Part 1

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THE EXPRESS COMPANIES OF THE UNITED STATES

A Study of a Public Utility

By BERT BENEDICT

Price 10 Cents

Published by THE INTERCOLLEGIATE SOCIALIST SOCIETY 70 Fifth Avenue, New York City 1919

_FOREWORD_

The Intercollegiate Socialist Society takes pleasure in presenting to the public this careful monograph of Mr. Bertram Benedict on the important subject of "The Express Companies of the United States." The pamphlet is particularly timely in these days when the nation is endeavoring to formulate its policy regarding the future control of the express business.

It is, moreover, the first concise and scholarly analysis of the express service in America that has appeared in recent years and is a distinct contribution to the literature on the subject. The author herein presents a vivid, bird's-eye view of the development of the express companies from the days of the stage-driver up to the present time. He portrays the rapid consolidation of express systems, their integration with the great railroads, their remarkable enlargement of activities, the growing competition of the parcel post with the private express systems and the increasing governmental regulation over this utility.

This survey is followed by an analysis of the present status of the express companies, and a discussion of express profits. The relative service rendered by express and parcel-post is then dealt with, and the reader is treated to an illuminating discussion of the probable savings accruing from government ownership and management of the express industry, particularly as a result of consolidation of equipment, agencies, offices, etc.

In conclusion, Mr. Benedict deals with various methods whereby the government may take over the express companies, tells of the present status of the companies as a result of the war, and gives us a glimpse into future developments. The author reaches the conclusion that the express service should be a public agency and that it should be closely connected with the post office department rather than with the railroad administration. The pamphlet as well explains the manner in which European countries have handled this problem and presents a complete bibliography on the general topic. The author throughout gives a wealth of accurate information concerning the express system in all of its manifold relationships.

The pamphlet is one of a series planned by the Intercollegiate Socialist Society on various phases of public ownership and democratic management.

HARRY W. LAIDLER.

_INTRODUCTION_[A]

_THE CHARACTER OF EXPRESS SERVICE_

The express companies of the United States are unique organisms, and have no counterparts in any country outside of North America. In Europe, their services are performed by the parcel-posts or by the railroads themselves, often in conjunction with collecting and delivering companies.

The express company in the United States collects from the shipper the matter to be sent by express and delivers it to the consignee. The charge for expressage may be either paid by shipper or collected from the consignee. The transportation between different points is generally furnished by the railroads, although steamship and stage lines are also used to a slight extent; and the charge for this transportation, as well as the charges for collection and delivery, are included within the one fee levied by the express company. This one fee also automatically includes insurance up to fifty dollars, there being additional fees for additional insurance, to the amount of which there is practically no limit. The goods shipped are sent in express cars attached to passenger trains or on special express trains maintaining the speed of passenger trains. Because of the speedy transportation thus afforded, merchandise large enough to be sent as freight, such as machinery and live stock, is often forwarded by express; but by far the greater part of express traffic in normal times is composed of articles weighing less than one hundred pounds. The larger companies conduct their activities in foreign lands as well as in the United States; and in addition perform a number of subsidiary activities not connected directly with the transportation of merchandise.

[Footnote A: The author wishes to acknowledge his indebtedness to the studies of Mr. Davied J. Lewis, the one man in official public life in the United States during the last decade adequately to realize the need for investigation and agitation in the field of a Government express service.

B. B. January 25, 1919.]

_ORIGIN AND DEVELOPMENT_

The development of the express business in the United States serves perhaps as admirably as the development of any other single public utility to hold up the mirror to the economic ideology which prevailed among the American people up to August 1, 1914.

The origin of the express business in this country is usually assigned to 1839, but the Davenport and Mason Company claims to trace its beginnings back to 1836. In July of that year, a railroad was opened between Boston and Taunton, Massachusetts, a distance of 36 miles; and with its opening Charles Davenport and N. S. Mason delivered valuables and small packages to customers at those two towns. Even before this time, however, the picturesque and half-legendary stage-driver had often called for, transported and delivered articles entrusted to him for persons living along or near his route. Similar service had been frequently rendered also by steamboat captains and even by the conductors on the first railroads, often, if not usually, as an unremunerated personal favor. A. L. Stimson, one of the early expressmen and the author of the most comprehensive history of the express business in the United States, states that the need for some form of transportation by express was so intense before 1840 that a person could hardly make a trip between two cities without being deluged with requests to deliver parcels, and that these requests would come not only from friends and acquaintances, but even from total strangers.

