Part 15

The railways of the United States have enormously retarded the agricultural development of the country, and added to the expense of living, by permitting the lodgment in our transportation system of that industrial parasite, the express company. Just what are the financial inter-relations which have contributed to the willingness of the railways to allow parcels carriage to pass from their hands, while sufficiently obvious in a general way, cannot now be detailed. The glaring fact is that the express companies, save for certain services which they have, in violation of the criminal law, usurped from the postal system, perform absolutely no functions which do not properly belong to the railways, and no functions which the railways of other lands do not assume. Every dollar of the huge profits which the express companies make is a burden upon industry which is unnecessary and unjust. But instead of seeking to remedy or lessen this burden, the railways pursue the policy of making it greater. They practically abandon the field of parcels carriage to the express companies. They allow their agents everywhere to work for the express companies on commission, so that their wages are increased as express business increases, while their interest in the growth of railway business is reduced to a minimum by the receipt from the railway of only a small fixed salary. Thus the railways not only turn over to the express companies the parcels business, but saddle on that business, and on the shippers by express, a good deal of the burden of their own payroll.

THE TOLLS ASSESSED ON AGRICULTURE.

The effect of this policy on agriculture is not to be measured by the amount of express tolls paid on shipments made. That is a great burden, but it is inconsiderable as compared with its injury to the farmers and to the Nation by reason of the immense volume of potential traffic that does not move at all. Under the paternal governments of the Australasian colonies of Great Britain, agriculture is fostered by low railway rates and a carefully studied policy of encouragement to the small shipper. Packages of poultry, eggs, meats and other farm products are collected on the remote railway lines, brought to concentration points, refrigerated, shipped to the world’s markets, sold and remitted for to the great benefit of the remote farmers, who otherwise would have no way of marketing their little shipments. But here the trucker and poultryman and the fruit-grower are in most localities relegated by the railways to a third party—the express company—who seems to have no office but the exaction of tolls which the railway itself could not charge, but which it divides with the railway. This is unjust and is rapidly becoming intolerable. The farmer must be placed in such position that he can work up trade in the city and ship in small packages direct to the consumer at just rates. The head of one of our great railway systems has delivered several powerful addresses recently, in which he has asserted that the farmers, and not the railways, are to blame for the spread of from 30 to 75 per cent between the price received by the producer of food products and that paid by the consumer. He advises farmers to “cut out the middleman.” Good counsel, but let him follow his own advice. Let him, and let all railways cut out the express middlemen, the private car middlemen, the fast freight line middlemen, and the ordinary farmer will be placed in better position for taking his advice. These agencies have no place in a rational system of transportation. They are parasites, which suck blood and confer no benefit. Transportation by rail should be a simple transaction between the railway and the shipper, and with no third party whatsoever. Whatever there may be in the way of parcels transportation which does not properly belong to the railways should be assumed by the government in the form of a general parcels post.

With the way cleared to simple relations between shipper and railroad, the matter of rate-making in the interests of national development may be taken up, and the railroads enlisted in such policies as may be dictated by patriotism. In these the farmers are entitled to so much of special consideration as is commanded by the importance of agriculture as the basic industry of the world—no more, no less. In many schedules the railroads have favored agricultural development. These instances are those in which farming interests have been controlling in the matter of dividends. Perhaps we should expect nothing more of the purely individualistic philosophy of the past, but of the future we must demand much more.

RATES AND DEVELOPMENT.

Instances of the influence of railway policies on agriculture may be found in almost every country of the world. The beet sugar industry of Austria has been built up through the adjustment of railway rates. Huebner says of the German policy in this regard:

With the deliberate purpose of regulating industry and commerce through the powerful medium of freight rates, 63 per cent of the traffic is given rates generally about half as high as classified rates and seemingly unusually low as compared with rates enforced in neighboring countries. These rates are given to build up particular industries, to promote specified districts, to protect German railways against foreign competition, to overcome emergencies, to build up German sea-ports, to promote German export trade, and discourage the entry of specified imports.

