Part 3

In Austria, Belgium, Denmark, Germany, Hungary, Norway, Rumania, the old Russia and Switzerland, packages weighing up to 110 pounds may be sent by parcel-post (and after 100 pounds the freight service of the railroads is readily available in the United States as elsewhere). In 1915 France and Italy imposed weight limits of 22 pounds. In Belgium, Germany, Hungary, Norway, Rumania and Sweden there is no size limit, except that in certain cases special fees are charged for unusually large sizes. In Italy, the limit is 24 inches in any one dimension, although in certain cases packages 41 inches long are accepted. The limit in Denmark is 39 inches in any dimension. In France, the limit is 60 inches in any direction. With no limits upon weight and size, the parcel-post might handle the problem of especially cumbersome articles whose size is disproportionately large for their weight by following the example of the express companies, charging a special rate twice as large as the normal rate. And as to shipments so bulky that especial transportation facilities are needed for them another page might be taken from the books of the express companies, and special preliminary arrangements stipulated before such shipments are accepted.

Moreover, the experience of other countries proves that there is no insurmountable obstacle to removing the limit upon the amount for which a package may be insured. Merely, special provisions might be necessary, and perhaps an additional fee above the normal insurance fee charged, for articles such as jewelry, for which space in safes would have to be reserved, and for bullion, etc. The following countries seem to have no insurance limit: Austria, Denmark, Germany, Hungary, Portugal, Rumania, the old Russia, Sweden, Switzerland. The limit in France is $1,000; in Italy, $200. In addition, some countries give automatic indemnity without separate insurance fee, up to a small amount.

Similarly, now that the parcel-post experiments for small amounts have proved successful, the limit upon the amount collected from the consignee for the expressed article itself could be and should be either removed or greatly advanced, the fee for this service advancing with the amount collected. Nor does any cogent barrier present itself against a separate division in the parcel-post system to sell articles consigned to it, or even to buy them, the fee again synchronizing with the amount of the principal involved.

The features inherent in the express service and not now in the parcel-post, as the express service and the parcel-post now function, might be preserved by either of two methods. They might be added to the present parcel-post as separate features to be utilized only when especially desired and for which separate fees would be levied. Or else the Government postal express might be organized into two separate divisions--one for the services now rendered by the parcel-post, with possibly certain additional fees for certain secondary features, to be determined by experience in administration; and the other for the services now rendered by the express companies, except those proved by experience in administration to be homogeneous with the parcel post service proper, and hence properly adhering to the first division. Either the method of complete consolidation or the method of two divisions would meet the exigencies of the service--only the results of experience and experiment could award greater merit to one or the other.

The fact that these separate functions of the express service are of too great value and in too great demand to be eliminated is seen by a study of the relation of the express shipments and the parcel-post shipments to the express and the parcel-post rates, this constituting the second point of departure (b) between the public method and the private method of transporting parcels. The differences between the express rates and the parcel-post rates may be graphically realized from a comparative table. As will be seen, the differences between the two sets of rates may be roughly summarized in one sentence--as a rule, the parcel-post rates are lower than the express rates for the shorter distances and the smaller parcels.

Accordingly, if the value of the service rendered by the two systems were nearly identical, the express company's shipments would be almost entirely of larger parcels and for the greater distances. But as a matter of fact it is generally known that a large proportion, a very large proportion, of the shipments sent by express are at weights and for distances at which the parcel-post rates are lower than the express rates, often decidedly lower. Only the need to a shipper of all, some, or any one of the above-discussed features of express service not duplicated at present in the parcel-post system can explain this situation. It is therefore imperative that the Government make provision for all these features in establishing a Government postal express.

_COST OF LIVING_

A moment's reflection is sufficient to show that a Government postal express would make express facilities available to a far greater number of persons than are served at present by the express companies. For the Government postman and the Government post office cover the country as a whole--the express companies operate only along railroad, electric, steamboat and stage-lines. Moreover, of these four media, 83.7% of the mileage is by railroad and only 2.9% by electric line, 13% by steamboat line, and 4/10 of 1% by stage-line.

