mile from, 
 transcontinental, 229; Trans- 
 continental rates, no, in. 
 
 Decline in rates, 389. 
 
 Delaware, Canning industry, 
 27; Manufacturing industry, 
 69; Peach crop, 24, uncer- 
 tainty of, 38. 
 
 Demonstration cars, 36, 209. 
 
 Demurrage, incidental service, 
 191-192. 
 
 Denver, Colo., Commerce of, 
 as affected by rates, 350-355; 
 Complaints before Interstate 
 Commerce Commission, 296; 
 Effect of rates on prices, 
 food supplies, 350-352, fur- 
 niture, 352, coal, 352, cloth- 
 ing, 353, axes, galvanized 
 iron tubs, padlocks, stoves, 
 washboards, 51 ; Rates, af- 
 fected by water rates, 84; 
 Packing house industry, 127; 
 as a "basing" point, 355. 
 
 Department of Agriculture, 
 Freezing food products for 
 shipment, 34; Importation of 
 navel orange from Bahia, 
 26; Improvement in produc- 
 tion and preparation for 
 shipment of food supply, 36. 
 
 DesMoines, Iowa, Complaints 
 before Interstate Commerce 
 Commission, 296. 
 
 Detroit, an early interior base 
 of supplies, 4. 
 
 Development, Complaints and, 
 243; of Commerce and In- 
 dustry by division of labor, 
 I, 5 ; of business, Railroads 
 and, 159, 235; of United 
 States, Railroads and, 235. 
 
 Differentials, Baltimore, Phil- 
 adelphia, and New York, 73, 
 76; Chicago, St. Louis, and 
 Missouri river, 80; Evolu- 
 tion of, 73, 170; Gulf Ports, 
 wheat, 198; New England, 
 on foodstuffs, 70, on manu- 
 factured products, 69, on raw 
 material, 69; Interstate Com- 
 
4i6 
 
 Index 
 
 merce Commission and, 119; 
 in Grain Export, 118-119; 
 Cincinnati and Louisville on 
 Chicago, to Virginia Cities, 
 88; Savannah to Galveston, 
 84; Wheat, 198. 
 
 "Differing rates," and differ- 
 entials, 170. 
 
 Discriminations, Abolition of, 
 400 ; Betwfeen large and small 
 shippers, 259; Between lo- 
 calities, 254; Between Local 
 and Through rates, 245; 
 Negligible in early railroad 
 history, 237; White pine 
 against Yellow pine, 135; 
 Unjust, Hepburn bill penal- 
 ties, 277. 
 
 "Distance" Tariff, Effect on 
 industry and Communities, 
 227, 228; first railroads and, 
 149; Basing points and, 160, 
 161 ; in Percentage system, 
 75 ; Modified by growth of 
 junction points, 156-161. 
 
 Distribution, Centers of, car- 
 load rates to, 204, rates as 
 affecting, 326, for manufac- 
 tured products, 45, Rates 
 from, and percentage sys- 
 tem, TJ, Trans-Missouri 
 " Jobbers' rates," 85, 204, In 
 Southeastern territory, 88 ; 
 Decentralization of, carload 
 ratings and, 203, 204, Texas, 
 94, effect of a " tapering 
 tariff " on, 228 ; Foodstuffs, 
 defective systems of, 60, 61 ; 
 Involution of, 28; Produc- 
 tion and, Railroads and, 159, 
 325-327, good roads and, 38; 
 Intimate relations between, 
 15 ; Raw material and Mer- 
 chandise, 40-46; Rates and 
 equilibrium in, 139-143. 
 
 Diversion en route, incidental 
 service, 193; California Fruit 
 Growers' Exchange, 2, 30. 
 
 Dividends, 388; Earnings and, 
 38s, 386, 387, 388. 
 
 Division of labor, i ; furthered 
 by railroad construction, 5- 
 
 Divisions of joint rate, power 
 of Commission over, 278. 
 
 Dock companies, service 
 charge, 178. 
 
 Dollar as measurement of val- 
 ues, 375. 
 
 Drain tile and sewer pipe. 
 Railway revenue per ton- 
 mile from, 230. 
 
 Dried Fruits, Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 286 ; Transcontinental, 
 Railway Revenue per ton- 
 mile from, 229. 
 
 Drovers, Elimination of, in 
 purchase of livestock by 
 packing houses, 35. 
 
 Duck, 19. 
 
 Duluth, Grain Trade, 120, 121, 
 198; Ore and coal trade, 
 121 ; Wheat elevators, 16. 
 
 Durum wheat, and manufac- 
 ture of macaroni, 15. 
 
 Earnings, Cost of operation 
 and, 384, 387; dividends and, 
 386, 387, 389; interest and, 
 385, 386, 387; Net, increase 
 in, 38s, 386, 387, 389. 1890, 
 1900, 1905, 376; Stock and, 
 388 ; Taxes and, 388. 
 
 Eggs, Arkansas shipments, 9; 
 Channels of movement, 9; 
 Development of production 
 of, 20, 21 ; Effect of rates on 
 prices of, at New York, 48, 
 at Denver, 351 ; English mar- 
 ket methods for, 21 ; Extent 
 of area of supply, 9, 21 ; 
 Freezing for shipment, 21 ; 
 Packing, 21 ; Pittsburg con- 
 
Index 
 
 417 
 
 sumption, 333 ; Railroad rev- 
 enue per ton-mile from, 229; 
 Refrigerator cars and trans- 
 portation of, 32. 
 
 El Paso, Texas, Complaints 
 before Interstate Commerce 
 Commission, 296. 
 
 Electric and steam roads, 
 through routes and rates, 
 complaints, before Inter- 
 state Commerce Commission, 
 298. 
 
 Elevation, 34, 182-183; Chi- 
 cago, 121 ; Charges for, 
 and Interstate Commerce 
 Commission, 182 ; Kansas 
 City, 121 ; Omaha, 121 ; St. 
 Louis, 121, 294; Service, 
 complaints of, before Inter- 
 state Commerce Commission, 
 291. 
 
 Elkins Law, 1903, 210; Re- 
 bates and, 265, 279; Penalties 
 of, 26s, 266. 
 
 Emergency Rates, Indiana coal 
 rate, 289, Texas rates, loi, 
 102. 
 
 Emigrants' Goods, Railway 
 revenue per ton-mile from, 
 230; Rates to Denver, on, 
 
 352- 
 
 Employees, Railway, 218, 381 ; 
 and Free Passes, 276. 
 
 Equipment, Cost of, 218; idle, 
 1897, 267; lack of adequate, 
 1899, 271; Increase in, 385, 
 386, 387. 
 
 Erie Canal, And construction 
 of Penn. R. R. and B. & 
 O., 70. 
 
 Erie Railroad charter and in- 
 terstate traffic, 162. 
 
 Esch-Townsend Bill, 276. 
 
 Exchange, mechanism of, i. 
 
 Expenses, Manufacturers, 379; 
 1890, 1900, 1905, 376; Mis- 
 cellaneous, and uniformity 
 of accounting, 303; Rail- 
 
 roads, 1890, igoo, 190S, 376, 
 378, 379- 
 
 Experimental Rates, 223. 
 
 Export rates, America, 147; 
 Germany, 147; Wheat, 119. 
 
 Export Trade, Wheat and the 
 differential, 119. 
 
 Express Companies, " Common 
 Carriers" in Hepburn Bill, 
 276; Complaints against, be- 
 fore the Interstate Commerce 
 Commission on Hepburn 
 Bill, 282. 
 
 Express trains. Flour, 118; 
 For sea-food traffic, 9. 
 
 Facilities, equal, and Interstate 
 Commerce law, 250 ; Increase 
 of, 38s, 386, 387, for live- 
 stock traffic, 129. 
 
 Farm lands, Railroads and 
 conversion of timber land 
 into, 135. 
 
 Farm Owners, net return to, 
 i8go, 1900, 1905, 376. 
 
 Farmer and careless egg col- 
 lection, 21, And the commis- 
 sion man, 29, And farm la- 
 borers, 1890, 1900, 190S, 376, 
 And good roads, 38, Prices 
 on food products, 48, 49, 50, 
 And railroad demonstration 
 car, 27, And trolley line, 39. 
 
 Fast Freight Lines, 163, 164, 
 207; Flour, 118. 
 
 Federal supervision, beginnings 
 of, 1868, 244. 
 
 Federal versus State Rate Reg- 
 ulation, 243, 309-313- 
 
 Feeding, Cattle, 16, 17. 
 
 Ferries, Railroad, 178. 
 
 " Ferry-car " switching, 177. 
 
 Fertilizer, Charleston, S. C, 
 industry, 358 ; Agriculture, 
 1890, 1900, 190S, 376; Rail- 
 way revenue per ton-mile 
 
4i8 
 
 Index 
 
 from, 229; Low rates to en- 
 courage use, 57. 
 
 Filing schedules, 277; Inter- 
 state Commerce law relating 
 to, 250, 261 ; Rates filed, the 
 legal rates, 261 ; Three days' 
 notice of change, 261. 
 
 Finance, Railway, 384-389. 
 
 Fines, Elkins Act, 265. 
 
 Fink, Albert, and Federal reg- 
 ulation of Railways, 248, 
 249. 
 
 Fire Brick, rate structure, 140, 
 141. 
 
 Fish, Channels of movement of, 
 9-10; Railway revenue per 
 ton-mile from, 229; through 
 routes and rates on. Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 290. 
 
 "Fixed differences," In Lum- 
 ber-milling districts, 134, 137 ; 
 Trans-Mississippi and Trans- 
 Missouri territory, 80 ; 
 Chicago and St. Louis, 342. 
 
 Flax Seed and Products, Ex- 
 cept Oil, Railway Revenue 
 per ton-mile from, 229. 
 
 Flemish Beauty Pear, 24. 
 
 Florida, Truck farming, 22; 
 Cantaloup, 25 ; Orange, 26. 
 
 Flour, Effect of rates on prices 
 of, 52, 54; Extent of produc- 
 tion, 16; Machinery in mill- 
 ing, 16; Milling, Butte, 356; 
 Movement of, 118; Railway 
 revenue per ton-mile from, 
 229; Rates, commodity, 118, 
 Minneapolis and, 349, relation 
 to wheat rates, 124; Milling 
 in transit, 195-200, Atlanta 
 and Nashville, 359. 
 
 Food products. Channels of 
 movement of, 8; Distribu- 
 tion of, 28-39; Employment 
 of machinery in preparation 
 of, 16-17; Exchange of, for 
 
 manufactured products, and 
 erosion of traffic channels, 6- 
 7; New England differential 
 on, 70; Pittsburg consump- 
 tion of, 333; Preparation of, 
 15-27; Prices and rates, 48- 
 50, 60, Denver, 350-352, in- 
 creased prices compared with 
 decrease in rates, 382, 383; 
 Railway revenue per ton- 
 mile from, 65; Trolley lines 
 and distribution of, 39; 
 Complaints before Interstate 
 Commerce Commission con- 
 cerning, 298 ; New England 
 differential on, 70. 
 
 Forest products, railway reve- 
 nue per ton-mile from, 230. 
 
 Forfeitures, for disobedience 
 of Commission's Orders, 278. 
 
