Part 2

The Mann-Elkins Act of 1910 went even further. Among its other provisions, the burden of proof on rates was shifted to the express companies and the Commission was given power to initiate, of its own volition, express rate rulings which not much later became subject to review only by the Supreme Court of the United States. Power over the classification of express traffic was also specifically given to the Commission. The Commission immediately utilized its new powers to inaugurate a searching investigation of every aspect of the express business, with the result that on February 1, 1914, there went into effect a reduction in rates amounting to an average decrease of about 16%, together with a new system for calculating such rates, the country being divided for that purpose into five zones. The newly prescribed rates were stated and arranged after a fashion simple enough to be readily understood by any tyro. All direct and indirect rebates were abolished. Articles of food were to go at three-fourths the new rates. The classification of merchandise was radically simplified. (Already in 1913, a further act of Congress had made discrimination against shippers a criminal offense punishable by fine or imprisonment.)

PARCEL-POST

But the hardest blow to the express companies had been delivered on August 24, 1912. On that day, after years of agitation, a bill providing for a parcel-post in the United States became the law of the land; and the parcel-post system went into effect on January 1, 1913. Congressman David J. Lewis conducted a staunch campaign to have a postal express provision included in the new law, but unsuccessfully; and the weight limit of the parcels which could be sent through the post office was fixed at eleven pounds. Nevertheless, the United States Express Company saw the handwriting on the wall, and in that year decided to wind up its business, ceasing operations on June 30, 1914.

The detailed history of the development of the parcel-post in the United States, closely related as are the parcel-post and express problems, is not pertinent to this study. It is sufficient to point out that more and more the parcel-post has been broadened so as to include much of what was the express companies' field. At the present time, the weight limit is 70 lbs. for a distance up to 300 miles and 50 lbs. for greater distances. Packages may be sent collect on delivery up to $100, and they may be insured up to $100. There are separate fees for those two latter services up to ten cents, which amount covers both a collection on delivery of $100 and insurance of $100. A receipt is given for the uninsured pre-paid parcel for a fee of one cent. So that by January 1, 1918, the business of transporting goods too small or too valuable to be transported as freight was divided between two agencies in competition with each other--one of them governmental, one of them private.

_THE PRESENT ACTIVITIES OF EXPRESS COMPANIES_

Before considering the problem thus presented to the mind--nor would it be inexact to add, to the conscience of every keenly-scrutinizing student of political and industrial phenomena in the United States--a resume of the practically contemporaneous activities of the private express companies will be helpful. In the twelve months preceding January 1, 1918, the statistics of the eight express companies doing interstate business in the United States--the Adams, American, Canadian, Great Northern, Northern, Southern, Wells-Fargo and Western--were as follows:

Total Mileage 307,400

Railroad 257,408 Electric Line 8,802 Steamboat 39,995 Stage Line 1,195

Total Mileage 307,400

Adams Express Company 48,602 American Express Company 73,289 Southern Express Company 34,918 Wells-Fargo and Company 115,521 All others 35,070

Cost of Land, Buildings and Equipment on January 1, 1918 $44,160,773 Land and Buildings 20,811,830 Equipment 23,348,943

Inventory Value of Equipment owned on January 1, 1918 $13,735,058

Total Express Charges $222,860,373 Other Operating Revenue 6,594,815 ------------ Total $229,455,188 Operating and Other Expenses $229,639,493 _Deficit from Operating_ 184,305 Other Income 4,471,292 Gross Income 4,286,987 Deductions from Gross Income 1,538,481 ------------ Net Income $2,748,406 Dividends 2,508,044

Profit and Loss Balance $24,294,792 Total Investment, Including Real Property and Equipment $123,484,515 Capital Stock $59,008,600 Funded Debt Unmatured 20,736,500

Money Orders Issued: Number 16,035,002 Amount $145,934,982

C. O. D. Checks Issued: Number 8,612,106 Amount $143,832,226

Limited and Unlimited Checks Issued: Number 236,071 Amount $108,798,279

Telegraph and Cable Transfers: Number 88,146 Amount $136,809,746

Travelers' Checks Issued: Number 1,608,037 Amount $34,923,816

Letters of Credit Issued:[1] Number 1,539 Amount $4,126,154

Revenue from the above six items and other sources, other than Express Charges $6,594,815

Maintenance Expenses $6,527,766 Traffic Expenses 925,033 Transportation Expenses $98,583,724 (Employees' Wages) (55,820,701) General Expenses 7,684,534 (Salaries and Personal Expenses) (4,161,299)

[Footnote 1: Including 569 Postal remittances to the amount of $39,435, issued by the Canadian Express Company.]

