Part 19

The foregoing shows an increase, in the average interest rate demanded upon new loans to railway corporations, from 3.90 per cent. in 1897 to 4.62 in 1907 and 5.04 in 1908. The increase in the rate from 1897 to 1907 was equal to 18.46 per cent. and from 1897 to 1908 it was 29.23 per cent. In other words, one dollar would pay interest on as much of the new capital secured by loans in 1897 as $1.29 would of the loans of 1908. The gross revenue of $105.00 obtained in both years from the typical shipment of fourth class freight between Chicago and New York, at the unchanged rate applicable to such a shipment in both years, would pay interest on $2,692.31 secured in the earlier year and on only $2,083.33 secured in the later year. The loss in power to purchase loaned capital therefore amounts to 22.62 per cent. In order fully to appreciate the importance of this rise in the cost of capital it is necessary to realize that very great sums of new capital are annually required for the necessary augmentation and improvement of railway facilities. This is made evident by the total yearly borrowings as shown in the foregoing tables, but it should be borne in mind that further sums, certainly not less extensive in the aggregate, have been raised through issues of stock, which promise no certain rate of interest, although these sums could not have been obtained unless the subscribers had considered it probable that they would, in the long run, receive returns in dividends at least equal to the "going rate" of interest. It is interesting to note that the aggregate of new capital secured by loans in each year has very largely exceeded the total interest payments to all capital obtained by borrowing. This is shown by the following table, the data in which, except those as to the sums obtained by loans, are from the reports of the Interstate Commerce Commission:

Per ct. int. New capital Interest on paym'ts new Year.(a) borrowed. funded debt. borrow'gs.

1898 $ 390,803,025 $ 237,578,706 60.79 1899 215,039,851 241,657,535 47.76 1900 215,039,851 242,998,285 113.00 1901 512,559,403 252,594,808 49.28 1902 471,578,658 260,295,847 55.20 1903 427,358,965 268,830,564 62.90 1904 325,078,790 282,118,438 86.78 1905 635,304,659 294,803,884 46.40 1906 514,638,170 305,337,754 59.33 1907 708,351,929 323,733,751 45.70 -------------- -------------- ----- Total $4,706,650,122 $2,709,949,572 57.58

(a) Accurate data for payments to capital in 1897 are not available.

FROM THE VIEWPOINT OF THE PURCHASER OF THE SERVICES.

So far the extent and significance of the changes in the value, or purchasing power, of money have been considered from the point of view of those who produce and sell railway transportation. But equally striking changes will appear and similar conclusions are inevitable when recent history is reviewed in the aspect which it presents to those whose earnings are devoted, in part, to the purchase of the services which the railways supply. For the important consideration to the wage-earner who wishes to travel by rail or who buys commodities that have been so carried, or to the producer whose products must go to market over railway routes, is not, how much money must be paid for the railway services, but, rather, how much labor must be expended, or what quantity of his goods must be produced, in order to obtain that sum of money. If the earnings of a particular wage-earner have increased from fifty to seventy-two cents per hour, a railway service is cheaper, to him, if it costs twelve cents than it was at ten cents when his earnings were on the fifty-cent basis, for he now procures with the fruit of ten minutes' toil what formerly cost the result of twelve minutes' labor. In Bulletin No. 77, just issued by the United States Bureau of Labor, the official statistician presents data showing the relative wages per hour of many different classes of wage-earners, not including railway employees, in 1897 and 1907. While these data show that wages have almost uniformly advanced (there are ten somewhat questionable exceptions among the 342 classes) the data supplied by the Interstate Commerce Commission show that during the same period average railway freight rates have declined from 7.98 mills to 7.59 mills per ton per mile, or 4.89 per cent. A table presenting and based upon these official statistics and showing the relative wages per hour of the various classes of labor, in 1897 and 1907, the percentage increase in wages rates per hour and the increased command over railway freight services which these wage-earners have obtained through the combined effect of higher wages and lower ton-mile rates is given in Appendix C[F]. In studying the data presented in this appendix it should be borne in mind that the wages are relative and not absolute. They mean, for example, that the average male blacksmith in the agricultural implement industry was paid, in 1907, $1.25 for the same quality and period of labor for which he was paid a little less than ninety-six cents, in 1897. This increase amounted to 30.58 per cent. of the wages rate of 1897, and, combined with a decreased cost of railway freight service of 4.89 per cent., which made 95.11 cents go as far in purchasing the latter in 1907 as one dollar would go in 1897, gave him 37.29 per cent. greater command over railway freight services.