 Fort Worth, Commerce of as 
 affected by rates, 364; Pack- 
 ing house industry, 127; 
 Rates and prices, 52. 
 
 Forwarding companies, in 
 through traffic, 163. 
 
 Freezing for shipment, eggs, 
 21 ; strawberries, 34. 
 
 Freight Bureau Cases, 255, 256, 
 
 335- 
 Freight Cars, Enlargement of, 
 as affecting rates, 65, 154, 
 201, Improper use of, as af- 
 fecting car shortage, 272, 
 grain, 182, demurrage, 191- 
 192, Number in use, 13, in- 
 crease in, 384, 386, 387, 388; 
 Claims, 213, 214, 246 402; 
 Services, switching, 174-178, 
 private tracks, 179-181, tap- 
 lines, 181, elevation and ware- 
 housing, 182-183, special cars, 
 183-187; Solicitors, 207, 208, 
 210, and increased cost of 
 transportation, 247 ; Traffic 
 Bureaus, 317, Departments, 
 206-215, Managers, 209, 
 Heterogeneity of, 173, 219, 
 
Index 
 
 419 
 
 220; Trains, local and 
 through, 173; High grade, 
 rates, 222. 
 
 Fruit, Canned, industry, 27, 
 railway revenue from, per 
 ton mile, 229 ; Complaints be- 
 fore Interstate Commerce 
 Commission, 286 ; Growers' 
 Associations, California, 
 
 Georgia, Norfolk Truck re- 
 gion, 30; Diversion en route, 
 193; Prices and rates, Den- 
 ver, 352; Rate structure, to 
 conserve common markets, 
 139 ; Reconsignment, 193 ; 
 Transcontinental, Railway 
 revenue from, 229. 
 
 Fuel, Oil and Waste, cost of, 
 218. 
 
 Furniture, car, 185 ; Centers 
 of production, 11 ; Rates and 
 prices, 52, Denver, 352 ; Com- 
 plaints before Interstate 
 Commerce Commission on, 
 288 ; Railway revenue per ton 
 mile on, 230. 
 
 Gallatin Valley, wheat produc- 
 tion, 356. 
 
 Galveston, Cotton rate, 131; 
 Commerce of, as affected by 
 rates, 364 ; early base of sup- 
 plies, 4; Water rate to, af- 
 fecting rates to Sante Fe and 
 Albuquerque, 85. 
 
 Game, Fish, and Poultry, Rail- 
 way revenue per ton-mile 
 from, 229. 
 
 Gauge, railway track, and in- 
 terstate commerce, 162. 
 
 General Electric Company, and 
 the switching charge, 181. 
 
 General Freight Agent, 206. 
 
 Georgia, Cantaloup, 25; Cotton 
 mills, 10; Growers' Associa-. 
 tion, 30; Peach crop, 24; 
 
 Rate contentions, 237 ; Rocky 
 Ford Melon, annual importa- 
 tion of seed from Colorado, 
 26; State Regulation, 149. 
 
 Germany, State ownership in, 
 and export rates, 147. 
 
 Glass and tin-plate industry, 
 Indiana, 369. 
 
 Glucose, Syrup, and Molasses, 
 Railway revenue per ton mile 
 from, 230. 
 
 Glutting a market, 30. 
 
 Goats and sheep, railway reve- 
 nue per ton mile from, 229. 
 
 Good Roads, Industrial Com- 
 mission on, 38. 
 
 Grain and Grain Products, Ag- 
 ricultural schools and grain 
 varieties, 15, Distribution of, 
 Louisville, 339, Elevator 
 service in marketing, 34, 35, 
 182, Machinery employed, 16, 
 Movement of, to the East, 
 8, 71, 120, Rates and prices. 
 New York, 49, Reconsign- 
 ment 193, 194; Complaints 
 before Interstate Commerce 
 Commission, 285, 286; Com- 
 modity rate structure, 117- 
 126; Broker, elimination of, 
 through milling industry, 35; 
 Gulf Export, 285; Rates, 122; 
 Rate Wars, 120, 121 ; Sup- 
 ply, 15-16, channels of move- 
 ment, 8. 
 
 Granger Laws, 241, 243. 
 
 Grape, indigenous origin and 
 crop, 25. 
 
 Gross income, Agriculture, 
 Manufactures, Railroad, 
 
 378. 
 
 Group rates, Baltimore, Phila- 
 delphia, "JT, Burlington, St. 
 Louis, Kansas City, 83; New 
 York to Chicago plateau, in 
 transcontinental traffic, 107 ; 
 Omaha, 83 ; Pittsburg, Cleve- 
 land, Johnstown, 76 ; " Shoe- 
 
420 
 
 Index 
 
 string district," 76; Virginia 
 Cities, 87, 88. 
 Gulf Ports, Adjustments in 
 wheat rate by Interstate 
 Commerce Commission, 285; 
 Differential, wheat, 122, 123; 
 Movement of Cotton through, 
 10; movement of manufac- 
 ture through, 8; Rates and 
 Texas Rates, 93. 
 
 H 
 
 Halibut, shipments to Atlantic 
 coast, 10. 
 
 Hattiesburg, Miss,, Complaints 
 before the Interstate Com- 
 merce Commission, 296. 
 
 Hay, classification. Complaints 
 before Interstate Commerce 
 Commission, 282, 284; Rail- 
 way revenue per ton-mile 
 from, 229; Rates and prices. 
 New York, 49; Reconsign- 
 ment, 193, 194. 
 
 Heading and staves, railway 
 revenue per ton-mile from, 
 230. 
 
 Heating apparatus, railway 
 revenue per ton-mile, 230. 
 
 Helena, Ga., Complaints be- 
 fore Interstate Commerce 
 Commission, 296. 
 
 Helena, Mont., Commerce of, 
 as affected by rates, 356. 
 
 Hemlock, sovtrce of supply of, 
 133- 
 
 Hepburn Bill, Private car line 
 abuses, 187; Provisions of, 
 276-279; Complaints on, be- 
 fore Interstate Commerce 
 Commission, 275-300. 
 
 Hides, Area of siupply, 10; 
 Channels of movement, 10; 
 Complaints on, before Inter- 
 state Commerce Commission, 
 286; Direct purchase of, by 
 tanners, 42; Railway reve- 
 
 nue per ton-mile from, 229; 
 Transportation charge on, as 
 affecting prices of leather 
 goods, 57. 
 
 High Grade Freight, rates on, 
 222. 
 
 Hogs, Extent of production, 
 18, improvement in feeding, 
 18, railway revenue per ton 
 mile from, 229; Products, 
 and corn crop, 16, 17, Rates 
 and Prices, 52, San Luis Val- 
 ley, 18. 
 
 Hogsheads, Tobacco, 41. 
 
 Horses, as motive power, 216, 
 railroad horsepower, 380 ; 
 Railway revenue per ton 
 mile from, 229; Rates and 
 prices, 129, 130; Special cars 
 for Race horses, 185. 
 
 Household Goods, Railway 
 revenue per ton mile from, 
 230. 
 
 Houston, Differential, 95 ; 
 Rates, 92, 95, cotton, 131. 
 
 Hundredweight, Rate basis of, 
 201, 202. 
 
 Ice, Complaints before Inter- 
 state Commerce Commission, 
 286; Extension of market 
 for, by traffic men, 212 ; Rail- 
 way revenue per ton mile 
 from, 230; Rates, 143. 
 
 Icing charges, 184, complaints 
 of, 32; transcontinental, no. 
 
 Idaho, Beet sugar supply, 13; 
 Cantaloup, 25; Wool supply 
 from, ID. 
 
 Illinois, Canning industry, 27; 
 Coal fields of, 12; Hogs, 18; 
 Manufacture of woodenware, 
 II. 
 
 Import and Export traffic, 144- 
 147- 
 
 Import Rates Case, 254-255. 
 
Index 
 
 421 
 
 Imprisonment, penalty of, 277, 
 279. 
 
 Income, Railway, 385, 386, 387, 
 389; disposition of, 392, 404. 
 
 Indiana, Canning industry, 27; 
 Coal fields, 12, rates, special, 
 289; Glass and tin-plate in- 
 dustry, 289, 369; Wooden- 
 ware manufacture, 11. 
 
 Indianapolis, commercial situ- 
 ation at, 368-373 ; Complaints 
 before Interstate Commerce 
 Commission, 296, 368; Pack- 
 ing house industry, 127. 
 
 Industrial agents, 209. 
 
 Industrial tracks, 179-181. 
 
 Industrial Commission, on cost 
 of hauling over country 
 roads, 38; on grain rate 
 structure, 125-126; on rates 
 and prices of horses and cat- 
 tle, 1901, 129, 130. 
 
 Industries, building up of, rates 
 and, 227; Preservation of, 
 rates and, 275, coal rates and, 
 Indiana, 289. 
 
 Informal Complaints to Com- 
 mission, 27s, 281, 282. 
 
 Initial carrier and responsibil- 
 ity for losses, 278. 
 
 Intercorporate relationships, 
 
 390, 391- 
 
 Inter-Regional Rates, 114-116; 
 Traffic, 113-116. 
 
 Interest, Earnings and, 385, 
 386, 387 ; on agricultural cap- 
 ital, 376. 
 
 Intermediaries, freight, 314-324- 
 
 " Intermediate " stations, and 
 basing point rates, 156-159. 
 
 i6S. 
 
 Interstate Commerce, Enabhng 
 act, 162, 166, 206, 237, 309; 
 Demand for Federal super- 
 vision of, 243; Development 
 of, 162-164; Relations to In- 
 trastate, 312. 
 
 Interstate Commerce Act, 1887, 
 
 248; provisions of, 250-251; 
 and discriminations, 251, fil- 
 ing tariffs, 251, interpreta- 
 tion of, 250-260, and pooling, 
 251, publication of rates, 145, 
 rate-making power, 251 ; and 
 long and short haul, 75, 251, 
 and Trunk Line Percentage 
 System, 75, 252, penalties, 
 251, 265; 1906, and icing 
 charges, 32. 
 Interstate Commerce Commis- 
 sion, and Accounts of car- 
 riers, 278, annual reports of 
 carriers, 278, and Bill of lad- 
 ing, uniform, 189, and Com- 
 plaints, 275, 295-300, and 
 Conciliation, 299-300, and 
 Differentials, 119, and Dis- 
 criminations between locali- 
 ties, 253, and Elevation 
 charges, 182, Enlargement of, 
 279, on Flour and wheat 
 rates, 125, Kansas City rates, 
 347, and Liability of carriers 
 for losses, 278, and livestock 
 rates, 129, and local and 
 through rates, 399, and Lum- 
 ber rates, 112, 137, and Long 
 and short haul, 252, 258, 359, 
 Membership of, 252, number 
 of members, 279, Orders of, 
 as to reasonable rates and 
 practices, 277, 278, Orders to 
 continue in force two years, 
 278, and Pooling, 251, and 
 publication of rates, 145, and 
 the rate-making power, 251, 
 256, 257, 279, and Rebates, 
 260, 266, 279, Reports of, 
 publication, 277, and Senate 
 Document, No. 257, 257, 273, 
 274, Spokane and the Pacific 
 Terminal rate, 368, Switch- 
 ing charges, 181, Tap Line 
 allowances, 181, Territorial 
 groups and complaints, 285- 
 300, Through routes and 
 
422 
 
 Index 
 
 joint rates, 278, Pittsburg 
 Brewery, Cartage allowance, 
 334, Wichita grain rate, 124. 
 
