Part 5

Of course, the need for fast service will depend upon the greatness of the distance, when demand is immediate, as much as upon the valuable or perishable character of the shipment. In our country, with an average haul for freight of 251 miles, from three to ten times as long as in Europe, the demand for speed to overcome the obstacle of the time lost in distance, the time-element necessity for an express service is correspondingly increased; and so the disadvantages of inadequate or ineconomical express service are vital. The railway organization of America and its system of practices does not seem adapted to meet this great need; while its refusal, upon adequate grounds, to accept a smaller payment than the rate for its minimum shipment of 100 pounds precludes it from this service even if speed were not prerequisite. The minimum charge of 25 cents (average 27 cents) imposes an equally substantial and serious restriction upon the express service as now conducted; so that when it is considered that the farmers or nonurban, about half of our population, are virtually excluded from the service of this great agency, and the express rates by their prohibitive costliness substantially minimize the service for the urban population, it is apparent that instead of possessing an express service commensurate with its needs, the United States has both unexampled necessity for, and unexampled deficiency in, its dispatch or express agencies. Add to this situation the tremendous waste and corresponding costliness of the unorganized country-to-town transportation of our necessaries, and such almost equally wasteful and quite equally costly express service as we have, and have we not put a finger on one of the big leaks which swallow so much of the unprecedented productiveness of our country?

_Prohibitive Express Charges_

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 express charge per ton here is shown to be $31.20, while the average freight charge is $1.90 per ton, giving a ratio of the express charge to the freight charge of 16 (16.42) to 1. This express charge includes the cost of such collect and delivery service as is rendered, covering, it is thought, about 90 per cent of the traffic. In the table now inserted this element of the expense of the express companies for collecting and delivering, amounting to 11.50 per cent, is excluded, because many of the European countries and other data do not include this factor of cost. The table embraces 10 countries, while the specific data upon which the ratios are based are set forth in Appendix B. All countries have been included where the express data is clearly distinguishable from general freight statistics.

_Ratios of average express charges to average freight charges in 11 countries._

+----------+----------+---------- | Average | Average | Ratios of | express | freight | average Countries | charge | charge | and | per ton. | per ton. | freight | | | charges. -----------------------------+----------+----------+---------- Argentina | $6.51 | $1.95 | 3.2-1 Austria | 3.77 | .74 | 5.0-1 Belgium | [A]4.92 | .53 | [A]9.3-1 Denmark | 5.49 | .87 | 6.3-1 France | 6.88 | .95 | 7.2-1 Germany | 3.80 | .76 | 5.0-1 Hungary | 3.68 | .93 | 3.9-1 Netherlands | 2.43 | .67 | 3.6-1 Norway | 1.90 | .49 | 3.8-1 Prussia | 4.32 | .86 | 5.0-1 +----------+----------+---------- Average for 10 countries | | | 5.23-1 United States | 27.61 | 1.90 | 14.53-1 -----------------------------+----------+----------+----------

[A] Belgium delivers parcels.

From this table it appears that while Argentina charges three times, Austria five times, Belgium nine times, Denmark six times, France seven times, Germany (including Prussia) five times, Hungary, the Netherlands, and Norway, about four times as much for carrying a ton of express as of freight, the express companies of the United States charge nearly fifteen times as much.

No further statement need be made to show that the charges of American express companies are prohibitively excessive, and such as to disqualify this service as a national economic agency. The instances given represent merchandise carried by passenger trains in all instances, and while higher charges for both the express and freight tonnage in America are justified by the longer haul, there is no necessary economic reason for a higher ratio of express charges to freight charges. The presence of the “express company” is the only circumstance distinguishing express transportation here from that of the instances cited. In those the “express company” has no part; the work is done exclusively by the railways. As we shall see later, the deficiencies of the express companies are constitutional, not gratuitous merely, and are such as can not be remedied through corporate agencies.

_Inadequacy of Various Proposals--Regulation_

We have seen that the present express fails to reach the farm, in itself a fundamental objection to its adequacy. It may be suggested that where its high charges are such as to inhibit the traffic, they might be corrected by appeals for reductions to the Interstate Commerce Commission. A glance at the express report for 1909, it is true, will show that the profits of the companies are clearly out of normal proportion to the investment. But it will also show that such profits amount to but 8.44 per cent of the gross receipts, i. e., to only 8.44 per cent of the rates charged. So that even if all the profits were taken away, the modified rates would show but a wholly inadequate reduction; so that the desired relief could not thus be obtained. As a matter of course, no such reduction would even be asked. No one would wish that they conduct the business without a profit. But in practice even when the justification for a reduction is present, and the power and purpose active, the regulating board will always hesitate to even substantially reduce a rate in the fear of unduly trenching on private rights.