NOTE:--Of the above figures the Adams, American, Southern and Wells-Fargo Companies accounted for 89% of the mileage and for 94% of the total operating revenues.

One feature of the above figures stands out pre-eminent. With a capital stock of $59,000,000 and a funded debt of $21,000,000, the express companies performed express operations bringing in an annual revenue of $223,000,000. (Of this latter sum, one-half went to the railroad, steamship and stage lines for transporting the packages entrusted to their care by the express companies.) On January 1, 1918, the cost of the land and buildings owned by the express companies was slightly more than $20,000,000 and of the equipment slightly more than $23,000,000. It is therefore immediately evident that the most valuable asset of the express companies is to be found, not in their tangible property, but in their contracts with the various railroad companies giving them the exclusive right to have their packages transported by the railroads on passenger trains--in a sense, their charters.

PROFITS OF EXPRESS COMPANIES

Previously to the regulation of express rates by the Interstate Commerce Commission and to the beginning of the parcel-post in this country, the profits of the express companies were undeniably swollen. By just how much they were unreasonably large, it is practically impossible to determine; although the Interstate Commerce Commission did on several occasions officially assert unduly large profits in the case of the Wells-Fargo Company.

As described above, three of the five leading companies had issued no stock at a fixed par value, but had distributed a certain number of shares of ownership. They had started in business with a limited equipment (Franklin K. Lane declares that it had not exceeded $1,000,000 in value) and had purchased new equipment mostly from current profits. Some companies have capitalized their profits. Others have carried them along from year to year in a profit and loss account. By their contracts with the railroad companies, they have become practically a part of the railroad system, and hence whatever equipment and property they themselves possess have served up to the present time as little basis for determining their just profits. For instance, as the decision of the Interstate Commerce Commission's report of 1912 pointed out, some one company may invest money in certain equipment which another company hires. They both may make the same percentage of profit on the same amount of business, but in the first case the profit would loom small in comparison with the property of the company, whereas in the second case, it would loom unnaturally large. In other words, a charge on capital in the first case would be classified as an item of operating expense in the second.

And yet, despite all these considerations, the fact that from 1909 to 1912 the net profits of the companies were from 17% to 65% of the value of their properties, coupled with the common sense knowledge that in those years there was no inward or outward compulsion upon the directors of the companies to charge one cent less than the traffic would bear, makes it certain enough for practical purposes that the express companies' profits were unethically swollen.

Whatever the profits before 1913, however, they have sadly dwindled since, as the following figures of the Interstate Commerce Commission will indicate:

Fiscal Operating Operating Net Operating Year Revenues Expenses Revenue

1909 $132,599,191 $120,305,182 $12,294,009 or 9% 1910 $146,116,316 $131,608,035 $14,508,281 or 10% 1911 $152,612,880 $141,025,251 $11,587,629 or 8% 1912 $160,121,933 $151,831,956 $8,289,977 or 5% 1913 $168,880,923 $163,088,205 $5,792,718 or 3% 1914 $158,891,327 $157,128,012 $1,763,255 or 1% 1915 $148,994,960 $145,037,555 $3,957,415 or 3% 1916 $179,206,649 $167,063,210 $12,143,439 or 6%

Calendar Year

1916 $196,137,768 $185,523,071 $10,614,727 or 5% 1917 $229,455,188 $227,256,116 $2,199,072 or 1% 1918 ... ... $5,579,601 _Deficit_ (First five months)

NOTE:--In studying the above figures, it must be remembered that approximately one-half of the operating revenues are paid to the railroads for transportation, so that for practical purposes the ratio of the total operating revenue to the net operating revenue with respect to the direct business of the express companies--the collection of packages for the railroads and the delivery from the railroads--would be approximately twice the percentages in the above table.