 Intrastate traffic, demurrage 
 and, 192. 
 
 Iowa, hogs, 18. 
 
 Iron and Steel, Articles, com- 
 plaints on, before Interstate 
 Commerce Commission, 288; 
 Industry, 10, 11, elimination 
 of broker in, 40; Ore, chan- 
 nels of movement, 10, elimi- 
 nation of broker in distribu- 
 tion, 40, Lake Superior 
 supply, ID, Rates on, 59-60, 
 Railway revenue per ton 
 mile from, 229; Iron Pipe, 
 railway revenue per ton- 
 mile from, 230; Iron Rails 
 and Trimmings, railway rev- 
 enue per ton-mile from, 230. 
 
 J 
 
 Japan, Cotton export to, 133. 
 
 "Jobbing," Centers, Texas, 95; 
 Carload rates and, 204; 
 " Jobbers' Rates," Trans- 
 Missouri territory, 85. 
 
 Joint Traffic Associations, and 
 the anti-trust law, 264, pro- 
 cedure of, 264. 
 
 Joint Weighing and Inspec- 
 tion, 214, 215. 
 
 Judson, F. N., on public policy 
 and wholesale and retail 
 rates, 259. 
 
 Junction points, and distance 
 tariffs, 156-161, 165; in Dis- 
 tribution of commodities, 45 ; 
 and Erosion of secondary 
 channels of traffic, 45 ; Multi- 
 plicity of, 166; Texas, 95. 
 
 K 
 
 Kansas, Cattle feeding, 17, Coal 
 fields of, 12, Corn canning. 
 
 27, Grain routes from, 8, 
 Hogs, 18, Sheep grazing, 19. 
 
 Kansas City, Beet sugar mar- 
 ket, 42; Complaints before 
 Interstate Commerce Com- 
 mission on Hepburn Bill, 
 347; Commerce of, as af- 
 fected by rates, 344-348; Dry 
 goods rates, 345 ; Effect of 
 rates on prices at, on axes, 
 galvanized iron tubs, pad- 
 locks, stoves, washboards, 
 51 ; Group rate, 83 ; Industry 
 of, 344, Packing house indus- 
 try, 127; Rates, St. Paul, St. 
 Louis, 82, 347; Sugar at, ef- 
 fect of rates on prices, 55 ; 
 Wheat elevators, 16, 121. 
 
 Kegs and barrels, empty, Rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Kentucky, Coal fields of, 12, 
 Hogs, 18, " Prizing" tobacco, 
 41, Tobacco supply, 13. 
 
 Kerosene Oil, Use as illumi- 
 nant, 12. 
 
 Labor, Cost of, in Agriculture, 
 Manufactures and Rail- 
 roads, 380, 381 ; Division of, 
 I, 5- 
 
 Lake Erie Ports, movements of 
 iron ore through, 10, of man- 
 ufactures and grain, 7, 8; 
 Railroad ferries, 178. 
 
 Lake Michigan, Railroad fer- 
 ries, 178. 
 
 Lake Superior, iron mines, 10. 
 
 Lamb, 19. 
 
 Lead, S. Dakota, Complaints 
 before Interstate Commerce 
 Commission on Hepburn Bill, 
 296. 
 
 Lead, Rates on ore as affect- 
 ing prices of, 58; Smelt- 
 ing and refining companies, 
 
Index 
 
 423 
 
 and direct supply of ore of, 
 42; Sources of supply, 11. 
 
 Leather, raw material of. Area 
 of supply, 10 ; Effect of rates 
 on prices of, 57 ; Goods, New 
 England and manufacture of, 
 68. 
 
 Legislation, hasty, 210, 392. 
 
 Lehigh district. Cement rock 
 supply, 141. 
 
 Lemon, California and im- 
 ported Sicilian variety, 26, 
 27 ; transcontinental rates 
 on, 109. 
 
 Length of haul, 221. 
 
 Lexington, Primary market for 
 tobacco, 41. 
 
 Lighters, 178. 
 
 Lime, Local area of supply, 12 ; 
 Rate structure, 143 ; Rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Lincoln, Neb., Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 296. 
 
 Liquors, Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 286; 
 railway revenue per ton-mile 
 from, 230. 
 
 Liverpool, Rail and ocean 
 routes to. And differentials, 
 
 119. 
 Livestock, Association, and 
 packing house products 
 rates, 129; Cars, 128, 183, 
 184; Carload rates and the 
 hundredweight basis, 201, 
 Pacific Coast, 202; and 
 Dressed meats commodity 
 rates, 126-130; disparity in, 
 128, 129, 130; Through 
 rates and routes complaints 
 to Commission, 290; Com- 
 plaints as to Kansas City 
 as distributing point for, 
 285, 286; Rates, Chicago- 
 
 New York, 130, South Caro- 
 lina Railroad, 1855, 151. 
 
 Local interests and interstate 
 rates, Texas, 98. 
 
 Local freight, cost of service 
 on, 173. 
 
 Local rates, 1855, 1909, 399, 
 Texas intrastate, 98. 
 
 Locomotives, increase in num- 
 ber of, 38s, 386, 387, 388. 
 
 Logs, Railway revenue per 
 ton mile from, 230. 
 
 Long and short haul, 167, 239; 
 Interstate Commerce Law 
 and, 75, 76, 253 ; Interstate 
 Commerce Commission and, 
 252, 258, 359; Virginia Cities 
 group and, 87, 88. 
 
 Long Island, Truck farming, 
 22. 
 
 Los Angeles, and San Fran- 
 cisco rates, 366; Early in- 
 terior base of supplies, 4; 
 California Fruit Grower's 
 Exchange, 30; Long and 
 short haul clause and, 253. 
 
 Louisiana, Rice supply, 13; 
 Sugar cane crop, 41 ; Truck 
 farming, 22. 
 
 Louisville, Commerce of, as af- 
 fected by rates, 338-340; 
 Early base of supplies, 4; 
 Differential on Chicago to 
 Virginia Cities, 88; Grain 
 distribution, 339 ; Tobacco 
 primary market, 41, ship- 
 ments of, 339; Whiskey ship- 
 ments, 339. 
 
 Louisville and Nashville Rail- 
 road, original Tariff of, 152. 
 
 Low-grade freight, rates on, 
 222; importance of, to com- 
 munities, 222. 
 
 Lumber, Associations, 41 ; 
 Commodity rate structure, 
 133-138, Oklahoma intrastate 
 rate, effect of, on, 311; Com- 
 plaints before Interstate 
 
424 
 
 Index 
 
 Commerce Commission, 288, 
 289, on through routes and 
 rates, 291 ; Diffused market, 
 41 ; Memphis industry, 359 ; 
 Railway revenue per ton mile 
 from, 230; Rates, adjust- 
 ments and complications, 134, 
 fixed differences in, 134, 136, 
 Carload, and development of 
 hundredweight basis, 201, 
 Shifting, due to shifting 
 sources of supply, 59, and 
 Interstate Commerce Com- 
 mission, 137, Transconti- 
 nental, 112, Unremunera- 
 tive, to preserve industries, 
 135. 136 ; Tap lines, 181 ; Re- 
 consignment, 194 ; Sorting 
 at mill, 134; Rates and 
 prices, 52. 
 Lynchburg and Danville case, 
 254- 
 
 M 
 
 Macaroni, manufacture of, 
 from Durum wheat, 15. 
 
 Machinery, in harvesting, 16, 
 in preparation of grain, as 
 foodstuffs, 16, of packing 
 house products, 17, 19, in 
 creamery products, 21 ; Rail- 
 way revenue per ton-mile 
 from, 230. 
 
 McRae, Ga., Complaints before 
 Interstate Commerce Com- 
 mission, 296. 
 
 Maine, Corn canning, 27. 
 
 Maintenance, Cost of, 148, as 
 related to revenue from 
 rates, 374 ; Use of petroleum 
 in, 13; Roadway and, 217. 
 
 Manhattan Island, " lighter- 
 ing" to, 178. 
 
 Manufactures, Capital em- 
 ployed in, 379, 380, 381 ; Cost 
 of materials used, 376, Trans- 
 portation charge in cost, 2; 
 
 Dependence of railroads on, 
 14; Domestic, stimulated by 
 Revolution, 4, 6, Expendi- 
 tures in, 376, 378; Products, 
 Channels of movement, 7-8, 
 Exchange of, and erosion of 
 traffic channels, 7-8, Gross 
 value of, 376, Multiplicity of, 
 and separation of tariffs and 
 classification, 153, as affect- 
 ing rate structures, 398, 
 Necessity of middleman in 
 distribution of, 44, New 
 England differential on, 69, 
 Net returns from, 376, 377, 
 378; Rates and equilibrium 
 in, 138, adjustments in, 6g, 
 70; Salaries and wages, and 
 labor conditions, 376, 379, 
 381, 382; Miscellaneous, rail- 
 way revenue per ton mile 
 from, 230, complaints before 
 Interstate Commerce Com- 
 mission, 288; Compared with 
 Agriculture and Railroads, 
 374-383; Segregation in, 7. 
 
 Markets, competition of, and 
 grain rates, 125; Extension 
 of, by traffic men, ice and 
 strawberries, 212, 213; Rates 
 as affecting selection of, 65, 
 bricks and cement, 140, 141, 
 coal, 139, Fruits and vege- 
 tables, 138, Glass, 141, salt, 
 143, sand, 143; Rates as af- 
 fecting widening of, 47, 48. 
 
 Maryland, canning industry, 
 27; Eastern Shore, Truck 
 farming, 22; peach crop, 24. 
 
 Massachusetts, Canning in- 
 dustry, 27; Industrial losses 
 of, 68; Regulation of Rail- 
 roads, 242. 
 
 Materials used, cost of. Man- 
 ufactures, and Railroads, 
 1890, igoo, 190S, 376. 
 
 Maximum rate, to be prescribed 
 to replace " unjust or pre- 
 
Index 
 
 425 
 
 judicial" rates, 277; Texas, 
 a specific rate, 93. 
 
 Meats, canned and dressed, 
 railway revenue per ton-mile 
 from, 229. 
 
 Melon Crop, 25, 26. 
 
 Memphis, Commerce of, 359; 
 Cotton industry, 359; An 
 early interior base of sup- 
 plies, 4; Lumber industry, 
 
 359- 
 
 Merchants' Despatch, 163. 
 
 Merchants and manufacturers' 
 Association and traffic ad- 
 justments, 321. 
 
 Mexico, Prospective use for 
 grazing grounds, 17; Na- 
 tional railroad and export 
 rates, 147. 
 
 Michigan, Coal fields of, 12; 
 Corn canning, 27; Depletion 
 of lumber supply of, 11; 
 Furniture manufactures of, 
 11; Peach crop, 24; Sheep, 
 English breeds, 19; Truck 
 farm products of, 9. 
 
 Middleman, In distribution, 28 ; 
 In purchase of raw material, 
 elimination of, 40; in manu- 
 factured products. Necessity 
 of, 43, 44. 
 
 "Midnight" tariff, 261. 
 
