OLIN HE 2123 .P3z The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924087837880 Railway Rates CORRESPONDENCE BETWEEN CHARLES T. PAGE CHAIRMAN EXECUTIVE COMMITTEE THE LEATHER BELTING MANUFACTURERS' ASSOCIATION AND WILLIAM C. BROWN I i SENIOR VICE-PRESIDENT NEW YORK CENTRAL LINES JULY, 19 08 I'. ir; t 880 CORRESPONDENCE, betvireen CHARLES T. PAGE: Chairman Executive Committee The Leather Belting Manufacturers' Association and WILLIAM C. BROWN Senior Vice-President Ne^AT YorK Central Lines CONCERNING FREIGHT RATES THE LEATHER BELTIXG :\IANUFACTURERS' ASSOCL\TION. Concord, N. H., July 3, 1908. Mr. W. H. Newman, President X. Y. C. & H. R. R. R., Grand Central Station, X'ew York City. Dear Sir — It has come to our knowledge that the rail- roads east of the Mississippi River and north of the Ohio and Potomac rivers propose to advance rates from 8 to over 121/4 per cent on classes and commodities in this territory, which would put a very onerous burden upon the many shippers located therein, and we wish to protest against any such action upon the part of the railroads, and to ask the governing offi- cials of these roads to abandon these advances. We feel that they are uncalled for, and if put in effect will injure shippers and retard progress toward better conditions. The railroads have suffered, possibly not to the extent that the commercial interests have, and certainly to no larger extent, during the recent and present depressed business conditions. Some railroad rc])resciitatives state that an advance in the freiglit rates would mean quick resumption of business, but it does not seem very plausible that when business conditions are depressed and it is hard work for merchants and manu- facturers to do business with any profit, that all they would have to do would be to ask railroads to advance rates, and business would immediately resume its normal condition. Shippers cannot combine during dull times to advance prices on their commodities, and, while we believe that rail- roads should be allowed to have their associations in order to secure uniformity in rates and regulation of their roads, such associations should not be allowed to advance rates at such times as these without due consideration of the public. The railroads claim that their interests and the interests of the commercial community are identical, but they hardly carry out their profession when they secretly get together and try to advance rates at a time when merchants and manufacturers can least stand such advances. Yours truly, (Signed) Chas. T. Paoe, Chairman Executive Committee. ^m NEW YORK CENTRAL LINES New York Central & Hudson River R.R. Lake Erie, Alliance & Wheeling R. R. Co. Lake Shore & Michigan Southern Ry. Co. Chicago, Indiana & Southern R. R. Co. Michigan Central R. R. Co. Rutland Railroad Co. Lake Erie and Western R. R. Co. New York St. Ottawa R. R. Co. Cleveland, Cincinnati, Chicago & St. Louis Ry, Co. GkAiND CliNTK.VL STATION, New Youk, July L"), VMVo. Mil. Charles T. Page, Chairman, The Leather Belting Manufacturers' Assn., Concord, N. H. 'My Dear Sir — Your letter of July 3rd has, in the absence of Mr. W. H. Xewman, to whom it was addressed, been re- ferred to me ; and I beg to say in reply that the railroads are contemplating advancing freight rates, but no attempt has been made to make this advance secretly as you suggest. On the contrary, the matter has been the subject of discus- sion for the last two months, and the taking effect of the pro- posed increase has been deferred for the express purpose of giving full opportunity for all interests to be heard. The railroads claim, as you say, that their interests and the interests of the commercial community are identical, and certainly nothing can be more convincing evidence of this fact than the reflex effect on your business and that of almost every manufacturer and merchant in the United States of the conditions the railroads have been called on to face during the last eighteen months, which have almost destroyed their purchasing power, stopped nearly everything in the way of construction of new equipment and very greatly curtailed the maintenance and repair work on existing equipment. I desire briefly to call your attention to a few of the things I refer to above, which in my judgment make it absolutely ncce.ssar\' for the railroads tf) secure a reasonable increase in conipcnsalion for the service they render: In the first place, the average wage paid to railway em- ployes has, in the last ten years, shown an increase of from 33 1-3 to 50 per cent. The average' cost of almost every class of material that railroads consume in tremendous c[uantities each year has increased from 50 to 100 per cent. To illustrate, I desire to call your attention to the follow- ing increases which have occurred during the last ten years ; and a comparison of the prices in IS'.IS with those of 18TS would, with the exception of steel rails and possibly two or three other items, show a still further increase. During the ten years from 1898 to 190s there have been the following increases in the cost of material ; Angle bars ."")() per cent Gray iron castings ... 37.5 Malleable iron castings 21.3 Bar iron 4'3 . 8 " Cut nails 95.4 Wire nails 45.6 Cast-iron pipe ST. 8 " Steel rails 47 . 3 Track spikes 25.9 Cast-iron car wheels 25 Barbed wire 32 " Bridge timbers SO " Cross ties 7U Car siding 90 " Locomotives (is . 3 Box cars 72.8 Car axles 51 '' Locomotive steel forgings : Crank pins 105 Piston rods ,57 " Main and side rods 28 " 4 This list could be increased to include almost every item of material used by the railroads. Taxes have increased from an average of $179.00 per mile to an average of $349.00 per mile, or approximately 95 per cent. Do you know of any other business in the country which could sustain such tremendous increase in cost without some increase in price of the commodity produced? Generally, these increases have been gradual and have been offset in some measure by increased tonnage and increased efficiency, resulting in decreasing the unit cost of transporta- tion. During the last- eighteen months, however, the follow- ing tremendous increases have come in leaps and bounds, and the converging lines of cost and compensation in railroad operation, which for years have been steadily approaching each other, have been suddenly brought so close together as to alarm shareholders and investors ; and it is certain that, in order to pay fixed charges, taxes and operating expenses, with even a very moderate return to shareholders, there must be either