In an earlier bulletin, No. 75, published during the current year, the Bureau of Labor continued its "index numbers," which show, in similar manner, the average relative wholesale prices of the commodities entering into the ordinary budget of family expenditures. For the purpose of presenting the changes in these prices on a uniform basis the Bureau represents the averages for the ten years from 1890 to 1899, inclusive, as one hundred per cent. and reduces the averages for each year to percentages of the averages for the basic period. The following table presents these figures for the year 1897 to 1907, inclusive:

Relative Wholesale Prices.

Cloths Fuel Metals Farm and and and Year. Products. Food. Clothing. Lighting. Implements.

1890-1899 100.00 100.00 100.00 100.00 100.00 1897 85.2 87.7 91.1 86.4 86.6 1898 96.1 94.4 93.4 95.4 86.4 1899 100.0 98.3 96.7 105.0 114.7 1900 109.5 104.2 106.8 120.9 120.5 1901 116.9 105.9 101.0 119.5 111.9 1902 130.5 111.3 102.0 134.3 117.2 1903 118.8 107.1 106.6 149.3 117.6 1904 126.2 107.2 109.8 132.6 109.6 1905 124.2 108.7 112.0 128.8 122.5 1906 123.6 112.6 120.0 131.9 135.2 1907 137.1 117.8 126.7 135.0 143.4

Lumber and House Building Drugs and Furnishing Miscell- All Com- Year Materials. Chemicals. Goods. aneous. modities.

1890-1899 100.00 100.00 100.00 100.00 100.00 1897 94.4 94.4 89.8 92.1 89.7 1898 95.8 106.6 92.0 92.4 93.4 1899 105.8 111.3 95.1 97.7 101.7 1900 115.7 115.7 106.1 109.8 110.5 1901 116.7 115.2 110.9 107.4 108.5 1902 118.8 114.2 112.2 114.1 112.9 1903 121.4 112.6 113.0 113.6 113.6 1904 122.7 110.0 111.7 111.7 113.0 1905 127.7 109.1 109.1 112.8 115.9 1906 140.1 101.2 111.0 121.1 122.5 1907 146.9 109.6 118.5 127.1 129.5

From the data in the foregoing table, which show advances averaging nearly forty-five per cent., the following table, indicating the present purchasing power over railway freight service of each class of articles, in a manner similar to that adopted to measure the increased power of labor to buy railway freight transportation, has been derived:

Increased Relative prices. power to pur- ---------------------- chase railway Commodities. Increase freight services 1897. 1907. per cent. per cent.

Farm products 85.2 137.1 60.92 69.19 Food 87.7 117.8 34.32 41.22 Cloths and clothing 91.1 126.7 39.08 46.23 Fuel and lighting 96.4 135.0 40.04 47.24 Metals and implements 86.6 143.4 65.59 74.10 Lumber and building materials 90.4 146.9 62.50 70.85 Drugs and chemicals 94.4 109.6 16.10 22.07 House furnishing goods 89.8 118.5 31.96 38.74 Miscellaneous 92.1 127.1 38.00 45.00 All commodities 89.7 129.5 44.37 51.79

AGRICULTURAL PRODUCTS AND FREIGHT RATES.

The statistician to the United States Department of Agriculture obtains annually a very large number of reports from farmers as to prices obtained for their products and these are carefully tabulated. The results show the average prices, at the farms, of the principal agricultural products. The following table shows the increased prices obtained for such products, and the increased power which these producers enjoy, per unit of their products, to purchase railway freight services:

Increased power to purchase Price. railway ------------------------- freight Product. Value of Increase service crop of 1907. Unit. 1897. 1907. per cent. per cent.