THE VENTURES OF HARNDEN, ADAMS, WELLS AND FARGO

The first reliable and extensive express service, however, does date from 1839. In that year, William F. Harnden grasped the need for, and chance of profit in, the delivery of valuable parcels between Boston and New York and to that end made a contract for his personal transportation on the Boston and Providence Railroad--the first express contract in the United States. Harnden made four trips weekly, by rail to Providence and thence to New York by boat; and carried the expressed articles in a hand satchel. But within several months the business outgrew that humble forerunner of the modern express car, and he was compelled to hire additional express messengers, to set up offices, and to arrange for special space on trains.

So successful was Harnden's venture and so serviceable that he soon found himself confronted by many imitators and competitors. In 1840, Alvin Adams entered the New England-New York field, thus becoming the founder of the present Adams Express Company; and later in the same year Harnden extended his business to Philadelphia. In the following year, Henry Wells and a partner established an express service between Albany and Buffalo. By 1845 express companies had sprung up on every hand. In the latter year Wells and William G. Fargo developed a company to cover territory, much of it railroadless, west of Buffalo; and very soon this service reached Chicago. Early in the fifties Wells and Fargo were delivering in California by the stage coach and pony express of song and story and motion picture, although it was not until 1869 that the first transcontinental railroad was completed. (The pre-occupation of the present Wells-Fargo Express Company with the western field is thus not fortuitous.) And by the early fifties also Adams and Company was beginning to tap the South.

EXPRESS COMBINATIONS

In 1850, Wells and Company, Livingston and Company, and Butterfield, Wasson and Company so far violated the contemporaneously sacrosanct belief in the greater efficiency of the competitive system and the contemporaneously pseudo-religious authority of the whole principle of competition as to combine into one large corporation, the American Express Company. Later, Wells, Fargo and Company organized as a joint stock company with a capital of $300,000. The year 1854 saw the consolidation of Adams and Company, Harnden and Company, Thompson and Company, and Kingsley and Company into the Adams Express Company, and in the same year the United States Express Company was organized. The origin of the Southern Express Company dates from 1886--it is controlled by and is recognized as a part of the Adams Express Company. These four express companies continued through the nineteenth century and into the twentieth as the four great branches of the express service system of the United States. It is true that there existed by their side a number of other companies, but the latter were subsidiary, local and comparatively unimportant. The fields of activities of these four great national systems were as follows: _Adams-Southern_--the East, middle West, and several western routes, and the South; _American_--the East, middle West and trans-Mississippi; _United States_--the East outside of New England and the middle West, with several western routes; and _Wells-Fargo_--the far West and the Southwest, with several eastern routes. But there have long been complete understanding and gentlemen's agreements among the separate companies; and for practical purposes they formed, not four units of competition for the express business of the country, but four branches of one organization. Several Canadian companies also do business in the United States.