_GOVERNMENT POSTAL EXPRESS VS. PRIVATE EXPRESS COMPANIES_

At certain periods of each year, the Post Office Department takes a count of the packages mailed in the parcel-post, the postage collected on them, and their total weight. These periods of count are the first two weeks in April and the first two weeks in October. By multiplying their sum by 13, we can thus obtain a fairly accurate figure for the total number of parcels mailed within the year in 1917--roughly 1,120,000,000. On the other hand, the number of parcels carried in that year by the express companies may be put at 280,000,000. (Note 1.)

Accordingly in 1917 the number of parcels expressed in the United States was roughly as follows:

By Parcel-Post 1,120,000,000 By Express Companies 280,000,000

But in 1912, if the average express charge was the same as in 1909, and no reason is known why it should not have been, the number of parcels carried by the express companies was about 320,000,000. In that same year the number of parcels carried by the post office, under the four-pound limit, was 240,000,000. In other words, the effect of the entrance of the Government into what had been a field of private enterprise resulted within five years in an increase of more than 450% in the extent of the service rendered by the Government, whereas the express company's services to the public in that time actually decreased 12-1/2%, although the extent of the total services rendered by the two combined agencies increased 250%.

Nor can the increase in the parcel-post business be explained by the assertion that the Government performs this business at a great loss. The balance sheet of the Post Office Department since 1912 has been as follows:

1912 $1,781,435 _deficit_ 1913 4,551,984 surplus 1914 4,390,796 surplus 1915 11,297,861 _deficit_ 1916 5,853,655 surplus 1917 9,887,398 surplus

Now, it is obvious that the financial account of the entire Post Office Department is composed of too many divergent elements for the financial account of the parcel-post alone to have any conclusive bearing upon it. But it is equally obvious that if so extensive and particularly so expensive a function of the Postal System as the parcel-post had been conducted at a considerable loss, the fact would be reflected, to some extent, at least, in a growing deficit of the Department as the parcels conveyed grew in number from 240,000,000 in 1912 to 1,120,000,000 in 1917. Nor have the railroads made good before the courts or before the Interstate Commerce Commission their contention that their recompense for carrying parcels is unfairly low.

COMPARISON WITH OTHER COUNTRIES

Similar findings on the comparative value of the Government service and the private companies' service in the express fields may be obtained from another source. Up to January 1, 1913, outside of parcels weighing less than four pounds, the private express companies had unchallenged exploitation of the express service of the United States. How did the extent of our service in 1912 compare with the extent of the service in other lands in which our private express companies found no counterparts?

Obviously, there is no absolute basis for fruitful comparison. Greater distances, more sparsely settled territory, greater wealth, greater geographical specialization of function and hence greater need for integration between different sections, higher standards of living, more diversified demands--these are some of the features of the problem here as compared with the problem abroad which make an absolute comparison of express services valueless. But practically every feature of the express situation would affect also the freight traffic of the United States as compared with the freight traffic abroad. In other words, the express traffic of the United States before 1913 should have had the same ratio to the freight traffic of the United States as the express traffic of other lands to the freight traffic of other lands, in case the United States express companies were as efficient in comparison with foreign express agencies as the railroads of the United States in comparison with railroads.

In a hearing before a committee of Congress in 1912, Mr. David J. Lewis, then a congressman from Maryland, presented the evidence, which he had obtained from the original reports of the railways of the countries concerned:

_Pounds_ _Pounds_ _Ratio_ _Freight_ _Express_ _Express_ _Shipped_ _Shipped_ _Shipped to_ _Country_ _Date_ _Per Capita_ _Per Capita_ _Freight_ Argentina 1909 10,680 165.4 1 to 64 Austria 1908 11,260 116.6 1 to 97 Belgium 1909 16,320 199 1 to 82 Germany 1909 15,980 140.4 1 to 113 France 1908 7,480 140.6 1 to 53 Hungary 1908 5,540 67.8 1 to 84 United States 1909 16,300 99 1 to 165

In other words, the express facilities of the United States were used 50% less than in the country above showing the lowest development of express service and about 200% less than in the country showing the highest development of express service. When it is remembered that express is much quicker and more convenient than freight, although more expensive, and that the industrial processes of the United States have long been and still are characterized by a keener demand for speed and convenience, irrespective of cost, than the industrial processes of other countries, the above table becomes eloquent with significance.