Corn $1,336,901,000 Bushel $0.263 $0.516 96.20 106.28 Wheat 554,437,000 " .808 .874 8.17 13.73 Oats 334,568,000 " .212 .443 108.96 119.70 Barley 102,290,000 " .377 .666 76.66 85.74 Rye 23,068,000 " .447 .731 63.53 71.94 Buckwheat 9,975,000 " .421 .698 65.80 74.32 Potatoes 184,184,000 " .547 .618 12.98 18.79 Hay 773,507,000 Ton 6.62 11.68 76.44 85.51 Cotton 613,630,436 Pound .066 .104 57.58 65.68 -------------- Total $3,932,560,436

Detailed tables presenting the data from which the foregoing averages for the whole country have been derived and showing prices and purchasing power over freight service are given in Appendix D[G]. These tables disclose the uniformity, throughout the United States, of the advance in agricultural prices and of the augmented command of agricultural producers over railway freight service.

FARM ANIMALS AND FREIGHT RATES.

The Department of Agriculture of the United States also collects data concerning the value of farm animals and annually publishes the average values reported for the first day of each successive year. All classes of farm animals have increased in value since 1897 and each represents a great command over railway freight services, for the sum representing the average value of each animal will now buy much more freight transportation than it would in 1897. This is shown by the following table:

Increased power to purchase Average price, each. railway -------------------------------- freight January 1, January 1, January 1, Increase, service, 1908. 1897. 1908. per cent. per cent.

Horses $1,867,530,000 $31.51 $ 93.41 196.45 211.69 Mules 416,939,000 41.66 107.76 158.67 171.97 Milch cows 650,057,000 23.16 30.67 32.43 39.24 Cattle, except milch cows 845,938,000 16.65 16.89 1.44 6.65 Sheep 211,736,000 1.82 3.88 113.19 124.15 Swine 339,030,000 4.10 6.05 47.56 55.14 -------------- ----- ------ ------ ------ Total $4,331,230,000 -- -- -- --

In considering the foregoing the fact that the prices relate solely to animals on farms should be borne in mind. They are doubtless somewhat lower than for animals elsewhere located, but prices of the latter have probably moved in the same direction and in about the same extent.[H]

RAILWAY RATES IN 1897 AND AT PRESENT MEASURED IN MONEY.

Throughout the foregoing discussion reference has frequently been made to what has been assumed to be a typical shipment, that is, a fifteen-ton carload of fourth class freight transported between Chicago and New York. The typical service rendered in moving this shipment would have brought the railways gross receipts of $105.00, in 1897 or in any of the intermediate years, and would bring the same amount now. The period in question, however, has witnessed many thousands of changes in railway rates on particular commodities and between particular points, and, confining the discussion for the present to the mere expression of rates in terms of money, it is necessary to inquire whether the general level of all rates has been raised or lowered and how far the change, if any is discovered, has gone in either direction. Now, it is manifestly impossible to correlate all rates in a single tabulation, and, giving to each its proper weight in the determination of a final average, thus establish definitely and with complete precision the relation between the money rates of 1897 and those at the present time. The number of different articles shipped and the great number of different points at which each article may enter into the aggregate of traffic movement or to which it may be destined, as well as the elusive character of the factors which would indicate the relative weight properly to be allowed to each separate rate, wholly preclude the adoption of such a method. Fortunately, however, American railway accountants long ago adopted a measure of traffic movement, which was later officially sanctioned by its adoption for the same purpose by the Interstate Commerce Commission, and which, when compared with the gross receipts from freight service, results in an average that throws great light upon the movement or absence of movement in the general level of the rates charged. When the weight of any shipment, expressed in tons, is multiplied by the distance which it is carried, expressed in miles, the resulting product gives a measure of the service performed, in units which are designated as "ton-miles." When the ton-miles (or ton-mileage) of all shipments are aggregated the total represents the sum of all services. The result of dividing the revenue from a particular shipment by its ton-mileage is the average rate per ton per mile for that shipment and if the sum representing the aggregate gross receipts from all railway freight services is divided by the aggregate ton-mileage of those services the quotient obtained is the average ton-mile rate for all services. During the period from 1897 to 1907 these data have been compiled annually by the Interstate Commerce Commission under the direction of Professor Henry C. Adams, its statistician. The average rates thus established are given both for the United States as a whole and for each of ten districts or groups. The following table shows these averages as they are given in the successive annual statistical reports of the Commission:

TABLE LEGEND

REGION: A == Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut.

B == New Jersey, Delaware, Maryland, New York, east of Buffalo, Pennsylvania, east of Pittsburgh, West Virginia, North of Parkersburg.