LACK OF REGULATION

During the sixty years from the inception of these private express companies in the United States to the dawn of the twentieth century, the rendering of this express service, of vital significance to the economic needs of the United States and of vital potential significance to the social needs of the people of the United States, was relegated without whimper to unchecked private agencies. Although the last thirty years of the nineteenth century saw the development of the United States into a complex and extensively specialized industrial mechanism--with a growing dependence of each geographical division of the country upon every other geographical division and of each economic unit upon every other economic unit--the country seems never to have suspected that it might well claim authority over so important a link in its industrial integration as the transportation and delivery of all merchandise too small or too valuable to be transferred and delivered as freight. There sprang into being during this period only some futile and spasmodic attempts at state regulation. By 1871, Germany had developed its remarkable Government express service, which later was classified into passenger and fast freight divisions, with corresponding variation in costs. In Great Britain, agitation for developing the express business as a part of the postal system had resulted in the establishment of a Government parcel-post as early as 1883. By 1892, the French Government was conducting an express business, selling the transportation of parcels both large and small to the French people without yielding profit to any owners of stocks and bonds, but imposing charges just high enough to meet the cost of the system; and developed, like our own rural free delivery, with an eye primarily to the service of the people, not to the profit-and-loss balance-sheet. But who were these countries that the United States could learn anything from them? The United States was the land of opportunity, and if gentlemen of affairs had been skilful enough to corral under their control the express business of the land, we most emphatically refused to thwart their opportunity for making the most of their foresight. We suggested jail for the agitator who insisted that the country owed the poor man a living, but the keystone of our economic creed was a faith that we owed the rich man a living. We weren't interested in what was serviceable as such to the people as a whole--we believed in the divine right of private enterprise of the economically capable. Were the express companies enforcing exorbitant rates? _Private enterprise._ Did they discriminate against certain shippers? _Private enterprise._ Did express profits represent a small amount of traffic at a high profit instead of a large amount of traffic at a low profit? _The freedom of private enterprise._ Was the cost of expressing a package unduly high because of the costliness of frequently transferring it into the hands of five separate companies? _Private enterprise._ Could the Government do the business more satisfactorily, more cheaply and more extensively, and thus reduce the cost of many commodities to their consumers? _The holiness of and the necessity for the untramelled right of private enterprise._

Accordingly, it was not until 1890 that even any accurate and reliable figures of the quantity and quality of the express service of the country were available for purposes of mere study and investigation. Within the census of that year, the express companies happened to be included--a survey being made of their operations for the fiscal year ending June 30, 1890; and thus for the first time and after fifty years the American people were able to get some information on the operations of the private agencies to whom the express service of the land had been entrusted. It is true that the act of Congress authorizing the census of 1880 had contained a provision for the collection of statistics of the express companies, and that a schedule of inquiry directed toward that end had been formulated and distributed. Only two of the eighteen companies in existence, however, replied to it. The others maintained that the census law had no authority over their vested interests, and declined to make a report. The Census Office in 1880 actually reacted to this attitude by courteously abandoning its legally-authorized investigation, and contenting itself with publishing merely some information on the contracts between the express companies and the railroads. And, although the 1890 Census went so far as to publish the expenditures of the express companies, it very naively declined to report upon their receipts.

AUXILIARY FUNCTIONS OF EXPRESS COMPANIES

By 1890, moreover, the express companies had developed and at the present time are performing certain functions which are secondary to or even independent of the express business proper. These functions for the greater part parallel at the present time similar functions performed by the national government or by other agencies. These adjunct and independent functions are:

1--The issue of money orders, letters of credit, travelers' checks, etc., payable through express company agents and correspondents over well-nigh the entire civilized world.

2--The purchase for customers of goods in any locality in which an express office is located.

3--The sale for their customers of goods in any locality in which an express is located.

4--Miscellaneous services, such as filing legal documents, redeeming pawned articles, selling exchange, entering and clearing articles of import and export at customs houses, paying bills, and, in short, attending to any business which can be readily performed by an agent for a customer.

THE 1890 CENSUS

Remembering, then, these secondary as well as the primary aspects of the express business, the students of the 1890 Census on Express Companies would have learned the following facts:

Number of companies 18 Total mileage operated 174,535 Total on Railroads 160,122 Total on Water Lines 10,822 Total on Stage Lines 3,055 Value of Equipment and Fixtures $5,074,045 Expenditures $45,783,123 Receipts Not reported Number of employees 45,718 Number of Money Orders Issued 4,598,567 Number of packages carried by Express 115,377,112 Paid to Railroads, Steamboats, and Stage Lines for transportation $19,561,182

Of the total mileage operated, as shown below, 92.7% was operated by the five leading companies listed above and the Pacific Express Company. The latter, organized in 1879, was owned and directed by the Gould group of railroads (the Union Pacific, Missouri Pacific and Wabash Lines); its business was taken over in 1911 by the Wells-Fargo Company.

