Railway tariff

“ The fact of the railways being in the hands of Government is by no means an unmixed good. A uniform system of rates is demanded everywhere. If a concession is made to one district, the rest of the colony naturally demand to be placed on the same footing, so that the Railway Department rarely meet the wishes of the public. A private Company, if it found that the freight could be got by lowering the tariff on some particular item, would do so at once, and if it paid, continue it. The cost probably would be merely a few tons of coals, and a small amount for wear and tear. ”

“ We are now desirous of offering some remarks upon the part of the recommendations of the Royal Commissioners which refers to a tariff being fixed by a general Act for the various classes of services required of railways by the Post Office. It would, we are convinced, be impossible to pass an Act of this class that would be of the slightest practical value, because the circumstances of every railway company, certainly of every district of country [123] through which a railway passes, are of constant variance. ”

“ For the cure of discrimination, the Transportation Committee of the New York Board of Trade suggests that Congress enact a law authorizing the Interstate Commission, in case of any rebate or other device for securing low rates, to declare that the net rate so made by the railway or car owners shall be the regular tariff rate, published as such, and open to all shippers ”

“ On the Prussian railways the maximum rates shewn in the tariff are actually charged. But exceptions are made where trade requirements, competition, and other similar circumstances appear to necessitate a departure from the official rates. It is not considered that railway companies are, in general, bound to adjust anomalies in the carriage charged for traffic arising in different districts, for one and the same destination, by reducing the rates from the more distant sending station. ”

“ While, in particular cases, two railways, by consolidating their interests under a single management, may have been able to so far reduce the expenses of administration as to ive their customers the benefit of a lower tariff, the logical effect of all monopolies is an increase of price of the thing produced, whether it be merchandise or transportation. ”

“ Covering of Goods in Open Trucks.—It is understood that the railway company, in the absence of instructions to the contrary, convey the goods included in the Special Tariffs—except certain articles specially provided for—in open wagons, the railway being exempted from all responsibility in case of damage arising from such mode of transit. If instructions are given on the consignment note to forward in covered wagons, such goods as the railway company is entitled to convey in open wagons, the tariff rates are increased by 10 per cent. ”

“ Subject to these conditions, the fixing of the tariff rates was left to the railway companies.
Article 45 of the Constitution of the German Empire [Pg liii] (dated 16th April, 1871) provides that the Government should secure, as much as possible, the adoption of uniform and reduced tariffs, especially for long distances for the carriage of coal, coke, wood, ore, stones, salt, rough iron, manure, and similar goods, and that such low rates should be adopted as might be required to further the interests of the trade of the country. ”

“ It is true that in many cases long-haul rates have been raised so as to correspond with the old short-haul tariff, instead of the shorter rates being reduced, and in the place of any such general and perfectly proportioned revision of tariffs as would be likely to exhibit the practical operation of the new law in its most favorable light. Such an effort on the part of railway managers could hardly be expected. It can not be denied that corporations are selfish, nor that their operations are conducted with a view to the largest possible ultimate profit. ”

“ Yet the rates voluntarily established by the Railway prior to the commencement of the present controversy averaged about $4.50 per car, a $4.50 rate was provided for in a tariff issued by the Railway in February, 1913, a uniform allowance of this amount was asked for by it upon the second hearing before the Commission, and the Railway concurred in, and now seeks to maintain, the Cotton Belt tariff which contemplated payment of that rate for its services. ”

“ A tariff wall, by keeping foreign products OUT keep American products IN, thereby narrowing our market and limiting production. If the workman does not produce he cannot consume, and production and consumption are the basis of railway business. But why, it may be asked, would the railway corporations cut their own throats by helping elect McKinley? ”

“ Subsequently to the making of such order the Grand Trunk System published a new tariff, to be effective March 16, 1912, naming a rate of $5 between industrial tracks, and a like rate between junction points with connecting carriers, within the switching district of Detroit, and industrial tracks within the said limits; $8 between junction points with other railroad companies, within said limits, and team tracks within said limits; and $8 between team tracks on the railway's own lines. The tariff was duly filed with the Commission and with the Interstate Commerce Commission. ”

“ The great privileges which the railways enjoy, especially in the matter of tariff, were granted in pursuit of a declared policy of encouragement to railway enterprise—a policy which no one there has reason to regret, as without it the country would never have emerged from its former lethargy. ”

“ Do you know of any good reason why this [78] army of railroad men, together with the 400,000 stockholders, should not receive as fair consideration from government and people at large as the farmer and manufacturer receive? And yet the government in effect lets the one have money without interest to buy his land, and by means of a tariff makes you pay more for much that you buy, so that the other can pay his employes good wages. ”