 Mileage, Capitalization and, 
 2,^T, cost of construction, 
 377, 394; increase in 385, 
 386, 387, 389; Rates, in 
 England, 70, Wagon tolls 
 and, 148. 
 
 Milk trains, 9. 
 
 Mill products, railway revenue 
 per ton mile from, 229. 
 
 Milling, Cotton and adjustment 
 of rates, 131; Flour, relation 
 of wheat rate to American 
 industry, 125 ; grains, 16, and 
 elimination of broker, 35; 
 Private tracks, 179-181 ; 
 Wool, 10. 
 
 Milling in transit, Atlanta and 
 Nashville, 359 ; Complaints 
 as to locations befoie Inter- 
 state Commerce Commission, 
 291 ; Incidental service, 195- 
 200; Minneapolis, and Du- 
 luth's grain trade, 121, 198- 
 200. 
 
 Milwaukee, Early interior sup- 
 ply base, 4; Chicago and, in 
 grain trade, 120. 
 
 Mine props, posts, and poles, 
 railway revenue per ton- 
 mile from, 230. 
 
 Mineral products, railway reve- 
 nue per ton mile from, 
 230. 
 
 Minerals, Complaints before 
 Interstate Commerce Com- 
 mission on Hepburn Bill, 
 286. 
 
 Minneapolis, Complaints be- 
 fore Interstate Commerce 
 Commission on discrimina- 
 tions in localities, 254, flour 
 rates, 349; Flour, Effect of 
 rates on prices of, from, 
 52, 54; Milling and the 
 wheat trade, 121, 197, 198; 
 Rates, see St. Paul rates. 
 
 Minnesota, Eastern flow of 
 grain of, 8; Egg shipments 
 from, 9; Intrastate rates, ef- 
 fect on rate structure, 312; 
 Milling in transit in, 196- 
 198, 200. 
 
 Mississippi, Truck farming, 22. 
 
 Mississippi River, as Basing 
 line. Common points to the 
 east, St. Louis to Dubuque, 
 81 ; Water-forced rates, go. 
 
 Mississippi Valley, Eastward 
 flow of grain of, 8. 
 
 Missouri, Apple crop, 23; Coal 
 fields of, 12; Grain routes 
 from, 8; Hogs, 18; Peach 
 crop, 24. 
 
 Missouri Valley, Beet sugar 
 
426 
 
 Index 
 
 consumption, 13, Grain pro- 
 duction of, 8. 
 
 Mobile, Commerce of, 360; An 
 early interior base of sup- 
 plies, 4; Price of bananas 
 at, affected by rates, 56; 
 Rates, indirect effect of New 
 Orleans water-forced rates, 
 90. 
 
 Molasses, glucose, and syrup. 
 Railway revenue per ton- 
 mile from, 230. 
 
 Montana, Common Points, 
 common through rate from 
 St. Louis and Chicago, 84. 
 
 Montgomery, Ala., Commerce 
 of, 359; Complaints before 
 Interstate Commerce Com- 
 mission on long and short 
 haul, 359. 
 
 Morrill, Justin Smith (Sena- 
 tor, Vt.), And advanced 
 methods in handling food 
 supply, 36. 
 
 Moultrie, Ga., Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 296. 
 
 Mules and horses, railway 
 revenue per ton-mile from, 
 229. 
 
 N 
 
 Nails, Effect of rates on 
 prices, St. Louis, 51. 
 
 Nails and wire, railway reve- 
 nue per ton-mile from, 230. 
 
 National Hay Association and 
 classification of hay, 284. 
 
 National Petroleum Associa- 
 tion, and oil rates, 291. 
 
 National Railroad of Mexico 
 and export rates, 147. 
 
 Nebraska, Cattle feeding, 17; 
 Grain routes from, 8; Hogs, 
 18; Sheep grazing, 19. 
 
 Nevada, Lead, copper, and sil- 
 
 ver production, 11, Wool 
 supply from, 10. 
 New England, Cotton market, 
 
 10, Depletion of lumber sup- 
 ply of, II, Effect of rates 
 on prices at mills of, 53, Ex- 
 port of products, 69, Flour 
 mills, decline of, 200, Im- 
 port of food products, 70, 
 Import of raw material, 69, 
 Industries of, 68, Manufac- 
 tures of, movements west, 7- 
 8, Mileage rates in rate struc- 
 ture region, 70; Rate struc- 
 ture, 67-70. 
 
 New Hampshire, Manufactur- 
 ing industry of, 68. 
 
 New Jersey, Canning industry, 
 27, Flow of manufactures 
 from, 7, Manufacturing in- 
 dustry, 69, peach crop, 24. 
 
 New Mexico, Coal fields of, 12, 
 Cattle feeding, 17, Lead, cop- 
 per, and silver production, 
 
 11, Spanish Merino sheep, 
 19. 
 
 New Orleans, Commerce of, 
 360, Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 296, 
 An early interior base of 
 supplies, 4, Importation of 
 coffee and cane sugar 
 through, 13, Price of flour 
 at, affected by rates, 54, 
 Price of bananas at, affected 
 by rates, 56, Railroad con- 
 nection with Chicago, i860, 
 5, Water-forced rates, effect 
 on Mobile rates, 90. 
 
 New York, Differentials and, 
 118, 119; Early trade of food 
 products for European man- 
 ufactures, 4 ; Food prices, not 
 affected by rates, 48-50; Im- 
 port of coffee and cane 
 sugar through, 13; Milk 
 supply, 9; Prices, as affected 
 
Index 
 
 427 
 
 by rates, bananas, 56, flour, 
 54, hides, 56, sugar, 55; 
 Railroad connection with 
 Buffalo, 5. 
 
 New York-Chicago Basic rate, 
 165; And Trunk line per- 
 centage system, 74, "j^. 
 
 New York (State) Canning 
 industry, 27; Flow of manu- 
 factures from, 7; Iron and 
 steel industries of, 10; Peach 
 crop, 24; Public Service 
 Commission, 242 ; Truck 
 farming, 22. 
 
 New York Central System and 
 the Merchants' Despatch, 
 163. 
 
 Newspapers, Consumption of 
 paper, 42. 
 
 Newtown Pippin, 23, 24. 
 
 Norfolk, Truck farming, 22, 
 Truck farm association, 30; 
 Water-forced rates to, 86. 
 
 Norfolk differential. And Nor- 
 folk group rates, 87, 88, Com- 
 mon rate with Baltimore, 87. 
 
 North Atlantic Seaboard, Cot- 
 ton milling, 10 ; Water-forced 
 rates to Norfolk, 87. 
 
 Northfield, State and Federal 
 regulation at, 312. 
 
 Nuts, Railway revenue per ton- 
 mile from, 229. 
 
 o 
 
 Oakland, " lightering " service 
 to San Francisco, 178. 
 
 Oats, Effect of rates on prices 
 of. New York, 49; railway 
 revenue per ton-mile from, 
 229. 
 
 Ocean rates, Fluctuations in, 
 145, Wheat export, 119. 
 
 Official classification, 305, 307; 
 Complaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, on, 298. 
 
 Ohio, Coal fields of, 12, Hogs, 
 18, Iron and steel industries 
 of, 10, Oil wells of, 13, Rates, 
 78, Sheep, English breeds, 
 18, Woodenware, manufac- 
 ture of, II. 
 
 Oil, Complaints before Inter- 
 state Commerce Commission 
 on Hepburn Bill, 288, 291 ; 
 crude and refined, railway 
 revenue per ton-mile from, 
 230 ; Distribution, elimina- 
 tion of broker, 41 ; Lines 
 subject to Interstate Com- 
 merce act, 276; Refining, 13; 
 Sources of supply, 13. 
 
 Oklahoma, Coal fields of, 12, 
 Cotton export to Pacific 
 coast and Orient, 10, Effect 
 of rates on prices, 52, Oil 
 rates, 363, Oil wells of, 13, 
 363, Public Corporation Com- 
 mission, 361. 
 
 Oklahoma City, Commerce of, 
 as affected by rates, 361-363, 
 Packing house industry, 127, 
 362, Milling in Transit, 362. 
 
 Omaha, Beet sugar market, 42, 
 Effect of rates on prices, 
 stoves, 51, Group rate, 83, 
 Lumber trade, 134, Packing 
 house industry, 127, Rate, 81, 
 Sources of lumber supply, 
 134, Wheat elevators, 15, 121. 
 
 Operation, cost of, 218, 384, 
 38s, 386, 387. 
 
 Orange, California, transconti- 
 nental rate, 109, no, Florida 
 and California crops, 26, 
 Mediterranean origin, 26. 
 
 Orchard products. Distribution 
 of, 13, Transcontinental rates 
 on, 109, no. 
 
 Orders of the Commission, 
 Carriers must comply with, 
 276, 278, Commission may 
 modify or suspend, 278, Di- 
 visions of joint rate, 278, 
 
428 
 
 Index 
 
 How obeyed, 275, Not sus- 
 tained by the courts, 275, 
 Punishment for noncompli- 
 ance, 278, Reasonable rates 
 and practices, 278, Time of 
 going into effect, 278. 
 
 Ore — Iron and Zinc, Railway 
 revenue per ton-mile from, 
 229; Rates, As affecting 
 prices of manufactured prod- 
 ucts, 57, 58. 
 
 Oregon, Apple crop, 23, Lead, 
 copper, and silver produc- 
 tion, II, Wool supply of, 10. 
 
 Organs and Pianos, railway 
 revenue per ton-mile from, 
 230. 
 
 Orient, exports to. Conditions 
 of traffic with, 145, 146, Cot- 
 ton, ID, Pacific coast prod- 
 ucts, 102, 103. 
 
 Oshkosh, Wis., Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 296, Lumber rates and 
 preservation of industries of, 
 
 135- 
 Over-capitalization, 389-391, 
 
 403- 
 Overcharges, 246, abolition of, 
 
 402. 
 Oyster Trains, Movement of, 
 
 9- 
 
 Pacific Coast, commerce of, as 
 affected by rates, 365-367, 
 Cotton market, 10, First rail- 
 road to, 1869, 6, General 
 products, 102, 103, Plum 
 crop, 25, Prunes, export of, 
 25, Requirements in mer- 
 chandise and manufacture, 
 103, 104, Water and rail 
 routes to, 7, 8, Transconti- 
 nental traffic and, 102-113, 
 365- 
 
 Packing houses, elimination of 
 the drover, 35; Machinery 
 in, 19; Private cars, 184; 
 Products, Prices and Rates, 
 Denver, 351, Railway reve- 
 nue per ton-mile from, 
 229; Sources ot supplies, 
 16-17. 
 Padlocks, Rates and prices, 
 Denver, Kansas City, St. 
 Louis, SI. 
 " Palace livestock cars,'' 184. 
 Panama route, 8, 106. 
 Panics, and the railroads, 268; 
 
 1873, 262; 1893, 266, 393. 
 Paper, Manufacture of. New 
 England, 68, ownership of 
 pulp supply, 42; Prices, as 
 affected by pulp rates, 57; 
 Railway revenue per ton- 
 mile from, 230. 
 " Paper " rates, improper ex- 
 ploitation of, 319. 
 Paris Exposition, 1900, exhibit 
 of American apples and sub- 
 sequent European demand, 
 24. 
 Passenger Cars, increase in 
 number of, 385, 386, 387; 
 Fares, Complaints before 
 Interstate Commerce Com- 
 mission on, 282; Traffic, 
 proportion of railway ex- 
 penses, 219. 
 Passes, free, 210, 246, 403 ; ex- 
 cepted classes, 276, 277 ; Pen- 
 alty for issue, 277; Traffic 
 associations and, 171. 
 Peach, area of crop, 24, Chi- 
 nese origin, 24, uncertainty 
 of crop, and car distribu- 
 tion, 38, Georgia, complaint 
 of rates, 287. 
 Pears, Crop, 24, European ori- 
 gin, 24. 
 Peas, dried, railway revenue 
 
 per ton-mile from, 229. 
 Pecos, Texas, Complaints be- 
 
Index 
 
 429 
 
 fore Interstate Commerce 
 Commission, 296. 
 
