Part 10
Reconciliation of private capital and the users of railroads might, of course, be brought about by government ownership, because if there were a deficit the people could pay it in their taxes. Even then railroad rates could not be made mathematically consistent, for government is never mathematically consistent. For example, if I mail a letter to San Francisco or London, I pay two cents, and if you mail a letter to Evanston you pay two cents. But nobody seems to want government ownership, although many people contend that that would be much fairer and more honest than governmental control of railroads without financial responsibility. Perhaps a middle ground may sometime be worked out by a profit-sharing arrangement, as in Chicago between the city and the street railway companies. That would have its advantages. Among the advantages would be cheaper money for railroads, if the government would guarantee a minimum return on agreed valuations. But of course this would be much more complex than to work out an arrangement with corporations like street railways, which do a single kind of business at one rate, instead of a business affecting every commodity of human consumption and stretching through forty-six states and two territories. However, I think there is food for thought for all of us in what has been accomplished here in Chicago, and the professional intellect present tonight may well think it over.
Finally,--while a man has as good a right to increase his fortune by investing in railroads as in any other manner, no matter what it may be, I believe we shall find a solution for some of the puzzles that beset us,--not through the gospel of tyranny on the one hand, nor the gospel of equality on the other hand, but through a gospel of stewardship. Let us all feel that although the acquisitive faculty is undoubtedly planted in the human breast for some wise purpose, we are not here primarily for personal aggrandizement. We are here for service, and the greater our talents or our wealth or our opportunities the greater our responsibility. We are trustees--for the users of our railroads, for our employees, and for investors; and let us welcome all the additional responsibility which may be put upon us as directors or salaried officials. I am sure this sentiment will commend itself to all of you, because there is no body of men in the world which has a higher code of ethics and which has demonstrated personal fidelity in a higher degree than the Engineers of America.
FOOTNOTE:
[D] In the United States in 1908 the average contents of loaded freight cars was 19.6 tons and the average of a freight train was 351.80. On some of the mineral roads the averages were much greater.--S. T.
TRANSPORTATION CHARGE AND PRICES
BY LOGAN G. MCPHERSON,
Lecturer on Transportation, Johns Hopkins University. Author of "The Working of the Railroads."
CHAPTER VI.
Reprinted by permission from "Railway Freight Rates in Relation to the Industry and Commerce of the United States," by Logan G. McPherson. Copyright 1909 by Henry Holt and Company, New York.
Vastly the greater proportion of the commodities moved by the railroads are in the processes of commerce; that is, the conveyance from the place of consignment to place of receipt in the majority of cases is sequent to a transfer of ownership. The seller cannot continue in business unless he obtain a market for his material, or his merchandise, and the purchaser can not continue in business unless he secure the material, or the merchandise, which he needs. The margin within which the added charge for transportation may be adjusted is therefore limited in one direction by the amount which the seller of a commodity will accept and the purchaser will pay and continue in business. If the seller or the purchaser cannot make a profit at least approximately as great as from other operations in which it might be feasible for him to engage he will, other things equal, change his business, and the railroad will no longer have the traffic that flowed from his operations. A railroad, therefore, must adjust its transportation charges that production may continue. This includes the adjustment of rates that products may be sent to markets, that the products of the region tributary to one railroad may reach markets in competition with similar products of other regions, and in competition with other products that will answer the same purpose.
The wider the markets that the producers can reach, the greater is the encouragement to production. The more numerous and varied the sources of supply of which the purchaser has choice, the more likely that his requirements will be met to his satisfaction. This is the case whether the sale or purchase be of food, whether it be of raw material to feed the processes of mill or factory, whether it be of wares for wholesale distribution, or whether the purchase be of merchandise by the retail dealer, or the final consumer.
It has long been claimed by the railroads of the United States that their rates of freight are lower than those of any other country, and that the nation's progress in industry and commerce has in large measure been due to the cheapness and the efficiency of its transportation service. By way of proof has been instanced the proportion that the transportation charge bears to the selling price of the staple commodities. It is said that the rate charged for the transportation of food products does not affect their selling price in any market of the United States--that price being fixed by the processes of supply and demand which the amount of the freight rate does not influence. In the spring of 1907 inquiry was made upon this point among the produce dealers of the city of New York, who gave the information contained in the following paragraphs.
The price paid by the housekeeper per dozen for eggs during the season of shipment seldom exceeds by more than five cents the price received by the Western farmer who takes them to the country store. That is, the railroads bring eggs a thousand miles to New York for a cent or a cent and a half a dozen, and two thousand miles or so for about two cents and a half a dozen, the dealers taking the remainder of the five cents as payment for handling. The net difference between the price paid per pound for butter at the creamery, whether in New York City or in the Mississippi Valley, and that paid by the New York retail dealer averages about one and one-half cents for commission and one cent for freight.