a moderate increase in freight rates or a very substan- tial reduction in wages of railroad employes. Becoming effective during the early months of 1907, in- creases in pay of railroad employes approximating one hun- dred million dollars per annum were made. This increase was not voluntary on the part of the rafl- roads, but was the result of weeks of conference between representatives of the roads and those of the employes ; and finally of intermediation by Chairman Knapp of the Interstate Commerce Commission and Commissioner Neiil of the Bureau of Commerce and Labor. The settlement was on a lower basis than the men thought they should have and higher than the roads felt they could afford to pay ; but it undoubtedly averted a strike which would ha\ e cost the coninicrcc of the countr}' many hundred times the amount involved. P'ollo^ing this tremendous increase in "wases, legislation by Congress and by a number of the States, restricting die hours of labor of trainmen, enginemen, telegraph operators, block signalmen, employes of interlocking towers, and others, made a further annual increase of approximately -liv! 5,000,000 in the payrolls of the railroads of the country. By legislation passed at the last two sessions of Congress and by subsequent rulings of the Postmaster-General, reducing compensation for handling United States mail, approximately $lO,r)00,oO() per annum has been taken from the revenue of the railroads. In the closing hours of the last Congress the Employers' Liability Act, which applies only to railroad companies, was enacted. This law removes the last vestige of protection that was secured to the railroads by the Common Law against personal injury or death claims on the part of employes or their fam- ilies ; makes the railroads liable for injuries caused by fellow employes, even where every possible precaution had been taken by the company to secure safety, and the law also removes the bar to recovery of damages for accidents which result from the employe's own carelessness. Under the operation of this law, the loss hitherto placed by the Commion Law upon the individual — the employe — is transferred to the employer — the railroad. That it was under- stood the employer could not, under present conditions, bear the additional burden and that it was not the intent of the framers of the measure that the railroads should assume this burden is not 'only clearly indicated but distinctly stated in the following cjuotation from the report on the measure sub- milled by Senator J~)()lliver, from the Committee on Kducation and Labor, when it was imdel consideration In' ihe Senate: "It is no part of the purpose of this legislation to oppress or adil burdens to the business enterprises of the country, but rather to promote the welfare of both employer and employe li\- adjusting the losses and injuries inseparable from industry and commerce, to the strength of those who in the nature of the case ought to share the burden." Again, in speaking of the risk and danger involved, the report says : "Yet, somebody must assume these risks, and the tendency, where the industrial life of the community is thoroughly organized, has been to modify the doc- trine of negligence so as to allow the burden of acci- dent and misfortune to fall, not upon a single helpless family, but upon the business in which the workman is engaged; that is, upon the whole coniuiunity." No person can approximately estimate what this legislation will cost the railroads of the country. As an indication of the effect of an Employer's Liability Act, and in a direction of peculiar significance and vital im- portance to the members of your association, I note the follow- ing taken from a report made by a special correspondent of the "London Commercial Intelligence." Speaking of the effect of the recently enacted law, he says: "The metallurgic industry is being hard hit in this respect. I have before me a return showing the num- ber of cases brought before the courts for compensa- tion, and I see that in the metallurgic industry alone no less than 6,318 cases came before the courts of France during the three months ending December 31, 100?. The number of accidents causing death was 204, and in addition to the compensation awarded to those who recovered, life annuities were awarded to 19.2 widows, and annual allowances till of age, to no less than 308 children." This is the record for three months in one private industry, probably exempt from the prejudice which public service corporations in this country invariably encounter. That the enactment of this law will result in a most sub- stantial benefit to the employes of the railroads is best evi- denced by the untiring effort of the railroad men, strongly supported by the President, in securing its passage, and every dollar of benefit to the employe must be paid by the employer — the railroad. The only possible manner in which this burden can be placed where the framers of the bill distinctly stated it should rest — ''upon the whole community" — is by an increase in rates by the carriers commensurate with the new burden imposed. The effect on the railroads of the conditions I have attempted to describe is exactly the effect similar conditions would have on any other manufacturing or mercantile business. The rail- roads are subject to the same conditions and must retrieve losses in the same manner as any other business. Increased expense of production means increased prices for the article produced. The credit of the railroads has been injured largely by the growing and well-founded conviction on the part of the in- vesting public that on the present basis of cost of operation and compensation for service rendered, the permanent pay- ment of interest on bonds, to say nothing of a fair return upon the money invested by shareholders, is extremely un- certain. How well-founded this conviction was, and is, may be best illustrated by calling your attention to some illuminating but extremely startling figures. The tremendous increases in expenses which I have referred to in detail became effective at successive dates during the first half of th.e year 1907. I have looked up the statements of about 80 per cent, of the principal railroads of the country and find that, during the last half of the year (after all the in- creases had become effective), while gross earnings of the rail- roads increased $57,-±] 3,078 over the same period of the pre- ceding year, their expenses increased $80,235,823 ; and, despite the tremendous increase in tonnage handled and gross