 Penalties, Elkins act, 265, 
 266; Hepburn Bill, for im- 
 proper issuance of passes, 
 277; Interstate Commerce 
 Law, 250, 251, 265. 
 
 Pennsylvania, Manufactures, 7, 
 69, steel and iron, 10; Oil 
 wells, 13 ; Tobacco, 13 ; Line 
 of Public Works and State 
 Ownership, 236. 
 
 Pennsylvania Lines, and abo- 
 lition of rebates, 269-271 ; 
 built to compete with New 
 York and Erie Canal, 70; 
 Entrance to New York, 73; 
 Increased mileage, 395 ; 
 Ownership of stock of other 
 lines, 390; and the Union 
 Line, through freight, 163. 
 
 Percentage System, in Trans- 
 Mississippi Territory, 83 ; 
 Trunk Line, 74, 75, 76, 78, 
 117. 
 
 Petroleum, Area of produc- 
 tion, 12-13, Consumption in 
 illumination, 12, Consump- 
 tion in railway operation, 13, 
 Elimination of broker in dis- 
 tribution of, 41, Rates and 
 prices, 57. 
 
 Philadelphia, Competition with 
 New York, 70, Differential, 
 74. 76, 77, 118, 119, Early 
 trade of food products for 
 European manufactures, 4, 
 Effect of rates on prices at, 
 SO, 54, S6, Fish trains from, 
 9, Group rate, 77, Price of 
 bananas at, effect of rates 
 on, 56, Price of flour at, ef- 
 fect of rates on, 54, Railroad 
 connection with Pittsburg, 
 
 5- 
 Pianos and Organs, railway 
 revenue per ton-mile from, 
 230. 
 
 Pickles, Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 
 286. 
 Pig-iron, Area of production, 
 10, Complaints before Inter- 
 state Commerce Commission 
 on Hepburn Bill, 286, Rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Pipe Lines, " common car- 
 riers," 276; and Oil Trans- 
 portation, 13, Oklahoma- 
 Texas, 363. 
 Pittsburg, Commerce of, 331- 
 334; Consumption of food 
 products, 333, An early in- 
 terior base of supplies, 4, 
 Effect of rates on prices at, 
 SO, Price of flour at, effect 
 of rate on, 54, Railroad con- 
 nection with Philadelphia, 
 i860, s, Rate, 76, Suburban 
 traffic of, 332. 
 
 Plaster, lime and cement, rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Plums, Crop, 25, Relation to 
 peach, 24. 
 
 Poles, posts, and mine props, 
 railway revenue per ton-mile 
 from, 230. 
 
 Pooling, money and tonnage, 
 Cullom report on, 248; In- 
 terstate Commerce law and, 
 250; Proscription of, 209; 
 Railroad amalgamation and, 
 251 ; Remedy for abuses, 262, 
 for rebates, 169, 170; Traffic, 
 208, 209, Wheat, 120. 
 
 Population, Concentration of, 
 and enlargement of area of 
 supply of fruit and vegeta- 
 bles, 9, Increased demand 
 for grain, effect on grazing 
 grounds to West, 17. 
 
 Pork, and the corn crop, 16. 
 
 Portland, An early interior 
 
430 
 
 Index 
 
 base of supplies, 4, Water- 
 forced rates to Boston, 70. 
 
 Posts, poles, and mine props, 
 railway revenue per ton- 
 mile from, 230. 
 
 Potatoes, extension of market 
 of. Freight agents, 212, A 
 general crop, 22; Effect of 
 rates on prices of, New 
 York, 49, so, Denver, 351, 
 352, Railway revenue per 
 ton-mile from, 229 
 
 Poultry, Effect of rates on 
 prices of. New York, 49, Ex- 
 tensive supply area, 9, Food, 
 Complaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 290, Improve- 
 ments in, 20, Railway reve- 
 nue per ton-mile from, 229, 
 Refrigerator cars and trans- 
 portation of, 32. 
 
 Practices, power of Interstate 
 Commerce Commission over, 
 277, 278, abuses in, 40. 
 
 Preparation of foodstuffs, 15- 
 27. 
 
 Preserves, Complaints before 
 Interstate Commerce Com- 
 mission, 286. 
 
 Prices, Bureau of Labor Bul- 
 letin on, 382, 383 ; and Rates, 
 47-66; Adjustment to mar- 
 ket conditions, 47; At In- 
 dianapolis, 371, New York, 
 48, 49, so, Philadelphia, 50, 
 Pittsburg, so; As affecting 
 food, 48, so, 60, 350-352, 
 Cost of raw material, S3-56, 
 Colorado, 3S4, bananas, 56, 
 copper and lead, s8, leather, 
 57, paper, 57 ; As affected by 
 transcontinental rate, 107, 
 108; Cakes and crackers, s8, 
 Cotton, S9. Denver, si, 52, 
 350-355, Fort Worth, S2, 
 Horses and cattle, igoi, 129, 
 130, Iron ore, 59, 60, Kansas 
 
 City, 51, 52, Lumber, S9, 
 Oklahoma, 52, San Antonio, 
 52, St. Louis, SO, SI, Sugar, 
 Indianapolis, 371. 
 
 Primary markets, sugar, 42, 
 tobacco, 41. 
 
 Private cars, 183-187; England, 
 183 ; influence on routing and 
 transportation charge, 32 ; 
 Livestock, 184; Coal, 185; 
 Refrigerator, 32, 183. 
 
 Private Industrial Tracks, 179- 
 181. 
 
 Privileges, reconsignment. Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 291. 
 
 " Prizing" tobacco, 41. 
 
 Producers, Competition of, 
 142. 
 
 Production, equilibrium in. 
 Rate adjustments, and, 138; 
 and distribution. Defective 
 system of distribution and 
 returns to producer, 60, 61, 
 Fluctuations in, 46, Intimate 
 relations between, 15, Sec- 
 ondary channels of, 45, 
 Traffic channels of, 4-14, 45. 
 
 Products, Agricultural, rail- 
 way revenue per ton-mile 
 from, 229, value of, 376; 
 Manufactures, gross value 
 of, 376; packing house, rail- 
 way revenue per ton-mile 
 from, 229; competition of, 
 and rates, 104. 
 
 Proportional rates. On export 
 and import traffic, 146, On 
 interregional traffic, 116, To 
 Mississippi river crossings, 
 81. 
 
 Proprietary interest and trans- 
 portation in Hepburn Bill, 
 277, 280, 403. 
 
 Prosperity of United States, 
 Coal supply and, 12; Rates 
 and, as facilitating produc- 
 
Index 
 
 431 
 
 tion, distribution and con- 
 sumption, 325-327; Railroads 
 and, 172, unpreparedness for, 
 1899, 268, 393. 
 
 Prunes, Home and export 
 markets, 25. 
 
 Pulp, newspapers and, 42; rail- 
 way revenue per ton-mile 
 from, 230 ; Transportation 
 charge as affecting price of 
 paper, 57. 
 
 Railroads, Achievements of, 
 384-396 ; Capitalization, 376, 
 377> 378; Conferences be- 
 tween, 166, and the Traffic 
 Associations, 171 ; Associa- 
 tion of General Freight 
 Agents, 206 ; Construction 
 of, early character of, 23s, 
 236, stimulated by Revolu- 
 tion, 6, and Civil War, 166, 
 167, from seaports to inte- 
 rior, 5, 165, demands of the 
 future for, 395 ; Dependence 
 on agriculture, industry and 
 commerce, 14, 374-383 ; Earn- 
 ings, 276, 277; Expenses, 
 376, cost of materials, 376, 
 salaries and wages, 376, 379, 
 380, 381 ; Development of 
 markets by, 159, 212, 213; 
 Farmers and demonstration 
 cars, 37; Courts and, pro- 
 cedure in Hepburn Bill, 278 ; 
 Public and, 235-274; Pro- 
 prietary interest in traffic, 
 247, 280; Canals and, 5, 70, 
 235, 395. 396; Development 
 by, 4, 14, 325-7. 
 
 Railway income, 385, 386, 387, 
 389, disposition of, 392, 404; 
 Rates and Wages, 381, 382; 
 Revenue per ton-mile from 
 products of agriculture, ani- 
 
 mals, forests, mines, 229- 
 230; Service, Elevation and 
 warehousing, 182-183, Local 
 and through traffic, 173, Pri- 
 vate industrial tracks, 179- 
 181, Special cars, 183, 
 Switching, 174-178, Tap 
 lines, 181. 
 
 Rate adjustments, In Missis- 
 sippi basing line, 81, In trunk 
 line percentage system, 1892, 
 75, New England, 69, 70, To 
 conserve equilibrium in dis- 
 tribution and production, 
 138-143, To conserve manu- 
 facturing interests, 69, 70, 
 Traffic associations and, 171 ; 
 Basis, 149, 258; Changes, 
 far-reaching effects of, 314, 
 405, Time of notice of, 146, 
 278; Cutting, Abolition of, 
 402, and excess of railroad 
 facilities, 167, and packing 
 house products, 128, Trans- 
 Mississippi territory, 79, 
 Trunk lines, 72, 73, General 
 business and, 238, 402, over- 
 loading an equivalent to, 
 201 ; Equilibrium, differen- 
 tials and, 170; Making, dif- 
 ficulties due to lack of pre- 
 cedent, 397, a Legislative 
 act, 257, Power, Interstate 
 Commerce Commission and, 
 256, 257, 279, 280, Texas 
 Commission and, 97, 242; 
 Reductions, far-reaching ef- 
 fects of, 256, 257; Struc- 
 tures, and competing inter- 
 ests, 66, 75, commodity, 117- 
 147, development of, 67, 405, 
 regional, 67-116, State lines 
 and, 310; Wars, 165-173, 
 386; Trans-Mississippi Ter- 
 ritory, 79, Trunk Lines, 72, 
 Minneapolis-Chicago, 1882, 
 120, Wheat, 120, 122. 
 