We have been told over and over again that the acquisition of the railroads of Germany by the government has been dictated by consideration of military strategy; but the world is just awakening to the fact that it is rather industrial strategy which has impelled the Germans to government ownership. The time is coming when the German railways will be freed from the fixed charges of both bonds and stocks, and German agricultural products will go to market, with her manufactures, at rates based on actual cost of service. The fostering uses of properly adjusted rates as applied to remote agricultural districts in Australia and New Zealand have been known to the world for years. Protection to home industries through tariffs has failed to benefit our farmers in any direct way, and the policy of attempting longer to maintain such tariffs seems to be in process of abandonment; but Van Wagenen has pointed out that agriculture may be stimulated and fostered through railway rates, and given all the benefits which clearly accrue to protected industries through tariffs. It might be no more than fair to the farmers if some of the taxes exacted from them through tariffs in the interests of manufacturers, were returned to them in such freight rates as would develop their agriculture along the intensive lines made possible by nearness to market; but it might be unfair to ask privately-owned railways to do it.

The whole structure of rates as they now exist is devised to favor the long line to and from market, and made up with reference to the demands of certain trade centers, and certain powerful financial interests, some of which are closely allied to the ownership of the control of railways. A striking instance of this is to be found in the history of the rates on the border line between the Gulf trade basin, and the territory of the railways running to Chicago and the Atlantic ports. From Kansas and Oklahoma points the distance to tidewater on the Gulf is only from a quarter to a half the distance to the Atlantic. The farmers of that region, and of a great part of Nebraska, Colorado, and much other territory, are entitled to an outlet by way of the Gulf. It is nearer. It is over cheaper track. It is on easier grades. It should be in every way more economical. But when the battle between the old lines and the new began with the building of the roads to the Gulf, it was fought out, not along lines of what was best for the Nation, not along lines of what was best for the farmers whose stake in the controversy was the right to a fair price for their grain, but with sole reference to the interests of the railways themselves, and of the grain trade with which the railways have always maintained so intimate a friendship. Such agreements were made that grain would be as likely to go from Kansas City to the Atlantic as to the Gulf. In other words, the building of the Gulf lines was robbed of its benefits to the farmer. Rates were so adjusted, and still are, as to make the Gulf lines as bad for the farmer as the Atlantic lines, instead of making the old lines as good as the new should be. This is equivalent, as an economic futility, to the plan of handicapping the binder so as to restrict its work to the amount done by the same force in the old days of hand binding. Financially it may be wise—for the elevator trade, and the railway community of interest—but it is an economic crime as much as the breaking of the power looms by the old weavers. The present railway situation is full of such anomalies. One could spend days in their discussion. They are familiar to the shippers of the nation. They are apologized for by the wise men who write great tomes on transportation. But they must sometime be so corrected that trade will go on the railroad which can perform the transportation task most economically, without regard to the historic channels of traffic and the private interests concerned in the use thereof.

“TAPERING RATES.”

I have spoken of the difficulties which confront the people of the deep interior of the continent in working out their complete industrial development. By complete industrial development, I mean that full growth in industry which has come to such seaboard locations as Great Britain, the Netherlands, our Eastern seaboard, our lake regions and the like. One can scarcely conceive such complete development in Iowa, Nebraska, the Dakotas, or Oklahoma. And yet it is merely a question of transportation. The problem of the future relates to the question of the ability of land carriage of any kind to furnish it. If it cannot be accomplished by land carriage, the Nation will have recourse to waterways. New Rockford and her sister hamlets will reach the sea, either by the way of the railroads, or by the Missouri river. If the railways are to give New Rockford—and in her I typify all the interior—what it must have if it is to develope completely, they must find some way to compensate the place by means of rates for its remoteness from the sea.

This may be done by what is called “tapering rates”—that is, by rates which increase not with the distance, but on some basis which gives the remote point a less tariff per ton a mile than the nearby point. The railroads have made such rates always when the demands of profit called for them; and their policy has resulted in great benefit to the interior; but the diverse ownership of the different lines and restrictive laws, as well as the lack of a national policy in rate-making, conspire to prevent the full application of the principle. Congressman D. J. Lewis of Maryland has laid down the principle that rates along a line should increase with the square root of the distance, instead of with the distance. Thus, if the proper rate per hundredweight for twenty-five miles is ten cents, for 625 miles the rate should be not $2.50, which would be the increase directly with the distance, but twenty-five cents, the increase over ten cents according to the square root of the distance. The value of this formula may lie principally in the emphasis of the economic justice, as well as the necessity, of tapering rates for long hauls. As it is, rates taper from New York to Chicago, not according to the square root formula, but in a manner not very much at odds with it; but then they are increased by the fresh start from Chicago as a basing point. Under a national policy in rate-making, these rates would continue to taper to the point at which it would be more economical to ship in some other direction—to the Pacific, or to the Gulf.