earnings, net earnings decreased $22,822,715. This showing was not the result of any depression or falling off in tonnage. Traffic was moving in unprecedented volume. Furthermore, the con- dition which these figures reflect is even more serious than is indicated on their face. There is hardly an operating official on any of our rail- roads who did not recognize the fact very early after the taking effect of these large increases, that the most drastic methods of retrenchment and economy would be necessary to offset in part the sudden and tremendous increase in operating ex- penses, and many of the economies adopted during the last six months of 1907 passed far beyond the line which divides true from false economy. Yet, in spite of these extreme measures of retrenchment, the startling loss in net revenue resulted. Statements of earnings and expenses issued by the principal roads in all sections of the country for the six months ended December 31, 1907, show that operating expenses increased 60 per cent, more than gross earnings, indicating that no increase in volume of business will make good the tremendous increase in expenses, and demonstrating clearly that there must be secured an increase in net earnings, by a moderate increase in freight rates, or a decrease in expenses by a substantial reduction in pay. During the first quarter of this year the New York Central Lines, traversing, as they do, the most populous and most prosperous section of the United States, have but little more than earned their lixed chari;es, making scant provision for dividends and none whatever for betterments. Two of them — the Cleveland, Cincinnati, Chicago & St. Louis, and' the Lake Erie & Western — located in the garden of the United States, and serving some of the largest and most important cities in the country, have passed from the list of dividend-paying roads. The reports from hitherto prosperous railroads located in and serving every portion of the United States show that this condition is imiversal. Dividends of the most prosperous railroads are being re- duced, and on others entirely suspended. Other roads, unable to earn their operating expenses and fixed charges, are being placed in the hands of receivers. The first effect of this condition was tO' close the usual sources from which large sums of money have heretofore been readily available for necessary improvements by the sale of long-time, low-interest bearing bonds, and to force the rail- roads to resort to short-time notes bearing high rates of inter- est, absorbing all the available funds of the banks, making it difficult, and in many cases impossible, for other business enterprises to borrow money at all, and forcing interest rates for all to an almost prohibitive figure. This condition will be repeated the moment the railroads attempt to resume the purchase of equipment in large quan- tities, or to prosecute the great work of improvement, which was interrupted by the panic, unless the credit of the roads can be restored, enabling them to sell securities of long tenor at a reasonable price and bearing a reasonable rate of interest. It is, perhaps, unnecessary to say that this resumption can never come, except by such restoration of credit ; and I do not believe such restoration of credit can be brought about save by an increase in railway rates, which will promise a revenue sufficient U> make railway securities a reasonably dependable investment. 10 This was the c-H\-cl of ihcsc suildon and trcnicnduus iii- crcasc'S in fxpciisrs vn IIk- railruads. Consider -for a nioniciit tlie effect upon nearly ever)- otlier class of business in the country. During the }ear li)0: the New York Central Lines paid out to car and locomotive manufacturers in the United States more than $:!1,()00,()0(), almost every dollar of which was eventually paid out for labor in some form or other. During the year 19()S, with the exception of a compara- tively small number of locomotives, not a dollar will be ex- pended by these lines for this purpose, and this record is being repeated by almost every railroad in the country. Xearly $11,';(M),000 was expended by these lines during the year liHiT for rails and ties. During the present year less than half this amount will be thus expended. During the yeaf 1907, approximately $3-.^000,000 was ex- pended by the New York Central Lines alone in reducing grades, improving alignment, providing second, third and fourth tracks, and other necessary additional facilities. At the present time, from the Atlantic to the Pacific, and from the Gulf to the Great Lakes, -work of this character is almost entirely suspended. If the railroads cotdd resume the purchase of equipment and material and the great and vitally necessary work of improving their facilities, the present depression would, iii my opinion, vanish almost in a day ; and the re-employment of hundreds of thousands of idle workmen would, by their pur- chasing power, start running to their capacity thousands of idle manufacturing plants all over the land. I believe these results would very speedily follow the taking effect of the suggeste;d increase in freight rates. The effect of a moderate increase in railroad rates, accepted by the public and approved by the Inter,state Commerce Com- mission, in restoring confidence in railway investment, Vv'ould 11 do more to put in motion the wheels of industry and start the country upon a new era of prosperity than anything else that could possibly be done. I sometimes think the question of freight rates and their effect on the price of commodities to the consumer is not very accurately known. We are prone to jump at conclusions in- stead of carefully analyzing figures and thus reaching con- clusions that are exact. In order to reach an absolutely fair conclusion, the trans- portation charge must be followed to its last analysis, which is its application to, and effect upon, the individual consumer. The whole fabric of freight rates, from the first shipment of raw material, is simply a transfer or carrying forward of freight charges until it reaches the final purchaser or con- sumer, and he pays the freight. When the New York Cen- tral Lines paid the various locomotive and car manufacturing companies approximately $31,000,000 for equipment and mate- rial furnished in the year 1007, the railroad paid every farthing of freight that had accrued on every pound of iron and steel from the time the first pick was struck into the ground that mined the ore ; it paid the freight on every foot of lumber from the time the axe was struck