“ Never in the history of railways have tariffs been so little respected as to-day. Private arrangements and understandings are more plentiful than regular rates. The larger shippers, the irresponsible shippers, are obtaining advantages which must sooner or later prove the ruin of smaller and more conservative traders, and in the end will break up many of the commercial houses in this country and ruin the railways. A madness seems to have seized upon some railway managers, and a large portion of the freight of the country is being carried at prices far below cost.... ”

“ There is a good deal of business that ought to be disturbed; that of the Beef Trust and the Oil Trust for example would be the better for a thorough house-cleaning. And the tariffs need considerable disturbance to bring them into close relations with the principles of justice. But the disturbance might be more than is needful. Our railroads say that Government boards the world over show a tendency to adopt some sort of a mileage basis, in the shape of a zone system or some other form of distance tariff. ”

“ Nor have we any reason to hope for a change in the present tariff policy of railroads. History has sufficiently demonstrated the fact that reforms must come from without. As long as human nature remains as it is, railroad officials will, if permitted, arrange tariffs in the interest of the men who give them employment, for if they did otherwise their services would soon be dispensed with. ”

“ The simple, honest truth is that railways, like natural persons, must live by doing what is set before them; that however their tariffs are regulated, whether discriminations by rebates and drawbacks are allowed or disallowed, whether they are ordered to charge more for the long haul or the short, whether passes are given to shippers or refused—the railway must do the business the people bring to it, or go into bankruptcy and wind up. ”

“ Courts necessarily move slowly, while all differences arising [Pg 381] between the public and the railways, and especially those concerning rates of transportation, require prompt and decisive action. There are no fixed conditions in commerce. It is a kaleidoscope constantly presenting new phases. Competition at home and abroad, tariff duties, the condition of the crops and a thousand other influences affect it and may require a prompt readjustment of the tariff. ”

“ However, since the cost of service is not the only, and with railroad men not even an essential, factor in rate-making, it is evident that the rates upon single commodities can not be reviewed upon their individual merits, but the tariff must, in the judicial determination of the question whether it is reasonable or not, be viewed as a whole. But as it is impossible to foretell what effect a readjusted tariff would have on the revenues of a road, even courts are forced to admit that an actual trial of the tariff is necessary to establish its merits or demerits. ”

“ No one questions for a moment that the widening of the sphere of competition by transportation agencies is a service of incalculable benefit to the country. But it should also be borne in mind that superfluous transportation is economic waste. The industrial combinations in seeking to effect a strategic location of their factories in order to divide the field have apparently come to a full recognition of this fact.
A fourth objection to undue development of special commodity rates is that they may entail increased burdens upon the local constituency of each railway. ”

“ But beyond the carriages there is nothing regarding American railroads equal to, or as good, as our system. Here in England the lowest tariff, the third class, is fixed by Act of Parliament. Every line is compelled to provide traffic at a given rate, viz. one penny per mile (parliamentary fares) , and thus the poor can always travel cheaply, or the rich either if they [Pg 66] choose to go third class. In America, as far as I could ascertain, there is no Government interference at all in this respect, and each railroad company can charge what fares it pleases. ”

“ 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. ”

“ For the American merchant in Philadelphia the rate to the same market was twenty-six cents. For the inland haul alone the Pennsylvania Railroad was receiving sixteen cents on the foreign goods, while coincidently charging American merchants ten cents more for the same service. Discrimination against the American merchant in favor of foreign competition, not infrequently more than sufficient to overbalance any supposed protection afforded by the tariff, has been repeatedly proved in such cases as this. The duty on imported cement was eight cents per hundredweight. ”

“ 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. ”

“ In several European countries when railways were first built, and afterward, especially in Germany in 1867, attempts were made to apply this principle widely in the construction of tariffs. Practical railway men, on the other hand, usually adhere to the second principle of value of service. This argument maintains that, while theoretically cost of service should determine minimum rates, owing to the nature [Pg 167] of commercial competition, as a matter of fact rates must be based upon the principle of charging what the traffic will bear. ”

“ A railroad is not merely an improved public highway, but it is a complicated transporting machine. To successfully manage such an institution, or even to make, approximately, a perfect tariff, requires peculiar ability and talent, which is so rare that it commands a very high price. The tariff which is the most profitable for any given road, is not the one which is the highest, but that one which is the most perfectly adjusted, so that each kind and class of freight shall pay just what it will bear. ”

“ At the present time the railroads of the country collectively represent about three times their value, or actual cost. If the people were not taxed on "watered" stock and bonds, dishonestly issued, the rates charged for transportation would be but little more than one-third the figures of the present tariff. ”

“ 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. ”