The influence of tapering rates on the industrial development of a people may be seen strikingly manifested in Texas, which has long had a rate system peculiar to itself. This system is said to be the fruit of the statesmanship of Judge Reagan, and was devised expressly in the interests of a population deemed to be permanently agricultural. It is exactly the opposite of the general policy which has built up a few great cities at the expense of the rest of the country, and the best or worst example of which is perhaps the case of Chicago. Chicago is fed by livestock shipments which sweep past the very doors of packing houses quite as well equipped to slaughter the stock as any in the Windy City, and the livestock rates are only a sample of the system of tariffs that keep in Chicago’s hands the headship in commerce to which in the natural development of things she would not be entitled. Railroad rates keep the great centers great by decreeing that the primary products shall be sold there, and that the supplies of goods ready for consumption shall be bought there. This is done by depriving other trade centers of the natural advantages over Chicago, of their nearness to the farms, while leaving them handicapped by their remoteness from water transportation. And wherever a great city is found in the United States, the same sort of rate structure is found. The economic result is that long hauls are favored for the railroads, with greater profits to them perhaps; but the farmers are deprived of the benefits of the home markets which nearby large cities afford. The state of Iowa is Chicago’s back field; and Iowa’s population is shrinking. This fact alone is enough to condemn the rate system which permits it. And Iowa’s case is glaring merely because she is an almost purely agricultural state. The farm populations of the other states on Chicago’s back fields are shrinking, also. And while I do not think it fair to attribute all this to rate mal-adjustments, I feel sure that if the Texas system of rates had been in effect in the Chicago-St. Louis basin, the phenomenon of decreasing population would have been long postponed, and might never have appeared.

THE TEXAS SYSTEM OF RATES.

The Texas system, as perfected by the Texas State Railway Commission, is based on the theory that many medium sized towns and cities are to be preferred, for the agricultural welfare of the state, to one or two overgrown municipalities with rates made to stimulate their growths at the expense of the rest. This has been accomplished by the establishment of a maximum freight charge, above which there can be no increase, no matter what the distance—with the exception of certain remote points in the cases of which additions are made, not according to the entire length of haul, but according to their distance beyond the limits of the zone which is established about every shipping point. Thus merchandise taking the class rates pays a tariff from any shipping point according to distance, up to 245 miles, beyond which the rate for 245 miles is paid no matter what the distance. The maximum rate on cotton is reached at 160 miles from any station; on flour, grain and hay at 140 miles; on coal, 790 miles; on fruits, vegetables and melons, 180 miles, and thus for all shipments. The result is that the remote truck farmer is as close, so far as rates are concerned, to the city 500 miles away, as to the one 180 miles off—and the principle is applied to all producers, with variations as to distance. This gives him a wide choice in markets and rates, which equalizes conditions so far as rates can do so, between the interior and the coast. And it fosters the small and new city by enabling it to compete in jobbing and manufacturing with the large and old one. Thus, while such places as Galveston, Houston, Dallas, Fort Worth and Waco are among the most prosperous towns of their size in the country, they are constantly meeting the competition of that numerous class of smaller Texan cities the unsuspected presence of which in the interior is such a constant surprise to the traveler from the North. Business is decentralized to an extent nowhere else seen in the United States in an agricultural community. And decentralization, while opposed to the immediate interests of the railways, is clearly profitable to the farmers, better for the people in general, and in all probability will prove in the end better for the railways themselves. For after all, railroad prosperity must depend on national prosperity.