into the tree from which the lumber was cut, and it paid the freight on every dollar's worth of provisions used and clothing worn by the employes of these companies and their families while working on this equip- ment. When the New York Central Lines paid for the 3,000,000 ties and approximately 1. So, 000 tons of rail used in 1907, it paid every penny of freight that had accrued on the ties and the rail from the time the one was standing timber and the other was iron ore in the mountains of Minnesota. The rail- road fed and clothed the workmen and their families and paid the freight on the provisions used and clothing worn by them from the time the tree was felled in the forest and the ore 12 dug from the ground until, passing through the thousands of hands, the ties and rails were finally laid in the track. The consumer buys what his family consumes — flour, butter, meat, sugar, tea, coffee and the like — by the pound. The clothing they wear, including hats, shoes, boots, under- wear, etc., is purchased at retail. Let us consider for a moment what the freight rate means to the consumer and what an increase of ten per cent would signify to him. The New England States are very largely interested in the manufacture of cotton and woolen cloth, knit goods, worsteds, flannels, boots, shoes, underwear, hats, etc. The freight rate from Boston rate points, which include Cam- bridge, Lynn, Salem, Lowell, Lawrence, North Adams, Man- chester and other places in that territory, on knit goods, woolen cloth, worsteds, flannels, etc., to Buffalo, N. Y., is 44 cents per hundred pounds ; to Chicago, 70 cents ; and to St. Louis, 83 cents ; making the freight rate per yard of cloth, from one-third to two-thirds of a cent per yard. An increase of ten per cent would add from thirty-five one-thousandths to sixty-six one-thousandths of a cent a yard to the cost of the cloth at the points named. Allowing ten yards of cloth to a woman's suit, the freight on the material used in making the suit would amount to three and fifty-two one-hundredths cents from New England to Buffalo, five and six-tenths cents to Chicago, and six and two-thirds cents to St. Louis. A ten per cent increase in the freight rate would add to the cost of the dress at Buffalo thirty-five one-hundredths of a cent, at Chicago fifty-six one- hundredths of a cent, and at St. Louis sixty-six one-hundredths of a cent. For a suit of men's clothing or the necessary cloth to make such a suit, the freight rate from New England to New York City is nine-tenths of one cent ; to Buffalo, two and sixty-four one-hundredths cents; to Chicago, four and two-tenths cents; 13 and 111 St. r.Duis, abmil five cents. A ten )iit cent increase in the freiL;lit rate \\()uUl add tu the cn'-t of tlie .suit at New York Cit\', nine onc-liundredths of one cent; at JSuffalo, twent\-six one-hundredths of to $:!.()() retail, from New England points to New York amounts to approximately fifteen one-hundredths of one cent; to Buffalo, forty-four one-hundrcdths of one cent; to Chicago, seven-tenths of a cent ; and to St. Louis, eight-tenths of a cent. An increase of ten per cent would add to the cost of the suit of underwear at New York City, fifteen one- thousandths of a cent; at lUifTalo, fort\-four one-tliousandths of a cent ; at Chicago, seven one-hundredths of a cent ; and at St. Louis, eight one-hundredths of a cent. The rate on calicos and cotton piece goods selling at from ten to fifty cents a 3'ard from New England points to New York City is 13 cents per hundred pounds; to Cufifalo, 33 cents ; to Chicago, ~>'2 cents ; and to St. Louis, 61 cents per hundred pounds. This ecjuals approximately twentv-six one- thousandths of a cent per _\ard at New York; sixty-four one- thousandths of a cent at IWiffalo; one-tenth of a cent at Chi- cago, and at St. Louis, one-eighth of a cent. Allowing ten yards of cloth to a dress, which would make its retail value from $1.00 to $-"i.OO, a ten per cent increase in the freight rate would add to the cost of such a dress at New York City, twenty-six one-thousandths of a cent ; at Bufifalo, sixtv-four one-thousandths of a cent ; at Chicago, one-tenth of a cent ; and at St. Louis, one-eighth of a cent. The rate on leather, felt and rubber boots and shoes, retail- ing at from $3.00 to $5.00 per pair, from New England points to New York City, is 25 cents per hundred pounds; to Buf- falo, 44 cents ; to Chicago, 70 cents ; and to St. Louis, S3 cents, amounting to from one-half to one and two-thirds 14 cents per pair. A ten per cent increase in the freight rate would add to the cost of a pair of boots or shoes at New York, five one-hundredths of a cent ; at Buffalo, eight and one-half one-hundredths of a cent ; at Chicago, fourteen one- hundredths of a cent; and at St. Louis, sixteen one-hundredths of a cent per pair. The freight rate on hats, in boxes, from New England points to New York City is 'M cents per hundred pounds, or approximate!}' seventeen one-hundredths of a cent each. To Buffalo, it is -L4 cents per hundred pounds, or twenty- two one-hundredths of a cent each. To Chicago, '^0 cents per hundred pounds, or thirt}'-five one-hundredths of a cent each. To St. Louis, 8u cents per hundred pounds, or forty- one one-hundredths of a cent each. An increase of ten per cent in the freight rate on these hats, selling at from $2.00 to •$■"1,110, would add from seventeen ofie-thousandths of a cent to the cost of the hat at New York City to forty-one one- thousandths of a cent at St. Louis. Do you not think that either the manufacturer or consumer would verv gladly accept this almost inconceivably small addi- tion to cost if as a result of such small increase in rates, equi- tably applied to the freight traffic of the country, the railroads could again resume their tremendous purchases of material and equipment, enabling the large locomotive and car manu- facturing companies, the rolling mills, the iron mines, the coal mines, and other industries (which to a very great extent are dependent on the railroads' purchases), to resume opera- tions, re-employ millions of men who are out of employ- ment, and make this vast army of men now idle and with no purchasing power whatever, patrons of the retail estab- lishments in the thousands of communities in which they live ; enabling these establishiuents, in turn, to buy knit goods, cloth- ing, cotton and woolen underwear, sweaters, machinery, with the leather belting to run it, and the thousands of other prod- ucts of the manufacturing industries of the nation. 