All in all, the mileage covered by the express companies totals 307,400. On the other hand, the mileage covered by the postal system is 1,374,056. Of this amount, 1,112,556 represents the mileage of the rural routes alone, and the number of persons served by the rural routes in 1917 was more than 27,000,000. Of course, it is certain that not all of the persons along these more than one and a quarter million miles were deprived of the benefits of an express service, but it is equally certain that many of them were, and it is probable that the majority of them were.

But it is the extension of the express facilities to just that element of the population living off the railroads and on the rural post routes in which lie the greatest potential benefits that an express service can render to the nation. For, speaking by and large, most of this population is engaged in farming; and, conversely, possibly the majority of the producers of foodstuffs in the country live off the railroads and on the rural post routes. Now, it is stated on reliable authority that of each dollar expended by the consumer for food in New York City, for instance, the farmer gets only from thirty-five to fifty cents. In other words, at least 40% of the cost of food is represented by the cost of getting the products of the farm to the ultimate purchaser. The role thus played in the drama of the high cost of foodstuffs and the high cost of living generally is apparent. Equally apparent is the role which a simplification of or a reduction in the processes of getting food from the farm directly to the dinner table could play in lowering the cost of living.

But such a simplification and reduction are possible only to a Government postal express. At present the rural free delivery does make provision for sending farm products directly from the farmer to the consumer, but its efforts in this direction are still largely embryonic. For the machinery of the process must be constructed anew and the task of construction is one of those tasks which cannot be hurried. On the other hand, the express companies have built up through the years an extensive and efficient machinery for "farm to table" transactions, but their services in this direction are hampered by the fact that the companies are limited on the whole to the territory adjacent to the railroad lines. The fertilization of the vast farming territory tapped by the post office by the express company facilities should give birth not many months after its consummation to the one most potent factor at present available to lower the retail cost of foodstuffs to an appreciable extent.

Under such an arrangement, a separate bureau would be established in the postal system, covering both the parcel-post and the postal express. This bureau would collect names of farmers--both those voluntarily resorting to it and those reached in its own canvasses--who would send their products collect on delivery to consumers. Similarly, lists of consumers desiring thus to be served would be collected. It would be no difficult matter for individuals on the two lists to get into touch with one another, and to deal directly through either the parcel-post or the postal express. Where they could not by their own arrangements get into touch with one another, the bureau's task would be to get them into touch. And where a farmer and a consumer could not even thus be brought into direct contact, the bureau would act as the agent for each--maintaining warehouses, if necessary, to which farmers would send goods to be sold at a stated minimum price and to which consumers would resort for their purchases. Since these functions are already performed to a slight extent by the express companies, there should be little question of the legality of such procedure by the Government. If necessary, additional legislation might be sought; nor after the activities of the Government during the Great War would there be much likelihood of such legislation being declared unconstitutional.

_ECONOMY IN OPERATION_

It has been seen that about 50% of the charges collected by the express companies for the transportation of packages go to the railroads, 50% remaining to the express companies. To be exact, in 1917 the sum of $222,860,373 represented the collection charges by the express companies, of which $113,535,059, or 51%, went to the railroads, leaving to the express companies from transportation, $109,325,314. Revenues of the express companies from operations other than transportation brought their total revenues up to $115,920,129. Their operating expenses were $113,721,057. In other words, for every 10% by which Government operation of the express service might decrease the operating expenses of the express service, even if the present contracts with the railroads are assumed by the Government, there should be a saving in the amount of express rates assessed the public of no less than 5%.

Such savings seem inevitable under a Government postal express. Vast as is the extent of the parcel-post operations, there is no evidence that all or even most of its ramifications have yet reached that point of magnitude where the addition of new business means an increasing instead of a decreasing cost per unit. Let it be remembered that the parcel-post carried in 1917 some 1,120,000,000 parcels and the express companies some 280,000,000; so that, taking into account the secondary features of the express service not performed at present by the post office, the inclusion of the express service in the parcel post would increase the latter's activities not much more than 25%. Certainly, it may be fairly assumed that any such services in which the law of increasing costs per unit might hold would be at least counter-balanced by services in which the law of diminishing costs per unit would hold; so that we may consider the economies of a Government postal express absolutely instead of relatively.