Total mileage operated 174,535 Adams Express Company 24,919 American Express Company 43,126 Pacific Express Company 21,332 Southern Express Company 21,714 United States Express Company 21,479 Wells-Fargo Express Company 29,098

These six companies also carried 92% of the parcels carried by express, as follows:

Total number of packages 115,377,112 Adams Express Company 26,456,382 American Express Company 23,871,251 Pacific Express Company 7,552,622 Southern Express Company 7,552,622 United States Express Company 17,039,844 Wells-Fargo Express Company 22,658,384

The unquestioning devotion of the American public of 1890 to the principles of private enterprise is attested by the fact that there was no further census, and hence no further reliable information about the express companies, until 1907. It is true that the express companies were included in a Census Report on Transportation in 1894, but this survey could hardly be considered comprehensive.

THE EXPRESS COMPANIES AND THE RAILROADS

Until the twentieth century, then, the express companies remained unchallenged and even uninvestigated in their control of the service of transporting packages and parcels weighing more than four pounds. (Packages and parcels up to four pounds in weight could be sent by mail.) In ownership and control as well as in the nature of their activities, they were linked with the great railroad systems; and there was in addition an extensive amount of interownership between the various express companies. When the 1907 (the second) Census report on express companies was published, it was found that of the $68,853,200 capitalization of the seventeen important express companies, $20,668,000, or 30%, was in the hands of the railroads as such. [The express companies as such had reciprocated by buying and holding the stock of railroad companies to the amount of $22,218,950 and railroad bonds to the amount of $12,324,000.] Moreover, of the $68,853,200 capitalization of the express companies, $11,618,125, or 17%, was held among the various express companies as such. How much of the remaining 53% of the capitalization of the express companies was held by individuals interested in the railroad holdings and control cannot be told, but may certainly be surmised.

It is therefore not surprising to find that in 1909 of the seven directors of the Adams Express Company, four were directors of railroad companies; of the nine directors of the American Express Company, three; of the seven of the Pacific Express Company, six; of the seven of the United States Express Company, two; and of the thirteen of the Wells-Fargo Company, ten. In 1918, more than half of the directors of the four large express companies were also directors of railroads. The explanation of the willingness of the railroad companies not to disturb the express companies in their exclusive exploitation of the express service field is hence not difficult to find. Even those few of the directors who were not directors in railway systems were nevertheless also of that group of controllers of industry which was responsible for the sinister connection between American politics and American big business which for so many years had prostituted the promise of American life. Furthermore, whatever few regulations could be applied generally to corporations as such had little effect upon the express companies; for the Wells-Fargo and the Southern were, and up to the present time are, the only large companies which have the corporation structure. The other three maintain their early status as limited partnerships of a fixed number of shares without fixed par value, although the Adams Express Company, on December 15, 1913, assigned a par value of $100 to each of its 120,000 shares outstanding, giving it a capitalization of $12,000,000.

Of no less wisdom than cynicism accordingly was the remark of a prominent American statesman when propaganda for the establishment of a parcel-post had finally begun to rear its defiant head: "There are four reasons why the parcel-post cannot be established in the United States," with the explanation, when pressed for details: "The four reasons are: (1) The Adams Express Company; (2) the Wells-Fargo Express Company; (3) The American Express Company; and (4) The United States Express Company."

REGULATION

By the twentieth century, however, the hypnotic spell of the private enterprise creed over at least the middle and lower economic classes was beginning to weaken. The American public was developing a sullen and by no means silent antipathy--in some sections seemingly congenital--to the great national corporations. The storm had burst first upon the railroads; and when in 1906 the Hepburn Act gave the Interstate Commerce Commission definitely increased powers over the railroads, with commendable logic the express companies were coupled with the railroads in the scope of the law. All express tariffs had to be filed with the Commission. No change could be made in a tariff except after thirty days' notice. A uniform system of accounts could be and soon was ordered by the Commission. The Commission was given access to all the books and records of the companies. And, of especial significance, upon complaint express rates could be fixed by the Commission, subject to review by Federal courts.