15 The freight on a refrigerator, such as is used by the ordi- nary family, from points in Indiana and Michigan to Boston, is approximately 70 cents; an increase of ten per cent would add seven cents to the cost of the refrigerator, which sells for from $15.00 to $50.00 delivered in Boston. The rate on butter and eggs from points in eastern Iowa to Boston — a distance of approximately 1,350 miles — is 90% cents per hundred pounds. On dressed poultry from the same points to Boston the rate is $1,031/2. The eggs are sold to the consumer by the dozen and the other commodities by the pound ; and the consumer pays every farthing of freight that has accrued from the time the egg is laid, which he buys in the "original package," or as dressed poultry, or from the time the cow is milked from which the butter is made. An increase of ten per cent would add nine one-hundredths of one cent per pound to the price the consumer pays for butter and eggs, and it would add one-tenth of one cent per pound to the cost of dressed poultry, for which he pays from 20 to 30 cents per pound. The rate on flour from Minneapolis to Boston and other New England points, in car loads, is 27 cents per hundred pounds, or ISy^i cents per fifty-pound sack. The flour is sold to the consumer at approximately $1.85 per fifty-pound sack. An increase of ten per cent in freight rates would add but one and three-tenths cents to tlie price of a fifty-pound sack, or a little more than two one-hundredths of one cent per pound. The rate on dressed beef from Chicago to Boston and New York is 45 cents per hundred pounds. The average price of this beef to the consumer is approximately "25 cents per. pound. A ten per cent increase in freight rates would add less than five one-hundredths of one cent per pound. The freight rate on a harvester for three hundred miles, 16 boxed and crated, by the carload, as they are shipped, would be $1.76. A ten per cent increase in this freight rate would amount to about seventeen and one-half cents. The machine sells for $130.00. The freight rate on a cream separator — by the carload — ■ from Bellows Falls, \'t., to Chicago, 111., is approximately 12 cents ; to ^Minneapolis, 67 cents ; to Kansas City and Omaha, 89 cents ; to Montreal, 29 cents. One of these separators retails for from $15.00 to $60.00 each. An increase of ten per cent in the freight rate would add from two and nine- tenths cents to eight and nine-tenths cents to the price of the separator which the purchaser would have to pay. The freight on a mower, weighing from 750 to 900 pounds and selling for about $15.00, from Poughkeepsie to Chicago is approximately $2.06; and to points in Central Ohio from $1.10 to $1.50 each. A ten per cent increase would add ap- proximately 20 cents to the price of the mower at Chicago ; 32 cents at Minneapolis; 39 cents at Kansas City and Omaha; and from 14 to 16 cents at points in Ohio. AA'^ould the manufacturer ^\■l^o makes these implements, would the farmer who buys and uses them, object to this very moderate addition to the cost if, by reason of it, thousands of well-paid, steadily employed consumers were added to those who bu}' the grain and other products of the nation's farms. This list could be enlarged to embrace every commodity that railroads handle, and the same process of analysis would in every case reach substantially the same result. I take it that no one line of business is likely to suffer in much greater degree than the manufacturers of leather belting in a period of depression such as this country is now going through. The railroads are very large purchasers of your product for their thousands of large car and locomotive repair shops, and the great car and locomotive manufacturing concerns are also extensive patrons of )'our industry. 17 Upon the ability of tlie railroads to earn mone)- to keep their own shops running and to purchase cars and locomotives, thereb\' keeping the car and locomotive manufacturing plants running, depends to a considerable extent the prosperity of your business. Of course, the effect goes far beyond the limits above sug- gested, because as these car and locomotive shops shut down and discharge thousands of employes, the decreased purchas- ing power, on account of this army of men being thrown out of work, stops the machinery in thousands of other factories, thus reducing or entirely suspending purchases by these fac- tories of the belting which your manufactories produce. Without attempting to unduly minimize the effect of freight rates in }-our particular line of business, I desire to submit the following figures. Leather belting sells by the foot at from 29 cents to $.5.18 per running foot for single thickness, varying in width from four inches up to seventy-two inches. I get these figures from the. prices our companies pa}- for belting of various widths, of which we are very large purchasers and users. The freight per hundred pounds from New York and Boston to St. Louis is 59 cents, which figures out approxi- mately from one-tenth of a cent to one and eight-tenths cents per running foot, according to the width. An increase of ten per cent in the freight rate would add from one one- hundredth of a cent to eighteen one-hundredths of a cent per foot of belting, Avhich sells — as above stated — for from 29 cents to $5.18 per foot. The rate from New York and Boston to Chicago, the great distributing point for the West and Northwest, is 50 cents per hundred pounds (or from eight one-hundredths of a cent to one and four-tenths cents per running foot). An increase of ten per cent would add from eight one-thousandths to foiu-teen one-hundredths of one cent per running foot, accord- Liiy to the w id til, to tile cost iif the bcltini;- at CIiicn,t;o. The rate from Xew York ami llo.ston to iiulianap(jlis, Iiul., and Cincinnati, Ohio, is, respectively, -17 and -11: cents per hundred pounds, or from seventy-eight one-thousandths of a cent to one and four-tentiis cents at Indianapolis, to seven one- hundredths of one cent to one and three-tenths cents per run- ning foot at Cincinnati. An increase of ten per cent would add from eight one-thousandths to fourteen onc-hundredths of a cent per running foot to the cost of belting delivered in these cities. In this connection it may not be out of place to say to ^•ou that the Xew York Central Lines, under normal condi- tions, arc purchasers of leather belting to the extent of approximately ^;.">,(I00 per annum; and in going over our pur- chases for the year lS!)i) as compared with those of 1!H)7 (our records do not go back farther than IS!)