 Rates, American and Euro- 
 
432 
 
 Index 
 
 pean, 48; Basis of, 216-234; 
 Character of freight and, 43, 
 151, 153; Capitalization and, 
 231-234; Carload, number of, 
 307, 308; Classification and, 
 152 ; Competition of products 
 and, 104; Commodity, 117- 
 147 ; Competing commodi- 
 ties, 143; Correlation of, 
 310-311, 31S, 405, in Trunk 
 line territory, 75, 76, Wheat, 
 122; Dressed Meats, 126- 
 130 ; Experimental, 223 ; Ex- 
 port and import, 14S; Fluc- 
 tuations in, so; Georgia, 
 149; Increase in, 273; Intra- 
 state and rate structures, 
 311; Livestock, 126-130, dis- 
 parity in, with packing house 
 products, 128, Chicago-New 
 York, 130; Prices and, see 
 Prices and Rates; Supplies 
 and, 65; Senate investiga- 
 tion, 275; Switching service 
 and, 180; Mileage, in New 
 England, 70; Railway reve- 
 nues and, 273, 374-383; Sea- 
 son, 153; Value of competi- 
 tive traffic and, 225, 226; 
 Local and through, 245 ; 
 Long and short haul, 239, 
 240, Interstate Commerce 
 law, 1887, and, 75, 76, 250, 
 Virginia Cities group, and, 
 87, 88; Lumber, see Lumber, 
 rates; Mileage, in South 
 Carolina and Georgia char- 
 ters, 148, 149; Non-competi- 
 tive, 400; Proportional, 81, 
 116, 146; Publication of, im- 
 port and export, 145; Rea- 
 sonable and just, 250; Re- 
 consignment and, 193; Spe- 
 cial, 142; Specific, ^()\ 
 Through, see Through rate; 
 Transcontinental, see Trans- 
 continental rate; Wages and, 
 64. 
 
 Ratings, classification, number 
 of, 307- 
 
 Raw materials, of manufacture, 
 Areas of supply, and move- 
 ment of, 10-13; Effect of 
 rates on cost of, 52, 53 ; New 
 England differentials on, 69; 
 Rates to aid manufactures, 
 224; Segregation of produc- 
 tion and manufacture, influ- 
 ence on problem of trans- 
 portation, 43; Rates on, and 
 cost of manufactures, Colo- 
 rado, 354 ; Miscellaneous, 
 Complaints before Interstate 
 Commerce Commission, 286. 
 
 ■"eagan, John H. (Judge), 
 Theory of distribution for 
 Texas, 94. 
 
 Reasonable rates. Interstate 
 Commerce Commission to 
 determine and to prescribe, 
 277; Present prevalence of, 
 399. 
 
 Rebates, Abolition of, 401 ; 
 Corporations liable for grant- 
 ing, 277; Elkins law and, 
 210; Favorite shippers and, 
 24s, 246; Freight agents and, 
 208; General business and, 
 238, 246; Interstate Com- 
 merce Commission and, 260; 
 Large shippers and, 259; 
 Offering or granting, a 
 crime, 277; Over-rapid Rail- 
 road construction and, 236, 
 238; Penalty for, 277; Pool- 
 ing as a remedy for, 169, 
 170; Soliciting, a crime, 277; 
 Switching charges and, 180; 
 Tap line allowances and, 
 181; Trunk lines and, 72; 
 A. J. Cassatt and, 269. 
 
 Receiverships, railway, 233, 
 266, 387, 391; rebating and, 
 169. 
 
 " Reciprocal Demurrage," 191, 
 192. 
 
Index 
 
 433 
 
 Reconsignment, incidental serv- 
 ice, 192-195; Privileges and 
 charges, Complaints before 
 Interstate Commerce Com- 
 mission on Hepburn Bill, 
 292. 
 
 Refineries; Beet Sugar, Califor- 
 nia, 103, Ore, direct sources 
 of supply of, 42, Sugar, Lou- 
 isiana, 41. 
 
 Refrigeration, And transpor- 
 tation of perishable food 
 products, 31, And western 
 movement of packing house 
 industry, 127, Transconti- 
 nental, no; Car, 183-184, 
 Early employment of, 31, 
 Private ownership of, 32, 
 184. 
 
 Refunds, Interstate Commerce 
 Commission and, 285 ; and 
 Rebates, 281. 
 
 Regional gateways, and pro- 
 portional rates, 114. 
 
 Regional rate structures. New 
 England, 67-70, Pacific coast 
 and transcontinental traffic, 
 102-116, South of Ohio and 
 East of Mississippi, 85-92, 
 Texas, 92-102, Trans-Mis- 
 sissippi and Trans-Missouri 
 territory, 78-85, Trunk Line 
 and Central Traffic Terri- 
 tory, 70-78. 
 
 Reno, Nevada, Complaints be- 
 fore Interstate Commerce 
 Commission, 296. 
 
 Restraint of trade. Traffic 
 agreements and, 263. 
 
 Revenue, as determining in- 
 vestment, 231. 
 
 Revolution, American, Its 
 stimulus to manufacture, 
 4,6. 
 
 Rhode Island, Manufacturmg 
 industries of, 68. 
 
 Rice, Area of production, 13, 
 Complaints before Interstate 
 
 Commerce Commission on 
 Hepburn Bill, 286; Sources 
 of supply, 13, Railway reve- 
 nue per ton-mile from, 229. 
 
 Richmond, Commerce of, 357, 
 Early trade of food products 
 for European manufactures, 
 4, water-forced rates, 357. 
 
 Rocky Ford melon, Colorado, 
 25, 26. 
 
 Rocky Mountain region, Ap- 
 ples, superior quality of, 23, 
 Lead, copper, and silver ores, 
 II, 12. 
 
 Roswell, N. Mexico, Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 296. 
 
 Rotation of crops, 22. 
 
 Routing, Private car compa- 
 nies and influence over, 32. 
 
 Rubber goods. New England 
 manufacture of, 68; shoes. 
 Effect of rates on prices, 54. 
 
 Russell, Wm. E. (Governor, 
 Mass.) And industrial losses 
 of Massachusetts, 67. 
 
 Rye, railway revenue per ton- 
 mile from, 229. 
 
 Sacramento, First California 
 railroad from, 104, Water 
 point, 104. 
 
 St. Louis, And Missouri river 
 traffic, 80, An early inte- 
 rior base of supplies, 4, As 
 Western gateway, impor- 
 tance to Trunk Lines, 71, 
 Beet sugar market, 42, 
 Bridge Arbitrary; 344; Car- 
 load " spread " and, 203 ; 
 Classification difficulties, 305 ; 
 Commerce of, as affected by 
 rates, 34^-344 '. Differential 
 between, and Chicago, 80, 
 
434 
 
 Index 
 
 Effect of rates on prices of 
 manufacturers' material at, 
 SI, Elevator service. Com- 
 plaints before Interstate 
 Commerce Commission, 294; 
 Furniture manufacture, 11, 
 Group rate, 83, Primary 
 market for tobacco, 41, 
 Railroad connections, i860, 
 S, Rates and Chicago Rates, 
 fixed differences, 342; Rate 
 on sugar beets, and price of 
 sugar at, 56, Rates to Texas 
 common points, 95, Southern 
 Rates Complaint and, 343; 
 Wheat elevators, 16, 121. 
 
 St. Paul, Commerce of, 348- 
 350; An early interior base 
 of supplies, 4, Rate, 82; 
 Sugar at, effect of rates on 
 prices, 55. 
 
 Salary and wage earners, num- 
 ber of, and Salaries and 
 wages, Manufactures, 1890, 
 1900, 1905, Railroads, 1890, 
 1900, 190S, 376, 379, 380. 
 
 Salmon, San Francisco and 
 Shipments to Atlantic sea- 
 board, 10, 366. 
 
 Salt, Complaints before Inter- 
 state Commerce Commission 
 on Hepburn Bill, 286; Rail- 
 way revenue per ton-mile 
 from, 230; Rate structure, 
 
 143- 
 San Antonio, Effect of rates 
 
 on prices at, 52. 
 San Bernardo Board of Trade, 
 
 and the long and short haul, 
 
 253- 
 
 San Buena Ventura, Cal., 
 Complaints before the Inter- 
 state Commerce Commission 
 on the Hepburn Bill, 296. 
 
 San Francisco, Carload 
 " spread," 203 ; Commerce 
 of, 365-367 ; " Contract 
 Plan," 106; An early interior 
 
 base of supplies, 4; Impor- 
 tation of coffee, and cane 
 sugar through, 13 ; " Light- 
 ering ' service from Oak- 
 land, 178. 
 
 San Luis Valley, Cal., Hog 
 products of, 18. 
 
 Sand, railway revenue per ton- 
 mile from, 230; Rate struc- 
 ture, 141 ; rates, special, 142. 
 
 Santa Barbara, Cal., Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 296. 
 
 Sash, doors and blinds, facto- 
 ries, New Mexico, 137; Osh- 
 kosh, rates and preservation 
 
 of, 13s. 
 
 Savannah, Commerce of, as 
 affected by rates, 359; Early 
 trade of food products for 
 European manufactures, 4 ; 
 Water differential to Galves- 
 ton, 84. 
 
 Schedules, filing of. Interstate 
 Commerce Law, and, 277. 
 
 Scrap and Pig-Iron, railway 
 revenue per ton-mile from, 
 230. 
 
 Sea food, Channels of move- 
 ment of, 9. 
 
 Seaports, influence of, on dis- 
 tance tariffs, 156-161, 165. 
 
 Seckel pear, 24. 
 
 Seed farms, California, 22, 
 Colorado (melon), 25. 
 
 Segregation, in manufacture, 
 7, 43 ; in production, 43. 
 
 Seligman, E. R. A., on eco- 
 nomic justification of long 
 and short haul rates, 240; 
 prophecy of railroad amal- 
 gamation, as result of pro- 
 scription of pooling, 25. 
 
 Senate, investigation, and Doc- 
 ument No. ^57, 273. 
 
 Service, Quality of, ixnprove- 
 ment in, 211, Traffic clubs 
 
Index 
 
 435 
 
 and, 321-324 ; Incidental, 
 188-205, Bill of Lading, 188- 
 190, Demurrage, 191-192, 
 Diversion en route, 193, 
 Milling in transit, 195- 
 200, reconsignment, 192-195, 
 Complaints of, before Inter- 
 state Commerce Commission, 
 292 ; Local and through, 173 ; 
 Secondary, 174-187; Value 
 of, as rate basis, 231, 287! 
 
 Sewer pipe and drain tile, rail- 
 way revenue per ton-mile 
 from, 230. 
 
 Sheep, American, English 
 breeds, Spanish Merinos, 19; 
 railway revenue per ton- 
 mile from, 229. 
 
 Sheet and bar metal, railway 
 revenue per ton-mile from, 
 230. 
 
 Sheldon pear, 24. 
 
 Shipbuilding, Boston's pre- 
 eminence in, 67, Weymouth 
 and, 68. 
 
 Shippers and Traffic Men, 316; 
 Rebating, 168; large and 
 small and rate discrimina- 
 tions, 258-259. 
 
 Shoes, Effect of rates on prices 
 of, SI, S3, Rates, eastern and 
 western compared, 308, 
 Complaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 288. 
 
 " Shoestring district," and 
 north and south bound lines, 
 72, 76. 
 
 Shooks, Box, Railway revenue 
 per ton-mile from, 230. 
 
 Side Tracks, Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 292; Service from, 175. 
 
 " Sides," cattle, 19. 
 
 Silver, Sources of supply, 11. 
 
 Sioux City, Iowa, Complaints 
 before Interstate Commerce 
 
 Commission on Hepburn 
 Bill, 296. 
 
 Sioux Falls, Iowa, Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 296. 
 
 Skilled labor, Industrial pros- 
 perity, New England, and, 
 
 69. 
 