In December, January and February turkeys are taken from the Texas ranches to marketing centers, the transportation charge on ten birds weighing one hundred and twenty pounds being about 25 cents. After these ten birds have been dressed and packed they weigh about one hundred and two pounds, and the freight rate from Texas to New York is $1.50 for 100 pounds. That is, a Texas turkey that retails in the New York market for 20 cents a pound will have paid one and three-fourths cents per pound to the railroads that took it from the ranch to the concentration point and thence to the market. The farmer in Texas received about nine cents per pound, leaving a trifle over nine cents to be divided between the packing house, the produce merchant and the retail dealer. Chickens and other dressed poultry that come from Chicago pay a freight rate of about three-fourths of a cent a pound, the railroad company supplying a refrigerator car, and keeping them iced while in transit.
The rail rate from Chicago to New York on grain and grain products for domestic consumption has been about 17½ cents per 100 pounds; that is, a bushel of oats or corn or wheat, that may bring in New York anywhere from 40 cents to $1, has been brought from the Western farm for from eight to fifteen cents. Hay that has yielded the farmer $18 or $19 a ton and sells in New York at about $24 has paid the railroads somewhere from $3 to $5 per ton, according to whether it came from the meadows of the Ohio or the Mississippi Valleys.
A bullock that weighs 1,200 pounds will, at Chicago, bring on an average $5.50 per 100 pounds, which includes an average of five cents per 100 pounds for freight from the grazing grounds. Its total value at the stock yards, therefore, is $66. When it has passed through the packing house its weight will have been reduced to 700 pounds. From Chicago to New York it will pay 45 cents per 100 pounds freight or, in other words, the 700-pound carcass, which, if retailed at an average of 15 cents a pound would bring $105, has paid the railroads between $3.50 and $4 from the far West to the metropolis.
On potatoes the freight rate per barrel containing about two and a half bushels is $1.05 from Florida, 65 cents from South Carolina, 45 cents from North Carolina, 30 cents from Virginia, and from this 12 cents per bushel the rate scales down to five or six cents per bushel from nearby regions. The freight rate on tomatoes from Florida is 25 cents per package of six baskets, from Texas 15 cents for twelve quarts, from Mississippi 76 cents per 100 pounds, and from the nearby farms eight cents per bushel of twenty-eight quarts. The freight rate on cantaloups to New York ranges from less than a cent for a melon from the Carolinas to about two and a half cents for that from California. Oranges from Florida to New York pay the railroads from four to nine cents a dozen, and those from California six to twelve cents a dozen, as they may be large or small. A three-pound can of tomatoes from Maryland pays the railroad about one-half cent per can.
The freight rates to New York on foodstuffs have been selected as typical of the transportation charges applying on such commodities in the main channels of traffic from the West to the East; and, in so far as fruits and vegetables are concerned, from the South to the East. The transportation charge per consumer's unit on these foodstuffs is a trifle less to Philadelphia and adjacent Delaware and New Jersey; another fraction lower to the great Pittsburg district, and still lower to the cities of the West and South that are nearer the places of production. As prices of food products fluctuate within a fairly wide range and freight rates also fluctuate, though within but a very narrow range, the rates and prices specified in the foregoing, as well as in the succeeding paragraphs of this chapter, cannot be considered as of specific application at any given time in the future. They were exact at the time they were collated and will very closely approximate accuracy at any period.
As New York may be considered representative of the places to which edible products of the West and South are consigned, so also may St. Louis be considered a typical center of reception of the manufactured products of the East. The information given in the immediately following paragraphs was obtained from merchants and manufacturers of that city.
The transportation charge on the material entering into a pair of shoes made in a St. Louis factory averages one and one-quarter cents. The transportation charge required to place that pair of shoes in the hands of a consumer in any part of the United States averages between two and three cents. The material entering into an ordinary bedstead, such as retails in St. Louis for $8, will have paid the railroad about 40 cents. From ten pounds of nails made in Pittsburg and retailed in St. Louis the railroad will have obtained a trifle over two cents, and from ten pounds of wire two and one-half cents. An axe made in the Pittsburg district that retails in St. Louis for $1 will have paid the railroads one and one-fourth cents. At Kansas City that same axe will have paid freight of a fraction over four cents and at Denver, where the retail price will have advanced to $1.30, it will have paid 14 cents freight. A padlock retailing in St. Louis at 50 cents will have paid the railroads a little more than one-half cent; at Kansas City it will have paid one cent, and at Denver, where the retail price advances to 75 cents, it will have paid two cents to the railroads. An eighteen-gallon galvanized iron tub that retails in St. Louis at 80 cents will have paid the railroad from place of manufacture two and three-tenths cents; to Kansas City the freight rate will have been six and one-fourth cents, and to Denver 15 cents, but here the retail price of that tub is $1. A stove that weighs two hundred pounds and retails in St. Louis for $18 will, in carload lots, pay 44 cents to Kansas City or Omaha, and retail there for $22; $1.48 to Denver, and retail there for $25; $2.50 to Seattle, and retail there for $30. When a housewife of St. Louis buys a dozen clothespins she has paid the railroad five ten thousandths of a cent. If she buys a washboard at 50 cents she has paid the railroad forty-two one-hundredths of a cent. In Denver she would pay for that washboard 60 cents, of which the railroad would have received two cents. The higher rates and prices that have been specified as applying in Kansas City and Denver may also be taken as applicable to cities in the interior South and Southwest, such as Oklahoma, Fort Worth and San Antonio.