!)), I find that the prices were as noted below for the sizes of belting most com- monly used : NET PRICE OF .SINGLE THICKNESS LEATHER BELTING. .'^ize 18!)!) 1!)()7 Per cent of Increase. -1 inch 23.33c 28.S0C 23.4 .") " ■iO..-)()c 36.00c 22.0 6 " 3(!.00c 43.20c 20.0 t 4-M-2C .50.40c 19.6 !) " .-4.11c 64.80c 19.7 1-? ■• 71.0:ic 86.40c 20.1 l.T " 78.1-.'c 93 . 60c 19.8 ■t— 1 83.!)2c $1 .008 20.1 . ^r, '■ DO.lOc .080 19.8 ifi '■ 95. 91c .l.-)2 20.1 17 '' $1, .(m .324 19.8 18 " 1. 4)71) , 296 20.1 19 Size 1899 i9or Per cent o Increase. 19 inch $1,140 $1,368 20.0 20 " l.lii!) 1.440 20.1 21 " 1.260 1.512 20.0 22 " 1.318 1 . 584 20.1 23 " 1.381 1.G56 20.0 24 " 1.439 1.T28 20.1 72 " 4.316 r, . 184 20.1 This equals an average increase in price for the sizes shown of 22 cents per running foot, or approximately 21 per cent ; and, taking all sizes of belting manufactured, the increase in price for this period of eight years averages 24 cents per nmning foot, or 21 per cent. In view of the fact that the railroads paid the leather belt- ing manufacturers from five and five-tenths cents to eighty-six cents more per running foot in 1907 than they did in 1899, is it unreasonable for the railroads to ask the belting manu- facturers to pay an additional freight rate of approximately eight one-thousandths of one cent to eighteen one-hundredths of one cent per running foot, according to the width, for the transportation of this commodity? Do 5'ou not think the manufacturers of leather belting embraced in your association could well afford to stand these almost infinitesimal additions to the freight rate if such an increase, fairly distributed over the commodities handled by the railroads of the United States, would result in , setting in motion the millions of belts now standing idle in factories all over this broad land, and the re-employment of the millions of men who are now out of work? I have written you at considerable length because — instead of attempting to raise freight rates secretly, as vou suggest — the railroads are anxious to give their side of the question the utmost publicity. 20 The question of an increase in freight rates in its bearing on, and the powerful influence it will exert either to hasten or retard the return of prosperity, is one of the most impor- tant before the people of this country to-day. It deserves the most careful, unprejudiced study and investigation at the hands of every member of your Association and all other busi- ness men in the country. \Mth such an investigation, care- fully and conscientionusly made by members of your Associa- tion and kindred organizations of business men of the country, the railroads can, in my opinion, submit the facts and with full confidence await the decision. Without such study and investigation, no man or body of men should undertake to influence such decision. The ques- tion reaches beyond the manufacturer or the jobber, to the home and hearthstone of 1,500,000 employes of the railroads of our country; it extends to and vitally affects the hundreds of thousands of workmen employed by the industries which supply the railroads of the country with the Billion and a Quarter Dollars' worth of material consumed annually, and this gives it an importance and significance that can not be measured in dollars and cents. Yours very truly, (Signed) W. C. Brown, Senior \"ice-President. NEW YORK CENTRAL LINES. Grand Central Station, New York, July 15, 1908. Mr. Charles T. Page, Chairman, The Leather Belting Mfrs.' Assn., Concord, N. H. My Dear Sir: Referring to my letter of even date, in 21 ail, rf|)1v tu yours of Jul)' 3(1, addressed to Prcsidenl Xewma relative lo the proposed advance in ffei.^lU rates: As this sul)ject is one of very i^Tcat interest to the public, I have taken the liberty of furnishing a cop\- of _\our letter to Mr. Ne^vman, together with copy of my reply, to the press, which I trust will meet with \our concurrence. Yours very truly, (Signed) W. C. T.rown, Senior Vice-President. THE LEATHER BELTIN(; MANUFACTURERS' ASSO- CIATION. Concord, N. H., July 22, 1908. Mr. W. C. Brown, Senior Vice-President, New York Central Lines, New York City. Dear Sir — I am in receipt of your letter of July 15th, together \^ ith a copy of the letter which you gave to the press. I have also received clippings of the correspond- ence from two or three New York papers. It is very unusual for one to make public private correspondence without the consent of the other party. In this instance, no especial harm has been done. I can see that it gave you a chance to make statements which you are glad to have published. Before writing your president, Mr. Newman, I had read your remarks delivered at Chicago, May 15th, and freely admit that from your standpoint you make a good argument. Viewed from the shipper's standpoint, if you will allow me to say so, your conclusion that the "customer will pay the freight," at least so far as the leather belting business is concerned, is fanciful and inaccurate. -29 As far as it is possible for an outsider, I think 1 appre- ciate the present difficulties under which railroads operate ; but I can conceive of no good reason why they should be singled out and made the recipients of special favors when every other business is in like manner embarrassed by condi- tions which at present prevail. You compare the prices of leather belting in 18IJ!) with those of 1!>0? and find that there was an advance of a little more than 20 per cent. You fail to note that there has been since then a decline of just about 20 per cent. An advance in freight rates will entail an extra burden upon belting manufacturers without any possible relief in the way of an advance in the price when selling goods. The gen- eral rule in 'the belting business is that manufacturers of belt- ing pay freight on incoming goods and deliver the product to customers. You see how mistaken you are in your con- clusion that the customers will pay for the added cost. The fact that the increase in freight on one foot of belting is infinitesimal does not relieve the situation. In the aggre- gate the added cost, if freight rates are advanced, would be a very considerable amount, a large part of which would have to be borne by the manufacturers of belting. The proposed advance in freight rates is deemed by the members of our association inexpedient and decidedly untimely under existing conditions, at least so far as I have been advised of their views. Yours truly, (Signed) Ch.\s. T. Pace, Chairman Executive Committee. 