It may be said that the Texas system has been tried out on a small and a state scale only. On a state scale, truly, but not on a small scale by any means. From El Paso to Texarkana the distance is almost exactly that from New York to Chicago, and from Brownsville to Texline is as far as from Kansas City to Winnipeg. Moreover, Texas has most of the problems which confront the Nation itself in working out a national system of rate-making—a coast well settled and old in development with all the wealth and power that the conditions imply—a hinterland ranging in conditions from fine farming land like that of Iowa, through semi-arid to desert. The Texas rate system may not be the last word in rate-making, and probably is not; but it seems to work well, and is certainly worth study. As will be seen at a glance, it is a modification of the systems of tapering rates suggested above—in which rates taper to a point where a maximum is reached, and then cease to increase at all. It is also a modification of the zone system in effect on certain foreign railways, under which within certain territorial limits railway rates are flat, like postage. The economic basis for such rates lies in considerations of national welfare, coupled with the well-known transportation principle that the terminal charge which makes up so large a portion of most shipments, is the same for a long haul as a short one.

THE DECLINE OF NEW ENGLAND AGRICULTURE.

For purposes relating to the fostering of such interests as seemed necessary to the welfare of New England and New England’s tonnage, the railroads have themselves put in effect with reference to that section a system of rates which in some ways resembles the zone system of Europe, or the maximum distance tariff of Texas. Cut off by the tariff on imports from her natural hinterland, Canada, the decline of New England’s agriculture under the competition of the prairie lands would have brought to her a permanent industrial decline, had she not turned her attention to manufacturing. And even as to that, she was placed at a disadvantage as soon as the development of the Middle States and Middle West brought that great region to the manufacturing stage. For New England’s manufactures had to go to market through New York, and most of her raw materials had to be imported from the West and the South. The railways used their powers of rulership in the interests of this whole group of states, as they are constantly doing in the case of cities—they decreed prosperity to New England’s manufacturers through a rate system. They made of New England a flat-rate zone for raw materials, with the same rate to all points, and practically the same as the rate to New York. This applies to all raw materials coming from west of a line drawn from Buffalo to Pittsburg through Wheeling. For out-going shipments, they gave all New England points a flat uniform rate to all points west of a line drawn from Cleveland to the Ohio river. That the wage earners of New England might be favored in cost of living—a feature reflected in low wages—the food products from the West are given a rate practically the same as that to New York—and thus the ruin of the old New England agriculture, already probable, was made certain. Had it not been for these imperial measures, New England’s headship in manufacturing would have been lost, first to the Middle States, and then, perhaps, to the Middle West. The expedient differs from the Texas system in the fact that it is applied partially and in the interests of manufactures, with New York as a center, while the Texas system is applied for the purpose of decentralizing business by making every shipping point the center of its own flat-rate zone.

But the most striking illustration of the power of the railroads to foster or to blight industry, lies perhaps after all in the field of agriculture. And it so happens that it is also the instance of the application on the broadest scale of the zone principle in which all rates are the same to all points within certain territorial limits. I refer to the rate structure which has been built up for the transportation of the citrus and other fruits and vegetables of the Pacific coast and the Pacific Northwest to the markets of the eastern half of the continent. While the principle is applied with more or less completeness to shipments of deciduous fruits and truck, it is best studied in its relation to citrus fruits. Oranges and lemons go to all points east of Denver at a flat rate. From Cheyenne, Wyoming, to Eastport, Maine, the rate on citrus fruit is the same. The effect has been most beneficial to the agriculture of the Western quarter of the United States, to the people at large, and to the railways. Whether or not the rates are just, the principle upon which they are made is conducive to the development of agriculture and is, perhaps, essential to such development, when the industry is hampered by land carriage over great distances. And nothing need be said in addition to citing these instances of the determinative effects of our railway rates on the course of prosperity, in spite of the averages which seem to show the economic unimportance of rates.

SOIL DEPLETION.

Thus far, I have discussed the influence of railroad policies upon the farmer as a man engaged in one of the many industries which make up the sum of industrial activities. But there are certain respects in which the farmer represents the everlasting welfare of the race, and certain demands which he may legitimately make on the transportation agencies of the land which are based on every man’s heritage in the soil, and interest in its continued fertility. The depletion of the soil by cropping is largely accomplished through transportation, and its restoration to fertility must be accomplished, where such restoration is necessary, in large measure, through the same agencies.

The soil is a reservoir of plant food. Most of the dozen or so elements used by plants in building themselves up from the soil are found in it in such great abundance that we need take little care for their conservation. Only three—or possibly four—are so scarce as to call for anxiety. These three are nitrogen, potash and phosphorus.