Freight cost

“ But even assuming the final cost to follow the range of transportation charges closely, is it not evident that, so small relatively are many freight charges by comparison with other costs of production, that consumption is not proportionately affected by their movement one way or the other? ”

“ The cost of service should invariably be an important factor of a rate. Railroads should not be compelled to carry any commodity for less than the actual cost of moving it, nor should rates be fixed greatly in excess of such cost of service. The carload should be the unit of wholesale shipments. Since it costs the railroad company as much to move ten carloads of freight which belong to one shipper as it costs to move ten carloads belonging to ten shippers, no advantage beyond the general carload rate should be given to the large shipper. ”

“ The only course then left to the railroad is to take the freight at whatever rate the shipper can send it with profit to himself and hope the whole of its traffic will amount to a greater sum than the cost of the service. The railroad may thus for years continue carrying freight at rates which do not cover the cost of the service, while the shipper will immediately stop his freight as soon as its transportation ceases to be remunerative to him. The rates can in no case be more than the value of the service, but they may be less than its cost. ”

“ If American labor is more expensive, it is also more efficient than labor is elsewhere.
It must also be considered that the average haul in Europe is much less than the average haul in the United States. It has always been maintained by the railroad companies, and very justly, too, that the terminal charges are as important a factor of freight rates as is the cost of carriage. ”

“ The commodities in the United States which [Pg 373] contribute principally to the long haul are raw products. The universally low rates of these commodities greatly lower the general average. In Europe, on the other hand, manufactured goods predominate as long-haul freight, and based upon increased risk and increased cost of carriage, considerably swell the general average of freight charges. ”

“ It costs no more to develop the average stream than to build a railroad of the same mileage, but the improved stream carries 125 times as much freight per year as can be carried by rails, and at one-sixth the cost. Some 75 percent of the total freight commodities originating on the traffic lines in the United States consist of heavy raw materials, the staple productions of the farms, the forests, the mines, and the live stock ranges of the interior. These are commodities where economy of transportation is a prime essential to production. ”

“ If an average freight-charge be taken for different countries of the world, it is found that our net railway receipts are among the highest, and as the volume of traffic per mile is greater than in any other country, the net income ought to be proportionately large, but the want of system in laying out the lines, and the exorbitant cost of land and preliminary expenses, have so inflated the capital accounts that no considerable cheapening of the cost of transportation can be expected from the Railway Companies. ”

“ He merely pays it, and at once shifts it to the consumer. For low-grade [Pg 171] or staple goods like cement or kerosene, where transportation charges form a large part of the total cost of production, it is conceivable that higher freight rates might so far increase the price as to check consumption. Five cents a hundredweight higher freight means $1.25 per 1,000 ft. added to the price of soft lumber, $2 to hard lumber; three cents per bushel added to the price of wheat, and $1 to the ton of pig iron or coal. ”

“ No charge is made for dock dues, and vessels are towed up the Mersey free of cost.
Sea-transport.—There is, of course, no system of transport that is so cheap as that of ocean carrying. The rates of freight now ruling for ocean transport, low though they be, are not by any means a true criterion of the actual charges involved. Thus, it appears that at a recent date, a large quantity of grain was carried between European and United States ports for 10s. per ton, or ·04d. per ton per mile. Between Newcastle-on-Tyne and German ports, coal cargoes have been carried rather largely for about 4s. ”

“ A full discussion of the limits of freight charges would take account of the fact that "what the traffic will bear" is an elastic amount. An infant industry will bear less than a mature one; and moreover, a rate that it will bear without being taxed out of existence may be sufficient to stunt its growth. A railroad may be interested in hastening its growth. When goods have one cost at A and another at B, a railroad company may carry them from the one point to the other for less than the difference between the costs because it wishes the industry at A to grow and furnish freight. ”

“ In the second place, the shipper is guaranteed a stability of rate schedules which is deemed necessary for settled business conditions. The merchant, for example, includes transportation charges in the cost price of the goods in which he deals. But if the transportation charges on the same class of goods are subject to frequent change, the merchant can never tell when his competitor is to be given the advantage of a sudden lowering in freight rates. ”

“ The existing scheme of adjusting freight rates hits been favoring the basing points, until industries are attracted to some centers and repelled from others. A great volume of uneconomic and wasteful transportation has attended, and the cost increased accordingly. The grain-milling and meat-packing industries afford ample illustration, and the attending concentration is readily apparent. ”

“ Both problems are very difficult, however, and the unintelligent adjustment of rates has frequently resulted in injustice both to the roads and their patrons.
A rate per ton-mile for each class of freight is out of question, because a large part of the cost to the company consists in loading, handling, and storing the goods. Once aboard the car, it costs but little more to carry a ton of freight one hundred miles than to move it one mile. The rates per mile, therefore, are necessarily greater for short distances than for long runs. ”

“ Much of the heavy freight of the country,—coal, iron, grain and lumber,—should be carried in this way, in order to reduce freight rates and so, indirectly, the cost to the people, and further to relieve the burden on the railways. ”

“ Such a tax, if it exists, would go far to offset the profit which unduly low freight rates in general have produced. In short, the problem is to consider the possible net cost to the American people of our highly involved and most efficient transportation system. Our markets are so wide, and our distances so vast, that the problem is a peculiarly American one. ”