23 NEW YORK CENTRAL LINES. Grand Central Station, New York, July 21), 1908. Mr. Charles T. Page, Chairman Executive Committee, The Leather Belting Manufacturers' Association, Concord, N. H. My Dear Sir — I am in receipt of your favor of the "J^d, and in reply beg to say it was my intention to ask your per- mission in advance to publish your letter, with my reply, but in some way it was overlooked. However, as the matter is of great public concern, and not in a strict sense private cor- respondence, I trust the oversight will be pardoned. I think you are under a misapprehension in regard to the decline of 20 per cent in prices of leather belting since last year, as stated in your letter. According to prices recently paid by our purchasing department, there has been a decline of less than 6 per cent in the cost of belting used by our lines. Of course, the decline is brought about by the tremendous falling off in demand for leather belting ; and this falling off in demand is the direct result of the closing down of the thou- sands of manufactories all over the country, which, in my opinion, would have continued running if the purchasing power of the railroads had not been almost destroyed by the condi- tions recited in my letter to you of July 17th. I believe that with a moderate increase in freight rates, the demand for leather belting would increase so that within six months from the date of the taking effect of the increase the members of your association could restore the decline in price, whatever it has been. I can not agree with your statement that my conclusion that the consumer pays the freight and will pay any addition that may be made to the freight rate "is fanciful and inaccu- rate." 34 In ISO!) our company paid for four-inch single-thickness leather belting 23.33 cents per running foot. The freight per running foot on this four-inch belting, by the carload, to St. Louis, which is the farthest point on our lines to which it could possibly be shipped from Boston, amounts to about two- tenths of one cent. In 190T, for the same size and quality of belting, we paid 2S,80 cents, an increase of 5A7 cents per running foot, the freight rate remaining the same. An increase of 10 per cent in the freight rate would add two one-hundredths of one cent per running foot to the cost of the belting. The price of six-inch belting advanced during this time from 36 cents to 43.2 cents, or 7.2 cents per running foot. No change occurred in the freight rate, which is three-tenths of one cent per foot from Boston to St. Louis. The additional cost of the belting by a 10 per cent increase in this rate would be only three one-hundredths of one cent per foot. The increase in price per foot of nine, twelve and four- teen-inch belting during this period was 10.69, ]1.47 and 16.88 cents, respectively. The freight rate on this belting is approx- imately four and one-half tenths of one cent per running foot for the nine-inch, six-tenths of a cent for the twelve-inch and seven-tenths of a cent per foot for the fourteen-inch, which is the same rate as was in efifect in 1S99. An increase of 10 per cent would add four and one-half one-hundredths of one cent, six one-hundredths of a cent and seven one-hundredths of a cent, respectively, to this rate. Xow, if the belting manufacturers did not include the freight charge in the price of this belting — ranging from two- tenths of one cent to seven-tenths of one cent per running foot for a distance of 1,230 miles — our railroad, as a purchaser of leather belting to the amount of $75,0(10 per annum, would be perfectly willing to have it added ; and, as a large user of leather belting, our lines will be perfectly willing to have an 25 a\cra,!4C of rr(_i)n two oiie-hundrcdtlis of one cent to seven (.me- hundrcdths uf uiie ccnl ])cr running" foot — which represents an increase of 10 per cent in tlie freight rate — added to the price of belting of the widths specified, which would relieve the belt- ing manufacturer entirely of the burden, so far as the finished product is concerned. The shops of the Lake Shore & Michigan Southern Rail- way Company, at Elkhart, Ind., are equipped with 13,288 running feet — or practically two and one-half miles — of vari- ous widths of leather belting, which cost approximately ^fi.S?!."). The freight rate on this belting, from Boston to Elkhart, a distance of 037 miles, amounted to $18.37, figured on the car- load basis, or $2.3.73 figured on the less-than-carload rate. An increase of 10 per cent in the freight rate would add $1.83 to the cost of two and one-half miles of belting, if figured on the carload rate, and $2,37 if figured on the less-than-carload rate. We have many shops equipped with a similar amount of belting, and, of course, it goes without saying that in a trans- action involving more than six thousand dollars a difference of either $1.83 or $2.37 would cut but little figure to the maiui- facturer or consumer. Does not this thought appeal to you, however, that there is a very strong probability — I believe a certainty — that an addition of this character to the freight rates of the country generally, or to such rates as could bear such an increase with- out any hardship whatever either to the manufacturer or con- sumer, will start up the thousands of manufactories now standing idle, thus making an increasetl demand for the prod- ucts of the leather belting manufacturers all over the country, and giving employment to hundreds of thousands of men now idle, who would at once become purchasers of the product of New England's mills if they could secure steadv, well-paid employment? In this connection I want to say that no general or hori- zontal increase in freight rates has been considered by the railroads, nor has any definite per cent of increase been decided upon. I have used ten per cent in what I have written merely as an illustration to show the effect of such an increase if applied to the commodities referred to. In your letter you sa)- that, as far as an outsider can, you appreciate the present difficulties under which railroads operate, but that )-ou can conceive of no good reason why they should be singled out and made the recipients of special favors when every other business is likewise embarrassed by the conditions which at present prevail. You entirely miss the point which I have tried to emphasize in all that I have said on this important question, viz. : The real question is not whether the present rates are sufficiently profitable in times of restricted business, but whether they are too low to be reasonably compensatory under ordinary