In response to inquiries made concerning certain staple articles of daily and general use in various of the smaller cities and towns extending from Massachusetts to Georgia and Illinois, and from Michigan to Mississippi, it has been ascertained that throughout this region the transportation charge on such articles ranges as follows: On a man's suit of clothes, from two to eight cents; on calicos and ginghams, from one-fiftieth of a cent to one-fifth of a cent a yard; the freight charge paid on the entire apparel of a fully dressed man or woman in this section would range perhaps from six or seven to 16 or 18 cents. The rate on an ordinary dining room suite consisting of table, sideboard, six chairs and a china closet would average from 75 cents to $5, on a parlor suite of sofa and four chairs from 50 cents to $4, on a bedstead and its equipment from 75 cents to $1.50, in each case from the factory to the home. The lumber used in the ordinary eight-room house will have paid the railroads from $35 to $150, and the brick from $6 or $8 to $50 or $60, as the kiln may be near or remote. A fifty-pound sack of flour from the mill, even at Minneapolis, in but a few cases has paid a freight rate of over eight or nine cents to the consumer. Products of the beef or the hog are carried from the western packing houses throughout this territory at rates that vary from a fifth of a cent to not exceeding a cent per pound.
It has not been difficult to secure such information as applies in the main to the transportation charge borne by a manufactured article from the place of making to the final market, or on foodstuff from the place of growth to the place of sale to the consumer. Data as to the amount of transportation charge carried by the various kinds of raw material entering into a manufactured product has not in many cases been so easy of ascertainment. A principal reason has been that the manufacturers in numbers of instances do not know what it is themselves. Many kinds of material are bought at a price which includes delivery at the factory, the freight rate not coming under the cognizance of the purchaser. The different materials used in a product may have come from such diverse sources, and paid such varying rates of freight, that the ascertainment of the total freight charge in any given unit of manufacture would be too difficult to be worth while. In numerous other cases the freight charge is confessedly so small an item that no attempt is made to apportion it as an item of expenditure per unit of product, the total simply being grouped in the aggregate of expense.
The statement that the transportation charge borne by the material entering into an ordinary pair of men's shoes averages one and a quarter cents is the result of a definite calculation made by one of the largest shoe manufacturers of the country. A leading woolen manufacturer estimates that the price of wool at Boston will average perhaps 30 cents a pound "in the grease," including a transportation charge that will average one cent a pound. The loss in cleaning and scouring is about forty-five per cent., and the price of a pound of scoured wool will average about 63 cents at the mill. Of this about two cents is chargeable to transportation. One hundred pounds of wool will make about seventy pounds of straight woolen cloth, on which the transportation charge has therefore been a fraction less than three cents a pound. On cloth that is mixed with cotton the transportation charge is less. The rates on woolen goods from any of the New England mills are so low that a yard of cloth which will sell from $1.50 upwards in any of the western markets will not have paid the railroads more than five cents from the sheep's back in Colorado to Massachusetts and back again to the Mississippi River.
The following information as to the extent of the transportation charge borne by divers materials of various industries has been obtained in each instance from an authority in that industry.
The transportation charge on raw cotton to the mills in Massachusetts will average from one-half to two-thirds of a cent a pound, not exceeding one cent per pound even from plantations so remote as those of Texas. Cotton loses from fifteen to twenty per cent. in the cleaning, one hundred pounds of cotton making from eighty to eighty-five pounds of cotton goods. As ordinary calico will run about six yards to the pound and sell for about five cents, the cotton that has paid a freight rate of from 50 cents to $1 is woven into $24 worth of calico.
The transportation charge on a pair of rubber overshoes, including the rubber from South America, the cotton stock, and the shipment to the western markets, averages about two and one-half per cent. of the cost of those markets. That is, a pair of rubber overshoes retailing for 75 cents will have paid for transportation, all told, less than one and nine-tenths cents.
