Railway rate

“ For instance, if too high a rate is charged for goods of comparatively small value, traders prefer to send by the cheaper modes, namely, by sea or by road, and in many cases it would not be worth while to send at all, whereas in the case of an article like silk or bullion of considerable value the extra cost of carriage even at a high rate would not add appreciably to the price. Therefore, the railway companies are compelled to make lower charges for low-priced goods, otherwise they would lose the traffic altogether. ”

“ Provision having been made for that kind and measure of governmental regulation of railway rates that will insure reasonable charges, the railways should be permitted to co-operate in rate-making and be given power to pool their competitive business. ”

“ Between 1889, when the Interstate Commerce Commission's statistics first became a valuable index of railway operation, and 1909, the average rate per ton mile has fallen from 9.22 to 7.55 mills. On the freight tonnage of 1909 this meant a reduction of over $372,000,000 in the yearly revenues of the railways. The railways suffered that loss from their income when they needed every cent of it to maintain the people's highway in a condition to transport the people's ever-growing traffic. ”

“ The economic justification lies in the fact that the railway can afford to make a low rate, leaving a bare margin of profit above the extra cost of adding this traffic to that which is already in motion. Such rates cannot exceed a definite figure based upon what the traffic will bear. A higher rate than this would kill the business. Something is contributed toward fixed charges by the new traffic, so far as the railway is concerned ”

“ They have not, as would be but fair, taken a large group of articles, and noted how insignificant is the cost of transport as compared with other charges, how small is the rate of profit of the railways as compared with the charges of the manufacturers and distributors. ”

“ Whether the great increase in prices in 1912 over preceding years, operating indirectly through insistent pressure for wage increases to enhance costs of operation, will necessitate a reopening of this issue in a large way, seems likely to depend upon the rate at which the volume of traffic augments in the immediate future. It is clear, in any event, that a sufficient surplus earning power must be permitted to insure a continuance in favor of railway securities as compared with other forms of investment. ”

“ In the United Kingdom, however, the average ton-mile rates for the transport of railway traffic are much higher than in the United States, or in any of the principal countries of the Continent. This higher rate of charge is defended on the ground that the cost of railways has in England been much higher than in any other country. ”

“ A river crossing brings competition for coal, lime, or cement, but does not affect the rates chargeable on high-class freight which seldom goes by water in any event. A railway specially interested in the development of some particular industry, wherever it crosses our hypothetical line, effectively holds down the rate on the product of that business. ”

“ The rate is, I believe, six cents a mile, which is just about three times that [Pg 68] for the third class in England. A railway should increase and foster travel. It always does so. No; one exception: the D. and R. G. Railway does not. In the same way as individuals use their legs, horses, anything in preference to the rail, so it is on this line found cheaper to cart crops to market, and it is so done. Another result: crops don't pay here because the cost of taking them to market is so high. ”

“ The problem of railway rates is a problem by itself, and stands as one of the most important of the unsettled problems of the day."—H. C. Adams, Science of Finance, New York, 1909, p. 280.
[644] "The cost of the service of transport for any given commodity cannot, under the varying conditions of railway operation, be even approximately calculated. The first insuperable difficulty is the division of the expenditure for any given work. ”

“ In regard to export trade, the inland producers of manufactured goods must be at a disadvantage as compared with their rivals on the sea coast. But no complaint that the railway companies had diverted traffic from England abroad by exorbitant rates was made out before the Railway Rates Committee. ”

“ Indeed, if railway rates were to be further reduced to-morrow, the public would, we believe, travel as safely, and perhaps even more so, than at present. The result of inadequate rates is not danger, but inconvenience, amounting to deprivation of many of those advantages which the railway system is calculated to bestow upon the country. ”

“ For many reasons the failure to pass the Railway and Canal Traffic Bill ought not to be regretted even by those who are dissatisfied with railway companies, but who sincerely desire to benefit the trade of the country. In the discussion of that Bill, and in the debates on the subject of railway rates in recent sessions of Parliament, the existence of many misconceptions were disclosed. ”

“ My belief is that having regard to the capital expended on construction of railways, English railway rates are not excessive for the services rendered, and I greatly doubt whether, after making proper allowances for differences in capital cost of railway accommodation, and for other essentially different conditions, rates in any country are lower, comparing like with like, than railway rates in England. ”

“ A more consistent enforcement of the long and short haul principle might provide a remedy almost as effective as pooling. The Alabama Midland decision nullified a salutary provision of the law of 1887 by holding that railway competition at the more distant point might create such dissimilarity of circumstances as to justify a higher rate to intermediate stations. Turn to our diagram on page 282 and observe the effect. Traffic around two sides of a triangle from A to C by way of B is carried at a rate equal to the charge for the direct haul from A to C ”

“ No single road is independent of rates made by its rivals—rates applicable not only to competing commodities and markets, but also as affected by apparently the most remote and disconnected contingencies. Thus railway rates, as has well been said, are not a set of independent threads ”

“ A rapid decrease in the purchasing power of the money they receive has brought about, within a single decade, a reduction in railway freight rates that cannot be less than twenty-five per cent. This reduction began almost imperceptibly at a time when American railway rates were already lower than ever before in the history of railways and lower than anywhere else in the world. ”