“ But on the subject of cross-continent freight, by which many people may want to ship their cars home, the Transcontinental Freight Company’s offices in Chicago, New York, San Francisco, etc., have a special rate for through shipment of automobiles that is a very good thing to know about. They ship three automobiles in one freight car, and for cars weighing 4,500 pounds and over, they charge a maximum rate of $225.00, or $5.50 a hundred pounds, from New York to San Francisco or vice versa. A car weighing 3,000 pounds would cost $165.00. ”

“ The reasonableness of making a distinction in freight rates according to the character of goods is easily apparent, as judged on the basis of cost of service. A multitude of factors enter into consideration at this point. The railway ought in self-protection to charge more for hauling a thing, if it actually costs it more in the long run to perform that service. Some of the factors which enter into this cost were well put by the Interstate Commerce Commission in 1897. [334] ”

“ The difference, moreover, between the charge which high-grade freight, such as merchandise, will bear by comparison with the highest rate upon grain or coal, is much greater than any difference in the cost of service. The profit, therefore, attendant upon the movement of traffic other than low-grade commodities is strikingly great; although, of course, profitableness is a question of relativity between operating cost and revenue. Heavy train loads of coal at 4 mills per ton mile may be better business than merchandise in light carloads at a rate five times as high. ”

“ The marked reduction in freight rates has been made possible only by a still greater and more remarkable reduction in the cost of transportation. This has been effected by consolidation of companies, by improvements in roadway, bridges, etc., and by the introduction of heavier trains, with engines of greater power and cars of greater capacity. This economy can be still further extended. The reduction in rates has been much greater than that in the prices of commodities. ”

“ The total freight traffic carried on the railways of the United States in 1881 was 350 million tons, being an average of 6·7 tons per head. In 1888 the total freight carried was 5891⁄2 million tons, being an average of 9·8 tons per head. In 1870 the cost of conveying a barrel of flour from Chicago to New York was 6s. 5d.; in 1880 a working man was only called on to pay 3s. ”

“ These facts shew the result of competition between Railways and Waterways abroad—and the way in which this competition has brought about an improvement of structure and a reduction of rates on both systems.
English Freight Rates. Turning to our own Railway rates we find a marked difference. The late Sir James Allport, for many years Manager of the Midland Railway Company, stated in 1883 that the cost of transporting mineral traffic on that system, assuming 42 trucks or 336 tons of minerals to a train, was 2s. ”

“ This scheme will, in effect, remove the principal obstruction to free circulation of passengers and goods, namely, expense. Cheapness of transport is “twice blessed; it blesseth him that gives and him that takes”—in other words, it enables the producer, whether agriculturist, manufacturer or merchant, to increase his market for goods, and enables the consumer who requires those goods to purchase at a lower price. It is common knowledge that agriculture in particular in this country is hampered and restricted by heavy charges for freight. ”

“ In modern transportation methods, as, for instance, those in vogue in Germany, this expense is so trifling as to be scarcely worth considering. Freights move in Germany on a uniform tariff, based entirely upon bulk, weight, and distance, discrimination is impossible, and any shipper can learn in a moment, by referring to the table, the exact freight charge to any point, and can ship knowing that his competitors must pay the same price for the same service. ”

“ Proportioning transportation charges to the value of the service must always be clearly distinguished from basing them upon the mere value of the goods. Nothing is more certain than that no direct causal relation between freight rates and the intrinsic value of commodities is traceable. On wire the freight rate between two given points may be about one-fourth of the commercial value ”

“ There are thousands of varieties of freight offered to the railroads for transportation. If each class of commodities were charged the same freight rate per ton per mile, the charges upon many articles of prime necessity, such as coal, lumber, and grain, would be so high as to prevent their being moved, while the rates on goods of high value per bulk would be much lower than they could readily pay. ”

“ Scarcely any species of merchandise brought from a considerable distance inland will bear such freight charges and leave a margin for profit to the producer and shipper. Would-be planters of coffee and sugar-cane dare not enter upon raising these staples for the market, unless situated very near the shipping point, or near some available river's course, the latter means being naturally much cheaper than any form of railway transportation. ”

“ 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 commodities. ”

“ Yet the enhancement of railway revenues would indeed be enormous from such an increase of freight rates. For these necessities of life, an increased freight rate might become an actual charge upon the people, without reducing their consumption, like a tax upon salt. Only upon goods the use of which might be freely lessened, would higher freight rates be reflected in a corresponding decline in the volume of business. Moreover, with all high grade traffic, the value of service principle fails utterly by itself alone to prescribe the upper level of a reasonable charge. ”

“ We should expect express charges to be higher per ton here than abroad, as much higher as our freight-per-ton charges. But no necessary economic cause is known which justifies a substantially higher proportion or ratio of the express to the freight charges here as compared with other countries. ”

“ The average freight charges in this country are the cheapest in the world, yet the question of rates is the most troublesome one with which railway companies have to contend. The relative rates between different roads and different points rather than the actual charges for freight involve problems which railroad pools, traffic associations, and legislators have not been as yet entirely successful in solving. ”