In no one of these examples, which, perhaps, are typical of the entire clothing industries in so far as the use of leather, wool and cotton are concerned, is the transportation charge an appreciable factor in the price either of the material to the manufacturer or of the finished article to the consumer.
A barrel of flour made in Minneapolis and transported to Boston is sold at the time of this writing by the milling company to a dealer of that city, or any other place in New England, for $6. Of that $6 accrues to the transportation agencies, for carrying the wheat of which that flour was made from the Western farm to the Minneapolis mill, and for carrying the flour from the mill to Boston, an amount that averages 85 cents. The proportion of the transportation charge to price at different markets varies with the freight rate. At New York the milling company would sell that barrel for $5.95, which would include a total transportation charge of 80 cents; at Philadelphia the selling price would be $5.90, the transportation charge 75 cents; at Buffalo or Pittsburg the selling price $5.80, and the total transportation charge 65 cents; at Atlanta the price $6.20, the transportation charge $1.05; at New Orleans the price $6.10, the transportation charge 95 cents.
Typical rates on leaf tobacco, averaging in value $13 per 100 pounds from plantation to warehouse in Virginia and the Carolinas, are from 15 cents to 21 cents per 100 pounds; on the smoking tobacco into which this leaf is converted, and which sells at $48 per 100 pounds, from Richmond, Virginia, to New York City 30 cents, to Chicago 59 cents, to Kansas City $1.16. Rates from the plantation to the warehouse on the leaf tobacco of the Kentucky and Tennessee region, which also brings an average of $13 per 100 pounds, are from 5 cents for short to 20 cents for longer distances. The plug tobacco into which this leaf is converted is sold at $28 per 100 pounds, being distributed on such rates as these: St. Louis to Louisville, 25½ cents; to New York City, 58½ cents; to Kansas City, 35 cents; to Seattle, $2.20. Manufactured tobacco in all cases is sold at a price which includes delivery from the factory to the place of consignment, wherever it may be, in the United Stales.
The freight rate on cane sugar from the "central" in the Louisiana district to the final refinery ranges from 5 to 10 cents per 100 pounds, the refinery paying from $3.50 to $4.50 for the sugar. Sugar that is sold by the refining company at 4½ to 5½ cents a pound retails at 6 cents, the dealer making little or no profit. As a town of five to ten thousand people at the average per capita consumption of seventy-five pounds a year will consume a carload of sugar in about a week, the jobbing of sugar is greatly decentralized. Contrasting with this retail price of $6 per hundred pounds typical distributive rates are, from New York to Chicago 25 cents, to St. Paul 30 cents, to Kansas City 42 cents; from New Orleans to Chicago 25 cents, to Atlanta 24 cents, to Kansas City 34 cents.
The freight charge on sugar beets raised in Colorado and Utah from the farm to the refinery is always paid by the sugar company. It averages from 30 to 40 cents per ton, or for a distance of fifty miles is as much as 50 cents. A ton of beets contains about three hundred pounds of sugar, which, allowing for an average loss during extraction, would produce two hundred and forty pounds of refined sugar. This is sent from the factories to the principal places of storage--Kansas City, Omaha and St. Louis. The aggregate freight charge from the farm to St. Louis on these two hundred and forty pounds is about $1.70, and the aggregate revenue to the refinery at five cents a pound, $12.
While the price of bananas is subject to great fluctuation, a fair average at New York, Philadelphia, Baltimore, Charleston, Mobile and New Orleans, the ports of import, is $1.75 per 100 pounds. The average rail charge for carload lots from port to market is from 30 to 50 cents per 100 pounds. About one-third of the bananas consumed in this country are received at the North Atlantic ports, whence they are distributed throughout the Eastern and Middle States. The remaining two-thirds, which supply the South and West, are received at the Southern ports. Immediately upon receipt at New Orleans, for example, shipments are made to the North in train loads that they may be taken out of the warm climate before they spoil, and cars are re-consigned en route at the instance of the company which has very thoroughly organized the banana business, an allied company having about sixty agencies with men who devote their entire time to extending the sale of the fruit.
For hides that pay a freight rate from the packing houses at Chicago to New York of 30 cents per 100 pounds, the butcher receives, according to quality, from $6 or $7 to $11 or $12 per 100 pounds. The butchers remote from market have the freight rate deducted from the price paid them for hides, but it is a trifle, seldom exceeding five cents per 100 pounds. The hide loses from twenty-five to thirty-five per cent. in the process of tanning; the price of leather is fixed by measure and not by weight. The rate on tanned leather, however, between Chicago and Boston is 39 cents per 100 pounds.