“ In France the railways owned and operated by the State are only a comparatively small section of the whole; but successive Governments have advanced immense sums for railway construction, and the State guarantees the dividends of the companies; while in France as in Germany railway rates are controlled absolutely by the State. ”

“ The first condition of any useful discussion of railway rates is that all interests shall be considered—the interests of all traders, and of all consumers, as well as of railway companies. To every proposal this test—the golden rule—should be applied. How would any projected change affect all concerned? Every one cannot get such rates as he would desire; the utmost which is practicable is to fix them in the manner, on the whole, most suitable to the requirements of the community as a whole ”

“ Especially true is this of the question of railway rates, not the least important problem of Political Economy. Of the trades and interests which are dissatisfied with existing arrangements, people hear and see much. Unfortunately they appear to take little heed of other interests, equally important, which are contented, or comparatively so, which do not send deputations to the Board of Trade, and which changes such as have been from time to time proposed would injure or even go far to ruin. ”

“ The original idea that railway rates and charges should be fixed on a mileage basis, on the same principle as tolls on turnpike roads and canals, was soon found to be impracticable, and successive Parliamentary Committees have demonstrated its futility; though its advocacy, in one form or another, has not even yet been discarded by those who think that railway rates for any given commodity should be so much per ton per mile for all traders alike, irrespective of distance and all other considerations. ”

“ The railways are prospering because they are managed with great skill and are doing increasing amounts of business, though at lessening unit profits. But there is danger of their reaching the point where there is little or no margin between unit costs of service and unit receipts for the service. It will probably be inevitable for American railway rates to trend somewhat upward in the future, as they have gradually declined in the past ”

“ And in fairness one must admit that this source of economy obtainable only under the conditions of monopoly must be set down as a point to the credit of State ownership.
Many of the complaints against railway rates as excessive are really, when analyzed, complaints of undue preference. They are based on comparisons with other rates, and, in nearly every case, it is the factor of competition which lies at the root of the difficulty. This is the natural result of our mixed system of competition and control. In principle all would admit that there should be equal treatment on railways. ”

“ It is conceivable that railway rates might and properly ought to increase under certain circumstances much more than in proportion to the general change in freight rates; or that, on the other hand, they might fairly be compelled to lag behind. This introduces the larger question of reasonable rates in general which must remain for discussion in our second volume.
The general level of rates affects the ultimate consumer more than the shipper. Steadiness of rates, on the other hand, is vital to a healthy state of trade. ”

“ So in our attempts to base railway rates upon cost of service, we must permit the profit from the introduction of economies, the use of improved appliances, etc., to be gathered by the railway company long enough to induce it to work toward that end. ”

“ Many apparent anomalies in railway rates arise from competition of the railways with the sea: others are the results of comparisons of the rates charged by railway companies, which must carry, if they are to carry the traffic at all, at the same rates as a company having a shorter route. Inasmuch as competition between railway companies is carried on extensively, many such disparities exist. The apparent anomaly in tin plates being carried from South Wales to Liverpool viâ Stockport, near Manchester, at lower rates than to Manchester, was referred to by Mr. ”

“ Much of the adverse criticism of railway rates and charges which has been indulged in of late years, without even any resort to an inexpensive complaint to the Board of Trade, has been due to comparisons with railway conditions in other countries. ”

“ The problem of railway rates has not, like that of postal charges, passed beyond the domain of current discussion. This is in part due to the fact that railways are universally regarded as a source of profit, to companies when privately owned, to the State when public property ”

“ The railways naturally consider this a rather one-sided function, and are not extremely zealous to aid in its performance. They have their own troubles with the public, and have no commission to come to their assistance. Everybody is after cheap railway rates, just as everybody is after cheap goods; and the means sometimes resorted to to get reductions would at least hold their own for astuteness with any that could be concocted in a traffic office for the raising of rates. ”

“ Economically and theoretically it is not up to the railways to solve this world old conundrum. Practically they are called on to meet every advance in the cost of living of their employes to which in twenty years they have not added a nickel, and they are denied the privilege, enjoyed by every other employer of labor, to add its increased cost to the price of their only commodity or service—transportation.
Today the advances in the scale of railway wages awarded, proposed and demanded mean an increase of from $60,000,000 to $75,000,000 in the annual "cost of living" of the railways. ”

“ It has no doubt been adopted on the assumption that the greater the cost of production the greater should be the charge, and, therefore, that as it costs more to build 100 miles of railway than one mile, and takes more coal or electric current to haul a train for 100 miles than for one mile, it is necessary to charge more for the longer distance. Even the Post Office still clings to the same idea, in charging higher rates for the telephone trunk service according to distance, although the charges for telegrams are the same for any distance! ”

“ They probably have made mistakes, and in some cases entered into undue competition with each other, or fostered it too much between producers or ports. But the principles upon which they have acted are sound; and the instances in which they have erred are exceptional. It has been the aim of railway companies to make rates conform to the requirements of trade, or, according to a popular expression, to charge what the traffic will bear. ”