 Sleeping Car Companies, Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, re, 282, In- 
 cluded in Hepburn Bill as 
 " common carriers," 276. 
 
 Smelters, Direct sources of ore 
 supply of, 42. 
 
 Smithfield hams, 18. 
 
 " Societies of Equity," and 
 wheat rates, 356. 
 
 Solvay Process Co., and 
 switching charge, 181. 
 
 South Africa, importation of 
 peaches from, New York, 24. 
 
 South and Southeast, Com- 
 merce of, as affected by 
 rates, 356-361. 
 
 South Carolina, Government 
 regulation in, 148, 149. 
 
 South Carolina Railroad, 
 Tariff of 1855, 150-152. 
 
 Southeastern Rate structure, 
 85-92; Influence of water 
 rates in, 85, 252 ; Staple man- 
 ufactures in, 336, 337. 
 
 Southern classification, 305, 
 307; Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 298; 
 Early Tariffs, 152. 
 
 Southern Railway and Steam- 
 ship Association, Adjust- 
 ment of cotton rates, 130, 
 
 131. 
 Southeastern Rates Complaint, 
 
 335-337; Louisville and, 340; 
 
 St. Louis and, 343. 
 Special equipment cars, 183- 
 
436 
 
 Index 
 
 187; Coal cars, 185, Dem- 
 onstration cars, 31, Livestock 
 cars, 184, Refrigerator car, 
 31, 183, Tank cars, 184, Ven- 
 tilator car, 31. 
 
 Specific rates, Hepburn Bill 
 and, 280; Interstate Com- 
 merce Commission and the 
 Freight Bureau Cases, 256, 
 257; In Trunk Line terri- 
 tory, 76. 
 
 Spencer, Samuel, and the rate- 
 making power of the Com- 
 mission, 280. 
 
 Spitzenburg apple, 23, 24. 
 
 Spokane, Washington, Com- 
 merce of, 367; Complaints 
 before Interstate Commerce 
 Commission on Hepburn 
 Bill, on Pacific Terminal 
 rates, 367. 
 
 " Spotting " cars, on industrial 
 tracks, 179, 180. 
 
 "Spread" in Carload Rate, 
 202, 203, 205. 
 
 Spurs, and Carload rates, 154; 
 Service from, 175; jurisdic- 
 tion of Interstate Commerce 
 Commission over, 276. 
 
 Stability of rates, pooling and, 
 170; ocean rates and, 145. 
 
 Standards, Roadway and Fa- 
 cilities, 393. 
 
 State Classifications, 309. 
 
 State Colleges of Agriculture, 
 Benefits of, to grain produc- 
 tion, 14, Work of, 36. 
 
 State ownership of utilities, 
 Pennsylvania 236. 
 
 State Railroad Charters and 
 through Traffic, 162. 
 
 State Railroad Commissions, 
 and rate stability, 311; 
 Texas, 94 ; Massachusetts, 
 242; Regulation, 209; and 
 Federal, 309-313. 
 
 Station Location, Change of. 
 Complaints before Interstate 
 
 Commerce Commission on 
 
 Hepburn Bill, 292. 
 Statistical difficulty in uniform 
 
 accounts, 303. 
 Staves and Heading, railway 
 
 revenue per ton-mile from, 
 
 230. 
 Steam, Source of power, 12, 
 
 235- 
 
 Steam road and electric road. 
 Through routes and rates, 
 Complaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 291. 
 
 Steamship rates, instability of, 
 
 145. 
 
 Steel productions. Areas of 
 production, 10, 11, Channels 
 of movement, 11. 
 
 Stock in trade, effect of Trans- 
 portation facilities on, 99, 
 100, 159. 
 
 Stone, railway revenue per ton- 
 mile from, 230; crushed, 
 special rate, 142. 
 
 Storage, and Reconsignment, 
 193 ; Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 292. 
 
 Stoves, Effect of rates on prices 
 at Denver, Kansas City, 
 Omaha, 51 ; Prices at St. 
 Louis, 51 ; Railway revenue 
 per ton-mile from, 230. 
 
 Straw, Complaints before In- 
 terstate Commerce Com- 
 mission on Hepburn Bill, 
 290; Railway revenue per 
 ton-mile from, 229. 
 
 Strawberries, Southern, exten- 
 sion of market for, by freight 
 agents, 213. 
 
 Structural and bridge iron, 
 railway revenue per ton- 
 mile from, 230. 
 
 Suburban Traffic, Pittsburg, 
 332. 
 
 Sugar, Complaints before In- 
 
Index 
 
 437 
 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 286; 
 Effect of rates on prices of, 
 SS, Indianapolis, 371, 372; 
 railroad revenue per ton- 
 mile from, 230. 
 
 Suits against Commission, Ap- 
 peal to Supreme Court, 278. 
 
 Summerville Hay case, and the 
 long and short haul clause, 
 253. 
 
 Supreme Court, and intrastate 
 rates, 313; And import and 
 export rates, 147, 255; Ap- 
 peals to, 278; On live stock 
 rates, 129; On rate-making 
 power of Commission, 257; 
 Rulings of Commission, Dan- 
 ville rates, 254, Elevation 
 charge, 182, Import rates, 
 25s, Summerville Hay case, 
 
 253. 
 
 Switches, spurs, and sidetracks, 
 174-177 ; Jurisdiction of Com- 
 mission over, 276; To be 
 provided, when justified, 277. 
 
 Switching charges, 176; Buf- 
 falo, 330; Complaints before 
 Interstate Commission on 
 Hepburn Bill, 292. 
 
 Switching, 174-178; "Belt" 
 Lines, 176, 177; "Trap-car," 
 177, lightering, 178, Charges 
 of industrial lines for, 180, 
 181. 
 
 Syrup, Molasses, and Glucose,' 
 railway revenue per ton- 
 mile from, 230. 
 
 Tank cars, 185. 
 
 Tanning, 10, 42. 
 
 Tap Lines, 181; lumber com- 
 panies and, 181. 
 
 " Tapering Tariff " and decen- 
 tralization of distribution, 
 228. 
 
 Tariffs and Classifications, 
 early, 148-155. 
 
 Tariffs, South Carolina R. R., 
 150-152, Louisville & Nash- 
 ville R. R., 252, Carload and 
 less-than-carload rates. Fil- 
 ing of. Interstate Commerce 
 law and, 250. 
 
 Taussig, F. W., on economic 
 justification of long and 
 short haul rates, 240. 
 
 Texas, Agriculture, 1890, 1900, 
 1905, 376. 
 
 " Team " Tracks, 154, 175. 
 
 Tennessee, Coal fields of, 12, 
 Egg shipment from, 9, 
 " Prizing " tobacco, 41, To- 
 bacco supply of, 13. 
 
 Terminal Facilities, Buffalo, 
 331 ; Jurisdiction of Commis- 
 sion over, 276; Rates, On 
 transcontinental traffic, 107, 
 108, Spokane and, 367. 
 
 Terminals, Trunk Line, 71, 113, 
 114. 
 
 Territorial groups. Commis- 
 sion, 283; complaints in, 
 285-300. 
 
 Texarkana, rate adjustment, 
 
 364. 
 
 Texas, Cantaloup, 25, Cattle, 
 16, Commerce of, 363-365, 
 Common point territory, 94, 
 95, 97, 98, 99, 363, 364, Cot- 
 ton export to Orient, 10, Egg 
 shipments from, 9, Hogs, 18, 
 Oil wells of, 13, Packing 
 houses in, 17, Peach crop, 24, 
 Rate structure, 92-103, Rice 
 supply, 13, Turkeys, 20, 
 Turkeys, prices of, in New 
 York, 49, Truck farming, 
 22. 
 
 Texas Railroad Commission, 
 And decentralization of dis- 
 tribution, 100, 102, And emer- 
 gency rate on wire and nails, 
 loi, 102, As a court, 102, 
 
438 
 
 Index 
 
 Cotton compressing, 132, 
 Cotton rates, 131, Flour and 
 wheat rates, 362, Inaugura- 
 tion 1890, 94; Intrastate 
 Maximum rate, 93, 96, 97, 
 36s ; effect of rate structures, 
 311; Power over rates, 97, 
 Car service. Traffic Bureaus 
 and, 322, 323. 
 
 Through freight lines, 163, 164. 
 
 Through rate, Interstate Com- 
 merce Commission, and, 
 power of apportionment, 278, 
 Through Rates, 1885, 1909, 
 399; Chicago and St. Louis 
 common to Montana Com- 
 mon points, 84; Complaints 
 before Interstate Commerce 
 Commission on Hepburn 
 Bill, 290; Western primary- 
 markets, wheat, to Liverpool, 
 119; division of, Traffic As- 
 sociation and, 171. 
 
 Through routes, Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 255, 290; Import and 
 export traffic, 144-147; Com- 
 mission may prescribe, 278. 
 
 Through traffic. Civil War 
 and, 161, Enabling Act 162. 
 
 Thurman, Allen G., and dif- 
 ferentials, 119. 
 
 Ties, Railway revenue per ton- 
 mile from, 230. 
 
 Timber and products, railway 
 revenue per ton-mile, 230; 
 expected from " commodity " 
 clause, 277. 
 
 Tobacco, Commission mer- 
 chants, 41, Effect of rates on 
 prices of, 55, Primary mar- 
 kets for, 41, Sources of sup- 
 ply, 13, Warehousing, 183, 
 Louisville shipment and 
 rates, 339. 
 
 Tolls, primitive, 216, 217. 
 
 Tomatoes, Canning, 27, Effect 
 
 of rates on prices of, New 
 York, so. 
 
 Ton-mile, Railway revenue 
 from, 383 ; Products of, Ag- 
 riculture, Animals, Forests, 
 Manufactures and miscella- 
 neous. Mines, 229-230; Road 
 hauling, cost per, 38. 
 
 Ton-mile basis of cost of trans- 
 portation, 220, 274; rates, de- 
 cline in, 389. 
 
 Ton-mileage, increase in, 384, 
 
 386, 387, 388, 389. 
 Tonnage, pooling of, 170, 262. 
 Track, Gauge, and through 
 
 traffic, 161 ; Storage charge, 
 incidental service, 192; Ju- 
 risdiction of Commission 
 over, 296. 
 Traffic, Agents, and extension 
 of markets, 212, 213; Agree- 
 ments, 261, 262, rate wars 
 and, 165-173; Associations, 
 and abuses, 171, and Anti- 
 Trust law, 263; Bureaus, 
 316-317; Channels, erosion 
 of, 6-8, Character of train- 
 loads over, 45, Commodities 
 of, and percentage system 
 rates, "^7, Secondary, 45 ; 
 Clubs, 321-324; Competition 
 for, and rate-cutting, 167, 
 239; Competitive, value of, 
 in relation to rates, 225 ; Con- 
 gestion, 1899, 271, 392, 393; 
 Earnings, 389; Experts, 314- 
 324; Traffic Men and Ship- 
 pers, 316; Increase in, 386, 
 
 387, 388; Units and efficiency 
 of operation, 384; Unremu- 
 nerative, as conserving re- 
 munerative, 266. 
 
 Transcontinental Commodity 
 Tariffs, 305. 
 