With respect to the costs of the express service, the same basis for comparison may be used.

_Ratio_ _Average_ _Average_ _Freight_ _Freight_ _Express_ _Charges_ _Charge_ _Charge_ _to Express_ _Country_ _Date_ _Per Ton_ _Per Ton_ _Charges_ Argentina 1909 $1.95 $6.51 1 to 3.2 Austria 1908 .74 3.77 1 to 5 Belgium 1909 .53 4.92 1 to 9.3 France 1908 .95 6.88 1 to 7.2 Germany 1908 .76 3.80 1 to 5 Hungary 1908 .93 3.68 1 to 3.9 United States 1909 1.90 31.20 1 to 16.4

And yet the statesmen at Washington have disposed and doubtless will still endeavor to dispose of the proposal to have the Government own and manage the express service of the land by speeches on texts to the effect that the spirit of America demands individual freedom; that that is the best Government which governs the least; that incentive to productive endeavor is possible only in private establishments and completely disappears in the public service; to which will now doubtless be added the charge that such a proposal smacks of Socialism and that every red-blooded American understands that anything and everything Socialistic is undeniably un-American!

The implication of the above figures, however, is undeniable for the man who trusts thought as well as emotions. The Postal System has gone into the express field and, in competition with the express companies, by their respective showings, has in five years rendered to the American public far more valuable service than that rendered by the express companies. The opponents of Government ownership and management have been ruthlessly confuted. They predicted graft--there has been none. They prophesized inefficiency--the figures give them the lie. They foretold unwholesome political intrusions--whatever may be the unwholesome features of the present operations of our postal system, those operations are less unwholesomely attached to political influences than ever before. There is accordingly every reason _a priori_ to assume that the Government would render more valuable service than that rendered by the express companies in the remaining section of the express field unoccupied by it and still occupied only by the express companies.

But there is no necessity for relying upon _a priori_ reasoning. The results to be achieved by the consolidation of the express service of the land into the postal system of the land are definite and demonstrable.

EXPRESS SERVICE VS. PARCEL-POST

Before defining and demonstrating the advantages of a Government postal express, however, it may be necessary to discuss more fully the features which differentiate at present the parcel-post from the express service.

They fall into two classes, (a) Special forms of service, and (b) Rates.

Under (a):

_Express Company_ _Parcel Post_

1. Collects the parcel free of 1. ---- charge.

2. The fee includes insurance 2. Special fees for all up to $50 without charge; insurance--insurance limit, additional insurance up to $100. any amount may be contracted for by special fees.

3. All sizes and weights are 3. Weight limit--70 lbs. (300 accepted. miles), 50 lbs. (above 300 miles). Size limit--84 inches, length and girth combined.

4. Collects fee from consignee 4. Collects fee from consignee at destination free at destination at a fee. of charge.

5. Collects cost of article itself 5. Collects cost of article up to any amount. to $100.

6. Buys articles for customers 6. ---- at a fee.

7. Sells articles for customers 7. ---- at a fee.

It will be immediately realized that some of the features of the express service which are not rendered at present by the parcel-post could be and should be rendered by the parcel-post for one fee without separate charges. On the other hand, it will be realized that some of these features should be rendered by the parcel-post only as separate privileges for which separate fees should be charged, as, for instance, the service of collecting parcels from the shipper. (Note 2.)

For instance, there seems to be no good reason for limits upon the size and weight of the packages in the parcel-post. These limits have steadily been expanded in the parcel-post system from its inception, and the process has so strikingly demolished whatever arguments for size and weight limits may have previously been considered that they no longer seem valid.