CONSOLIDATION OF EQUIPMENT

In the first place, the express companies require for their operations much the same kind of equipment as is required by the Post Office Department. Express cars and railway postal cars; horse-drawn express delivery wagons and horse-drawn post office delivery wagons; motor express trucks and motor post office trucks; express company horses and Post Office Department horses--all do similar work, along similar routes, in similar sections of similar cities at similar times of the day and under similar conditions. The economies possible by consolidation are lessened only slightly by the fact that on the main railroad trunk routes express traffic is often carried by trains composed entirely of express cars, in which there can obviously be little saving by consolidation of the express system and the parcel-post. In passing, it should be noted that the railway mail cars are furnished by the railroads, and in most cases the trucks and wagons and automobiles used in transporting mail through a city render that service by contracts of the Post Office Department with their owners; so that the savings in consolidation would accrue indirectly by lower contract rates rather than directly.

Especially in smaller communities and in the thinly settled outskirts of larger communities can one wagon or one motor truck often render the service now requiring one express wagon or motor truck and one post office wagon or motor truck. On less crowded routes and on less crowded trips, one railroad car can often render the service now requiring an express car and a railway post office car. And on the crowded routes and in the thickly-populated cities, if one vehicle of transportation cannot render the service now requiring two, at least in many cases four such vehicles can render the service now requiring five. (Note 3.)

CONSOLIDATION OF AGENCIES

In the second place, it has been seen that each of the express companies of the United States concentrates its activities upon a certain section of the country. That is to say, on many occasions a package traveling a long distance may be handled by two or three, or sometimes even four express companies before it reaches its destination. The wastes and superfluous costs therein are evident. There is not only the direct cost of unloading, transferring, and re-loading parcels from one express company to another--and at many points express offices and yards are the width of an entire city apart. There is also the cost of the complicated bookkeeping necessary to determine for what part of the journey of a package each express company has been responsible and accordingly to what share of the express charge each is entitled. That this cost is no mere creature of a brain hell-bent upon Government ownership is proved by the fact that of a total operating expense of $113,721,057 in 1917, exactly $32,272,795 or 30% was paid to office employees. As it stands, this is the largest single item of expense in the express business, nor does this sum include the salaries of the officers and general superintendents and minor managers, nor the salaries of their clerks and subordinates directly engaged in the managing and superintending aspects of the express business. A consolidation of the express companies of the country into one agency would end that large proportion of office work attendant upon the calculation of the pro rata returns to separate express companies, and upon the issue of separate receipts, waybills, etc., and would hence result in still further reduction of express rates.

CONSOLIDATION OF PERSONNEL

But, in the third place, there are also to be considered the expenses represented by the employees not in the offices--those on the vehicles, around the stables and garages, and on the trains. Consolidation of the express service with the postal service would result in a consolidation, not only of equipment, but also of personnel. If one truck does the work of two trucks, or four trucks of five, two truck employees can do the work of four, or eight of ten. Where one railway car does the work of two, one railway car crew can do the work of two crews. That such saving would have a not altogether inconsiderable effect upon the operating expenses and hence upon the rates of the express companies is evident from the fact that the wages of vehicle, stable, garage and train employees amounted in 1917 to $23,547,906, or 20% of the operating expenses of the express companies.

CONSOLIDATION OF OFFICES

In the fourth place, there were in the United States in 1917 some 55,000 post offices. The number of express offices is not definitely known, but it is probably in the neighborhood of 40,000. The possibilities of saving by cooperation and consolidation here are again obvious, particularly when it is remembered that a large section of the activities of practically every post office is given over to handling packages mailed under the parcel-post. Especially in many smaller cities and towns, post offices could handle with little increased cost the business now requiring separate express offices in those localities. Where post office facilities are inadequate to handle the demand now being made upon them, the present express company offices might readily serve to save the cost of additional construction and facilities in the future. The amount of rental saved merely by the consolidation of many different express offices may be indicated by reference to the recent experience of the Railroad Administration in a parallel situation. Similarly, there is possible an extensive consolidation and economizing in stables and garages, office furniture and supplies.

THE POSTAGE STAMP

In the fifth place, there is the saving represented in the very nature of the postage stamp itself, which can be sold and accepted for payment of charges only by the Post Office Department. Much of the expense of the express companies in issuing receipts, making statements, checking upon money received, etc., could be saved if the express parcels could proceed under a postage stamp.