 Transcontinental rate, 366, 
 Clipper ships and, 104, 105, 
 Competition of markets and, 
 104, "Contract Plan," and, 
 
Index 
 
 439 
 
 lo6, Rate plateau. New York 
 to Chicago, 107, And long 
 and short haul clause, 252; 
 rates per ton-mile, Railway 
 revenue from, Fruits and 
 vegetables, 229; Traffic, 102- 
 113, Filing of export and im- 
 port rates, 145, First trans- 
 continental Railroad, 1869, 
 105- 
 
 Trans-Mississippi and Trans- 
 Missouri territory, 78-85. 
 
 Trans-Missouri Freight Asso- 
 ciation, and Anti-Trust law, 
 263. 
 
 Transportation, early, 2 ; effects 
 of seaports on, 4, 5, 156-161 ; 
 Charge, basis for, 216-234, as 
 affected by extent, 65, com- 
 plaints of, in early traffic, 
 327, private car companies 
 and, 47, as related to reve- 
 nue and maintenance, 3; 
 Cost of, 219, 220, 221 ; Coun- 
 try road, cost per ton-mile, 
 38, Meaning of term in Hep- 
 bum Bill, 276; Function in 
 Commerce, 2, 159; "on the 
 hoof" and Cattle rate, 126, 
 127; Wages and purchasable 
 amount of, 64; Segregation 
 in manufacture and produc- 
 tion, as related to, 43, 159. 
 
 "Trap-car" switching, 177. 
 
 Trimmings and Iron Rails, 
 railway revenue from, 230. 
 
 Trolley lines, and distribution 
 of farm products, 39. 
 * Truck farm products, Califor- 
 nia seed supply for, 22, 
 Channels of movement, g. 
 Extent of area of supply, 9, 
 22. 
 
 Trunk line and central traffic 
 territory. Local rates in, JT, 
 long and short haul rates, 
 252, obliteration of rebates 
 in, A. J. Cassatt and, 270, 
 
 Regional rate structure, 70- 
 78. 
 
 Trunk Line Association, 171, 
 Differentials, 118, 119, Form- 
 ation of, 73, Uniform bill of 
 lading, 188. 
 
 Trunk Line rate, On South- 
 eastern grain traffic rate, 91. 
 
 Trunk Line Percentage Sys- 
 tem, 170; Erection of, 1876, 
 
 74, Revision of, under I. C. 
 Law, 1887, 1892 and 1896, 
 
 75. 76, 78, Steadying water 
 and rail competition, 117. 
 
 Trunk Lines, 71, Baltimore to 
 Parkersburg, New York to 
 Buffalo, New York to Sala- 
 manca, Philadelphia to Pitts- 
 burg, Their relation to Chi- 
 cago, St. Louis and Cincin- 
 nati, 71. 
 
 Trust law, anti, 263. 
 
 Tubs, galvanized iron. Effect 
 of rates on prices of Denver, 
 Kansas City, St. Louis, 51. 
 
 Turkeys, 19, Effect of rates on 
 prices' of, New York, 48, 
 49, Texas supply, 20. 
 
 U 
 
 Undue preference or advantage 
 
 forbidden, 277. 
 Uniform classification, 304-309, 
 
 403- 
 
 Unjust discrimination defined 
 and forbidden, 277. 
 
 " Unjust and unreasonable " 
 rates and a maximum rate, 
 277. 
 
 Union Line, origin of, 163. 
 
 Union Springs, Ala., Com- 
 plaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 296. 
 
 Unremunerative rates to pre- 
 serve industries, 136, to con- 
 serve other traffic, 226, 227. 
 
440 
 
 Index 
 
 Unrestrained competition, evils 
 of, 262. 
 
 Use, as determining rate, 151. 
 
 Utah, Beet sugar supply, 13, 
 42, Cantaloup, 25, Coal fields 
 of, 12, Lead, copper, and sil- 
 ver production, 11, Truck 
 farm products of, 9, Wool 
 supply from 10. 
 
 Value of service, rate basis, 
 
 231. 
 
 Values, as entering into fix- 
 ing of rates, 150, 221 ; Dol- 
 lar as measurement of, 375. 
 
 Vegetables, Canning of, 27, 
 Diversion en route, 193, Rate 
 structure, to conserve equi- 
 librium in common markets, 
 139, Rates, carload, on, 1 10, 
 revenue per ton-mile from, 
 229. 
 
 Vehicles, railway revenue per 
 ton-mile from, 230; lumber 
 rates and preservation of 
 Factories, 135. 
 
 Ventilator cars, 31. 
 
 Virginia, Grass-fattened cattle 
 of Southwest, 18, Oil wells 
 of, 13, Smithfield hams of, 
 18, Tobacco supply, 13, 41. 
 
 Virginia Cities' rate, 87, 88. 
 
 W 
 
 Wages and salaries, Manufac- 
 tures, 376, 380, Railroads, 
 218, 376, 380; Agriculture, 
 376. 
 
 Wagon Toll, 148, 216, 397. 
 
 War of 1812, Stimulus of, to 
 manufacture and exchange, 
 
 4- 
 Warehousing and elevation, 
 182-183; Cotton, 182, To- 
 bacco, 183. 
 
 Washboards, Effect of rates 
 on prices of, Denver, St. 
 Louis, 51. 
 
 Washburn, Elihu B., And the 
 differentials, 119, On dressed 
 meats and livestock rates, 
 130. 
 
 Washington, Apple crop, 23, 
 Coal fields of, 12, Lumber 
 production of, 112. 
 
 Water, delivery, 178. 
 
 Water-forced rates, 165, bear- 
 ing on Southwestern rates 
 complaint, 336, California 
 and Pacific Coast, 108, 109, 
 Denver, 84, New England 
 coast, 70, On grain transpor- 
 tation, 117, Southeastern 
 rate structure, 86, 87, on 
 jMississippi river points, 90, 
 Transcontinental rates, 104, 
 105, 106, 366, and Value of 
 competitive traffic, 225. 
 
 Water points. Basing points in 
 Southeastern rate structure, 
 87. 
 
 "Water" Stock, 232; exces- 
 sive rates due to, 246. 
 
 Water transportation. Fluctua- 
 tion in rates of, 117, 118. 
 
 Waters, Complaints before In- 
 terstate Commerce Commis- 
 sion on Hepburn Bill, 286, 
 railway revenue per ton mile 
 from, 230. 
 
 Watermelon, African origin of, 
 25, Crop, 25, Rate instance, 
 61-64. 
 
 Wages and rates, 64. 
 
 Weights, minimum carload and 
 estimated. Complaints be- 
 fore Interstate Commerce 
 Commission on Hepburn 
 Bill, 292. 
 
 Weight, Relation to rates, 43, 
 in early tariffs, 150-155. 
 
 West, Flow of grain from, 8, 
 Flow of manufactures to, 7, 
 
Index 
 
 441 
 
 Food products of, as erod- 
 ing channels of traffic, 7, 
 Growth of railroads towards, 
 5-6, Raw material of leather 
 from, 10. 
 West Virginia, peach crop, 24, 
 Iron and steel industries of, 
 
 ID. 
 
 Western Classification, 305, 
 307; Carload ratings in, 203; 
 Complaints before Interstate 
 Commerce Commission on 
 Hepburn Bill, 298. 
 
 Weymouth, Mass., arid ship- 
 building industry, 68. 
 
 "What the traffic will bear," 
 227, 231, 24s, 400. 
 
 Wheat, Back traffic, 120; Com- 
 modity rate, 1 17-126, Cross- 
 fertilization in, IS, Differ- 
 entials, ii8-iig, 198; Gulf 
 export of, 122, 123, Durum 
 wheat, 15, Gulf rates, 123, 
 Effect of rate on prices 
 of, New York, 49, Improve- 
 ment of the crop, 15, Ma- 
 chinery in handling, 16, 
 Railway revenue per ton- 
 mile from, 229; Rates and 
 "Societies of Equity," 356, 
 and prices, 126, 351, wheat 
 growing, care in, 15. 
 
 Wholesale and retail mer- 
 chants. As affecting cost of 
 distribution, 44. 
 
 Wichita, grain rate, 124, Com- 
 plaint before Interstate Com- 
 merce Commission on Cotton 
 piece goods rates, 289. 
 
 Wilmington, Commerce of, as 
 
 affected by rates, 358, Early 
 trade of food products for 
 European manufactures, 4. 
 
 Wine and brandy, railway reve- 
 nue per ton-mile from, 230. 
 
 Wire, copper, railway revenue 
 per ton-mile from, 229; 
 Effect of rates on prices, 51. 
 
 Wire and nails, railway reve- 
 nue per ton-mile from, 230; 
 Texas Railroad commission 
 and emergency rate on, 100, 
 loi. 
 
 Wisconsin, Corn canning, 27, 
 Egg shipments from 9, Grain 
 routes from, 8, Hogs, 18, 
 Railroad building, 241, To- 
 bacco supply, 13, Vegetables 
 from, 9. 
 
 Witnesses, Interstate Com- 
 merce Commission and, 265. 
 
 Woodenware, Manufactures of, 
 area of, 11. 
 
 Wool, area of production, 10; 
 effect of rates on prices of, 
 53 ; railway revenue per ton- 
 mile from, 229. 
 
 Woolen and worsted goods. 
 New England and manufac- 
 ture of, 68. 
 
 Wyoming, Cattle feeding 17, 
 Coal fields of, 12, Wool sup- 
 ply from, 10. 
 
 Yellow pine, And white pine, 
 13s, 136, Area of production, 
 II, Rates, New Orleans to 
 Chicago, 59. 
 
McPherson's The Working of the Railroads 
 
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 readable." — N. Y. Sun. 
 
 " As readable as a first-class novel. Not only a study of 
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 IMMIGRATION : And Its Effects 
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TWO BOOKS ON VITAL QUESTIONS 
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 By mail $1.92. 
 
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 ble people who wish to know, who wish to form good sound opinions, 
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 ing else better worth reading and study." 
 
 •'Admirable, exactly the sort of book needed. , .. Enlightened and 
 persuasive discussion of the negro problem in its present phases and 
 aspects. Not a dry history. Human, dramatic, interesting, absorb- 
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 philosophy wnich not only furnished interpretation of past events, 
 but offers guidance for the future. . . . Impartial and informing, . . . 
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 the American negro." — Chicago Record- Her aid. 
 
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 STUDIES IN 
 AMERICAN TRADE-UNIONISM 
 
 J. H. HOLLANDER and G. E. BARNETT (Editors) 
 
 Twelve papers by graduate students and officers of 
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STANDARD BOOKS IN ECONOMICS 
 
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 CLARK: THE LABOR MOVEMENT IN AUSTRALASIA 
 
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 Quarterly Journal of Economics :— A valuable work based upon investi- 
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 movement and estimates critically its significance. 
 
 HOLLANDER AND BARNETT: STUDIES IN AMERICAN 
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SEAGER'S JNTRODUCTION TO ECONOMICS 
 
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 ten what is probably the beet text-hook on the elements of economics that has yet 
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 ance of the writer is here most evident, for in spite of his Austrian training, he 
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 . . , The chapters on practical problems are models of exposition andargu- 
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 appears to us, equally suited to students on this and to those on the other side 
 of the Atlantic. . . . His treatise, indeed, seems to us to possess, as a 
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BIOLOGY AND ITS MAKERS By W. A. Locy. 
 
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