normal business conditions. In other words, has the cost of operation so increased, despite all the various economies, that it is no longer possible to carry freight at a reasonable profit at existing rates, no matter how heavy the tonnage may be? I would respectfully call your attention to page T of my letter, where I give the earnings of 80 per cent of the prin- cipal railroads of the country, which shows that during the last half of liJO?, when tonnage and earnings were vastly in excess of those of anv similar period in the history of the railroads, with an increase in gross earnings of $57,41;!, 078 over the same period of the preceding year, there was an increase in operating expenses of $sO/i.'].'),.S"^.'l, making a loss in net earn- ings for the six months in question of almost $'i:'>, 000,000. Is there any business in the world showing such a large increase in gross earnings, and at the same time such a start- ling dccri'asr in net earnings, tliat would not at once take very positive steps to correct such a disastrous condition? 27 What we all ought to seek very earnestly to accomplish is to secure the return to this country of the abounding pros- perity of the last five years. If the suggested increase in rates is going to make conditions worse, the railroads certainly do not want it. If, on the other hand, such increase in freight rates will, by the restoration of credit, enable the railroads to resume their tremendous purchases of material and equipment and the prosecution of necessary improvements and exten- sions, and thus exert a very powerful influence in restoring prosperity, we all want it — shippers as well as railroads. I have recently made a very thorough analysis of the amount of equiprnent and material purchased by the New York Central Lines during the year li)()7, in order to determine what such articles would have cost if the same basis of prices in effect in 1807 had prevailed last year ; and beg to submit the following figures for your information: Increase in Cost in 1907. Cost Over 1897 Prices. TRACK material: Cross ties, rails, angle bars, spikes, track bolts, frogs and switches $10,510,000 $7,117,018 SHOP AND MISCELLANEOUS MATERIAL: Lumber, castings, nails, rivets, bolts, nuts, washers, forg- ings, brass and copper goods $13,670,000 $5,683,650 NEW equipment: Cars and locomotives $31,000,000 $12,764,700 Total $64,180,000 $25,565,368 The above figures do not covel- a number of articles used by our lines, such as fuel, oil, waste and other miscellaneous 28 supplies. Including these items, the sum we were compelled to pay for equipment and material purchased in 190? amounted to a total of approximately $31,375,:i(icS more than the same articles would have cost on the basis of prices in effect in 1897. If our payrolls for 1907 had been upon the basis of wages paid in ]8i)7 we could have employed the same number of men in the same positions for about $"^3, '291, 214: less than it cost us under the increased wage schedule. Increased cost of material and higher wages paid to em- ployes, therefore, increased the cost of operation of the New York Central Lines alone approximately $54,666,582 for the year 1907 over the amount it would have cost to handle the same tonnage had wages and prices of material been the same as in 1897 ; and, as the last large increase in pay and added expense caused by national and state legislation did not be- come fully effective until the last half of the year, the above figures do not tell the whole story. This vast sum, however, is $8,000,000 more than the total fixed charges of all the roads comprising the New York Cen- tral Lines for the year 1907, including interest on bonds and other outstanding obligations, rentals of leased lines, taxes, and all other capital charges. Your Association is composed of business men. The aver- age American business man is a fair man ; and these figures, together with the facts which they express and the condition which they reflect, must appeal to them. If you accept my statements as accurate, can you reach any conclusion other than that the railroads are entitled to a fair increase in freight rates? If you doubt them, can yon do less than to investigate and either confirm or disprove them? In this investigation I beg to offer you every facilit}- at our command. Yours very truly, (Signed) W C. Brown, Senior Vice-President. 29 NEW YORK CENTRAL LINES. Grand Central Station, Niiw York, July Jl, liMiy. Mr. Cii.VRLics T. PAt;E, Chairman Executive Coniniittee, Leather Belting Manufacturers' As.sociation, Concord, N. EL ]\Iv Dear Sir — After having mailed my letter of the 29th, and, upon re-reading it, I fear, on account of the extremely small fraction of a cent involved in the transaction, you ma)' regard my suggestion that the increase of 10 per cent can be added to the price at which the manufacturers sell the belting as trifling or sarcastic. Above all things, I want to a\'oid anything of this charac- ter in the discussion of this very important question. I realize that in the manufacturing and mercantile business in these days of strenuous competition the profit is frequently counted in fractions of cents, also that in the case of leather belting — where an increase of 10 per cent in the freight rate would amount to only two one-hundredths of one cent per running foot — it would require fifty feet to bring this increase up to one cent; but in buying belting, as we do, by the thou- sands of feet, it seems to me that it would be entirely prac- ticable to include the original freight rate and add the amount which may be involved in any increase in the freight rate that may be finally decided upon. To the railroads, small as the fraction is when measured by lineal feet of belting as I have done, in the aggregate it means a great deal. A readjustment of freight rates, involving a reasonable increase applied to such articles and commodities as can stand it, \\ithout any appreciable hardshiii either to manufacturer, merchant or consumer, means the difference between grinding economy and a fair degree of prosperity. 30 It means the difference lx't\\ eon closed shups and susjiended iiiiprijvenients, and the resumption of im[)rovements with the ability to resume the lar^e purchases of material and equip- ment, giving" full employment to labor and furnishing improved transportation facilities, which, within a very short time, the commerce of the country is going to be demanding more in- sistently than ever. Yours very truly, (Signed) W. C. Brown, Senior Vice-President. ni JAMES KEMPSTEB PRJHT, N.