MISCELLANEOUS SAVINGS

Finally, there are the hosts of miscellaneous items of operating expenses in which we must be led to expect saving by all other experience in consolidating similar agencies performing similar services. Some of these expenses might even be eliminated entirely under Government ownership and control. Such are the cost of superintendence and auditing, insurance, the cost of securing traffic commissions, advertising and law expenses, to say nothing of the profits paid stockholders in normal years.

The amount of these savings can only be roughly surmised; but in 1912, Mr. David J. Lewis estimated that they would amount to at least 40% of the total operating expenses. In this connection, it may be remarked in passing that Mr. Lewis's qualifications for throwing light upon the express service problem include not only theoretical knowledge gained by years of study of the problem, both here and abroad; but also practical knowledge of ways and means, as attested by general belief that the establishment of a parcel-post in the United States was due to his analyses more than to the efforts of any other one man; and also by the fact that when the Government in 1918 assumed responsibility for the management of the telephone and telegraph systems of the land, Mr. Lewis was made, and at the time of writing is, the general manager in charge of those systems while under Government control. Certainly, in view of the economies enumerated above as inherent in Government ownership and control of the express companies, on the face of it Mr. Lewis's statement seems extremely reasonable.

THE CONSEQUENT REDUCTION IN RATES

So that, if Mr. Lewis's estimate were accurate, and remembering that the operating expenses of the express companies in 1917 represented one-half of the total charges made by the express companies for transportation, a reduction of 20% in the express rates should accompany the acquisition of the express companies by the Government, other things being equal. But other things are not equal. Lower rates mean increased business; and in an agency which has developed the field at its disposal so inadequately as have the express companies, each additional unit of business can be handled at a lower cost and hence at a greater profit than each previous unit. This consideration was the primary one advanced by the Interstate Commerce Commission in ordering 16% reduction in the express rates in 1914. So that, the lower amount of profit per parcel being counterbalanced by a greater number of parcels, the economy in a Government postal express should be represented by a lowering of express rates anywhere from 25% to 35% of the present rates.

But up to this point our calculations have assumed that under a Government postal express the railroads would continue to obtain their 50% of the charges on each package transported by express. This method of calculating the return due to the railroad is certainly ingenious in its simplicity and lack of scientific basis, but it is just as certainly unfair to the shipper of parcels by express. Let us consider, for example, two shipments of similar articles under similar conditions--one from New York City to Yonkers, New York, a distance of some 20 miles; the other from New York City to San Francisco, a distance of more than 3,000 miles. In each case, the express companies collect the parcel and deliver it to the railroad in New York City; and collect the parcel from the railroad and deliver it to the consignee, in the first case in Yonkers; and in the second case in San Francisco. In both cases, the services rendered by the express companies are about identical, aside from the different lengths of time during which space and protection in express cars must be afforded. But the services rendered by the railroad companies are far different in the two cases. In the first case, the parcel is carried for less than an hour; in the second place, for some days. Obviously, the share of the railroad in the entire service rendered in transporting the parcels is less in the first case than in the second, but in each case it gets the same share of the total express charge--namely, 50%.

Such a system in its very nature must thwart any attempt to make express rates reflect the value of express service. For, of course, the rates actually fixed endeavor to do justice to both the express companies and the railroads in each case considered above. In the first case, the rate must be high enough so that 50% of it will not be too glaringly little for the express companies to retain for their _relatively_ more important and more costly service of collecting a parcel in New York and delivering it in Yonkers. In the second case, the rate must be high enough so that 50% of it will not be too glaringly little to turn over to the railroad for their _relatively_ more important and more costly service of carrying the parcel across the continent. The railroad directors and express company directors cannot be expected to have reached a fair compromise after fighting for their own interests when the contracts were originally made, for, as has been seen, their interests are largely identical. It would seem, then, that only the shipper sending a parcel several hundred miles is charged a fee commensurate with the value of the service rendered him. It would seem that shippers sending parcels shorter distances must be charged too much and that shippers sending parcels longer distances must be charged too little. A glance at parcel post rates proves the validity of this surmise, for parcel post rates are lower than express rates for shorter distances and higher for longer distances. Under the present system of competition between the parcel post and the express companies, the nature of the contracts between the express companies and the railroads compels express rates which unfairly discriminate against the express companies at the shorter distances and unfairly discriminate against the parcel-post at the longer distances.

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