It was this principle which Bismarck had in mind when in connection with a similar subject he spoke of--

The attempts to bring about reform by (regulatory) laws have shown the futility of hoping for a satisfactory improvement through legal (regulatory) measures, without trenching materially on established rights and interests. (Parsons, The Railways and the People, p. 318.)

With a margin of but 8 per cent of the rate to work on, the board would feel this constraint in a marked way; for under substantially reduced rates a very slight perturbation of the customary traffic might place in danger the whole net return. Substantial relief in the way of regulation is thus shown to be wholly impracticable.

_Various Parcels-Post Schemes_

There remains to discuss the numerous proposals for limited carriage of parcels up to 11 pounds, and so forth, by the postal department. These all concern the present railway status quo of the post office. It is apparent that such proposals can only result in two things--the express companies taking the major portion of the short-haul, profitable traffic and the postal department getting the long-haul and losing traffic. But there is another fact recently disclosed by the express report--a fact rendering any of these proposals, so far as they involve railway transportation, wholly untenable.

The Post Office Department pays an average of 4 (4.06) cents per pound to the railways for carrying the mail, excluding equipment.

The express companies pay an average of three-quarters (0.74) of a cent per pound for carriage of express matter, excluding equipment.

It is manifest that not even the government could render substantial service under conditions so utterly unequal. It could not pay--what we shall see when we come to consider the length of the express and the mail hauls amounts to--about three times as much as the express companies pay to the railways for carrying its parcels. One is mail service, which is naturally more costly; the other more closely resembles a fast freight service, which lies midway between the mail and the freight in the weight cost of railway movement.

Other difficulties in such proposals, based on the status quo of the post office, need only be suggested:

(_a_) The government would have to install urban delivery wagons at a cost its traffic might not justify.

(_b_) The express companies still in the field, the wastes of service would merely be increased by the entrance of the Postal Department, and the people would have to pay it all.

(_c_) The government, being a moral agent with the inelastic rate proposed, would be at the mercy of its unrestrained competitors.

(_d_) The express companies’ contracts with the railways permit them to reduce their compensation to the railways to the point of 150 per cent of the freight rate--i. e., from the present ratio of about 8 (7.80) to 1 of the freight rate to about 1½. Of course, they could not go to this extreme without destroying their own profits, but their contracts permit them to go as far as they might wish. Thus, while the government in the beginning might have to pay about three times as much to the railways for its parcels per pound, in a struggle the express companies could exaggerate this disparity to any point they wished for the purpose of destroying the postal department as a competitor.

_Essential Elements of an Adequate System_

For the sake of brevity we state these elements categorically:

(_a_) Fast service.

(_b_) Greatest economically feasible extension of delivery and collect service, necessitating coordination with both urban and rural free delivery systems.

(_c_) Express railway contracts to secure the relatively low railway rates.

(_d_) Cheap capital charges.

(_e_) Reliable public-service motive.

(_f_) Economies of single organization, in which all existing serviceable plants should be merged.

With regard to the element of fast service, discussion is unnecessary. It is now commonly rendered by the railways for the express companies in connection with the passenger service. It seems worthy of suggestion, however, that a single organization like the post office might on the strong lines of traffic, where carload lots might be regularly obtainable, employ for certain kinds of matter the fast freight service, profiting enough on the carload rate reductions to fully cover the expense of delivery and collection, the regular railway 100-pound charges to be paid to the postal express by the shipper. It is further suggested that in this way agricultural products might be received through the rural free delivery in small allotments from the truck gardeners and farmers, consolidated into carload lots and conveyed on the trunk lines to the branch lines and distributed over the branches to destination by passenger trains. The Prussians do, in fact, have this latter service, for which the charge is based on a tariff of twice the freight rate, the regular service by passenger train calling for a charge of four times the freight rate. The railways would now perform such service if, of course, the collect service existed to gather the shipments from the country and assemble them.

It is obvious that the element most wanting is the service described as “collect and delivery,” necessary between consignor and railway at the beginning and railway and consignee at the conclusion of the act of transportation. Our country is utterly deficient in this respect as to the “country” or farming population. In towns of about 3,000 or 4,000 population up the present express companies do render this service for such traffic as their rates permit to move; but what is required is a service as extensive as the postal agency, which reaches cities, towns, and country with the degrees of efficiency of the urban and rural deliveries, conceded to far excel such delivery as the express companies give.

There can be no doubt that with regard to this collect and delivery the postal department is the only agency to which we can look for a service sufficiently extensive to be really efficient. It only remains to observe that with regard to the farming part of the country the service already exists in the form of rural free delivery, equipped and paid for, and actually waiting with empty wagons to receive and execute the work.

_Advantages of Postal Express_

In three years under a postal administration it is believed that the reformed system will produce:

(a) A minimum charge of 7 cents for the first pound, graduated to 17 cents for a 11-pound package, for average distances.

(b) General reductions of about 28 per cent in all merchandise charges.

(c) The extension of the service to the out-of-town and agricultural population.

(d) The elevation of the employees to the plane of the postal service.

(e) The coordination of country supply of the vital necessaries with urban demand by a cheap and regular collect and delivery service.

(f) As a result, a greater attractiveness in rural life and improved highways.

(g) In 10 years’ time, with the development of the traffic, a reduction of rates to about one-half of the present rates.

It is as difficult to describe in detail the manifold economic and social results of a great agency like this as to give a bill of particulars of the benefits of the postal system. And in this connection it seems not irrelevant to suggest that a proper coordination of the railway mail with the railway express service may indeed render penny postage feasible. As things are now the rural free-delivery agency does not bring a direct fiscal return to pay for itself. In a few years, as the traffic develops in parcels and agricultural products, the proposed system would enable it to do so. This would assure a considerable financial gift to the account of penny postage.

_The Agricultural Post_

In the present state of things the truck farmer must devote a large part of his time to marketing; that is, to the transportation of his product, however little it may be, to the place of demand. He must also for this purpose provide himself with transportation facilities, however small his business. These involve a horse, and its maintenance and care, and a barn; and the expense of both during the unproductive seasons. And yet in a socio-economic sense his work and expense of transportation is the smallest element in his service to the public, although it requires the maximum of upkeep work and expense, if not of capital. The proposed postal collect and delivery eliminates all these, and would enable the truck farmer to enter into the business on a minimum of capital, and pursue it on a minimum of labor and expense. The field service of a horse he could hire as occasion might require. Thus the truck-farming industry would receive a necessary impetus and the cost of such foods be greatly reduced to the consumer, saying nothing of the advantage in quality coming from a speedier forwarding to the market by daily allotments instead of the delays now incurred to garner a worth-while load.

This application of postal express, with its thoroughly articulated service and regular schedules, may be taken as illustrative of the close relations which may be established between the rural producer and town consumer, as well as between producers and merchants generally.

It is manifestly unfair to the proposition to judge its social value on a mere computation of the savings in rates which may be made. While this saving would amount to some $35,000,000 a year on the traffic of 1909, and from seventy to a hundred millions a year when the traffic reaches its normal dimensions, yet as large benefits will follow in clearing the prohibitive rate clogs from this necessary conduit of commerce that it may freely discharge its normal output, in placing the 50,000 express employees on a postal basis, in rendering it easier to engage in and market food production, to relieve the towns and cities of high prices for necessaries of life, and relieve them, too, of the overplus of labor, and, perhaps, too, in aiding in reversing that tendency of population movement from the country to urban centers to which is due the most aggravated and most discouraging social problems of our time.

Hearings before the Committee on the Post-Office and Post-Roads. April 20-29, 1910. pp. 296-7.

Postal Savings Bank and Parcels Post.

Letter of Dr. Barth.

Whilst the postal savings-banks system became firmly established some time ago in Belgium, France, Great Britain, Italy, Holland, Austro-Hungary, Russia, and Sweden, all efforts have failed to introduce the system into the German Empire. In the year 1885 the draft of a postal savings-bank law was laid before the Reichstag. The draft never came out of the committee. The principal reason of this opposition lay in the competitive interest of the many local savings banks existing in Germany, which are generally under the control of commercial boards of directors. Since the frustration of the plans for the law in the year 1885 no further serious efforts have been made to introduce postal savings banks.

All the greater has been the development of the parcels-post traffic with us. This traffic dates in Prussia back to the eighteenth century. Under Frederick William I there already had been introduced a postal monopoly (the exclusive right of the mail to forward packages) for packages up to 20 pounds. Under Frederick the Great this monopoly was increased to 40 pounds. By a postal law of June 5, 1852, it was again reduced to 20 pounds, and only entirely abolished by the law of March 20, 1860. This postal monopoly has never been revived in Germany; nevertheless, the parcel postal traffic has developed tremendously without the protection of a monopoly. In Germany the weight for postal parcels has now been set at 50 kilograms (110 3-10 pounds); while, as is well known, there has also existed since 1885 European international parcels-post traffic with a maximum weight limit of 5 kilograms (about 11 pounds). Only very few articles within the aforementioned weight limits are excluded from the postal traffic. Even live singing birds, fish, crabs, fresh flowers, grapes, etc., are sent by us in postal parcels. The parcels-post service in Berlin employs about 1,000 officials. The rate within the postal territories of Germany and Austro-Hungary is 25 pfennigs (6 cents) for packages up to 5 kilograms (about 11 pounds) in weight and 10 geographical miles in distance: at 50 pfennigs (12 cents) for further distances. With heavier parcels the rate increases rapidly for every kilogram (2½ pounds) in excess of 11 pounds with the growing distance, so that, for instance, at a distance of 150 geographical miles every kilogram over 5 costs 50 pfennigs (12 cents) more. This rate proves that the post lays its principal stress on receiving parcels up to 5 kilograms (11 pounds) in weight.

The parcels-post traffic in 10-pound packages is therefore the normal one. For many trades and producing branches a very strong direct traffic between the producer and the consumer has grown up in these 10-pound packages, and many articles which in the locality in which they were produced were either not utilizable, or forced to sale at a very low figure, have found a market which without the cheap 50 pfennig (12 cents) postage they would never have attained. Mushrooms gathered in the forests of Masuren near the Russian frontier come to Berlin in postal parcels. Large crabs caught in the waters of western Prussia come even to Paris. We ourselves, for example, obtain for our household through the parcels post meat from Silesia, butter from eastern Prussia, eggs from Mecklenburg, melons from Hungary, etc. For the household this is not only cheaper but also more convenient than the purchase in the market halls, for the post brings the parcels (for delivery sum of 15 pfennigs; 3½ cents) to the door, also calls for parcels, cashes in the amount in c. o. d. deliveries, in short, makes it extremely convenient for the order. It is clear that this postal traffic forced out many middlemen; the retailers especially in small places have been made to feel very keenly the competition of the large forwarding houses in the capital cities. Their complaints therefore were formerly directed very actively against the cheap parcels postage. But since the flat land in turn could derive benefits for its agricultural products, such as fruits, meats, butter, eggs, etc., from these self-same cheap rates, the complaints of the retailers became silenced after awhile as far as the question refers to the cheap parcels rates. They now turn so much the livelier against large warehouses and forwarding businesses for whom one is seeking through all sorts of lawful tricks to make the competition more difficult. The parcels-post traffic has meanwhile become so firmly rooted that it seems impossible to upset it. Considered from a politic-economic viewpoint it presents itself as a most important and very beneficent branch of the whole system transport.

Following the German example in the United States would, I believe, be of enormous advantage, particularly for the agricultural districts surrounding the large cities. For the producer of eggs, poultry, butter, vegetables, fruits there would develop, with a cheap parcels-post rate, entirely new market possibilities; also the decentralization of many branches of industry would to a certain degree become a possibility.

Monthly Consular and Trade Reports. No. 329. pp. 104-6. February, 1908.

German Parcels Post.

Consul W. T. Fee, of Bremen, states that the parcels post system of Germany, as well as most of the railroads, is owned by and is under the control and operation of the Imperial government. He adds:

The express companies in Germany are less developed than those in the United States, where the largest part of parcels forwarded are handled by these companies. Under the German parcel-post system, parcels are divided into five classes namely: (1) Parcels with value declared; (2) registered parcels; (3) common parcels, value neither declared nor registered; (4) collect-on-delivery parcels; and (5) urgent parcels. Each shipment of parcels must be accompanied by a waybill called “packet addressee”; and no more than three packages which must be of the same class, and which must bear the same address, are to be entered on one waybill. Each c. o. d. or urgent package, however, must have its own waybill.

Forms of waybills, with the respective postage stamp of the amount of the charge printed thereon, are furnished by the postoffices at the price of the postage charge, while waybills, without this stamps imprint, are sold by the postoffices at the price of 1.19 cents for five pieces. Forms of waybills, which are purchased from other sources, must conform in every respect with those furnished by the postoffice department. There are two different kinds of waybills in use, foreign and domestic.