C == New York, west of Buffalo, Pennsylvania, west of Pittsburgh, Michigan, lower Peninsula, Ohio, Indiana.

D == West Virginia, south of Parkersburg, Virginia, North Carolina and South Carolina.

E == Kentucky, Tennessee, Georgia, Florida, Alabama, Mississippi, Louisiana, east of Mississippi River.

F == Illinois, Wisconsin, Minnesota, Iowa, Missouri, north of St. Louis and Kansas City, South and North Dakota, east of Missouri river, Michigan, upper Peninsula.

G == Nebraska, Wyoming, Montana, North and South Dakota, east of Missouri River, Colorado, north of Denver.

H == Arkansas, Indian Territory, Oklahoma Territory, Kansas, Colorado, south of Denver, Texas, Panhandle, New Mexico, north of Santa Fe.

I == Texas, except Panhandle, Louisiana, west of Mississippi River, New Mexico, north of Santa Fe.

J == Washington, Oregon, Idaho, California, Arizona, Nevada, Utah, New Mexico, western portion.

============================================================== Year and average rate in mills per ton per mile. ----------------------------------------------- Group. Region. 1897 1898 1899 1900 1901 1902 -------------------------------------------------------------- I. A 12.02 11.76 11.23 11.52 11.51 11.72 II. B 6.75 6.17 5.82 6.13 6.46 6.64 III. C 6.05 5.78 5.29 5.46 5.68 5.76 IV. D 6.48 5.92 5.94 5.95 6.41 6.50 V. E 8.64 8.35 8.07 8.08 8.02 8.16 VI. F 8.55 8.26 8.21 8.06 7.89 7.87 VII. G 11.48 11.57 11.01 10.64 10.43 9.94 VIII. H 10.79 9.61 9.68 9.64 9.71 9.78 IX. I 10.40 10.42 10.65 9.38 10.18 9.84 X. J 12.75 11.46 11.36 10.67 10.55 10.37 -------------------------------------------------------------- United States 7.98 7.53 7.24 7.29 7.50 7.57 --------------------------------------------------------------

{table continued} =============================================================== Year and average rate in mills per ton per mile. ------------------------------------------------ Group. Region. 1903 1904 1905 1906 1907 1908(a) --------------------------------------------------------------- I. A 11.67 11.96 11.79 11.72 11.45 11.10 II. B 6.67 6.86 6.65 6.50 6.55 6.43 III. C 6.07 6.20 6.07 5.94 5.98 5.94 IV. D 7.14 7.16 6.91 6.90 7.03 6.96 V. E 8.27 8.51 8.39 8.13 8.27 8.25 VI. F 7.74 7.79 7.66 7.45 7.43 7.35 VII. G 9.80 9.64 9.00 8.94 9.33 9.42 VIII. H 9.62 9.98 9.88 9.47 9.66 9.53 IX. I 9.74 10.00 10.96 10.09 10.51 10.02 X. J 10.05 10.36 10.98 11.03 11.63 12.04 --------------------------------------------------------------- United States 7.63 7.80 7.66 7.48 7.59 7.5 ---------------------------------------------------------------

(a) Average for 1908 added from 21st annual Report of Prof. Adams. S. T.

The foregoing shows that the average rates per ton per mile, expressed in money, were lower in every group but one, as well as in the whole country, in 1907 than they were in 1897. The average for the whole country was lower in 1907 than in any other year shown except the years 1898 to 1902, inclusive, and for three of those years the difference was less than one-tenth of one mill. The decrease in the general average from 1897 to 1907 was 4.89 per cent. and the increase from 1899, the year of the lowest average, was 4.83 per cent.

So far as the quality of the ton-mile unit is affected by changes in the geographical distribution of traffic the tendency between 1897 and 1907 was toward a higher quality, for traffic movement grew more rapidly in the regions where rates are normally higher than it did in the regions of lower rates. In the following statement the groups used by the Interstate Commerce Commission are arranged with the group in which ton-mileage increased most rapidly from 1897 to 1907 at the top, the group that increased next most rapidly in the second line, and so on to the group that increased least rapidly at the bottom:

Average rate per ton Tons of freight carried one mile. Increase, per mile in mills. Group. 1897. 1907. per cent. In 1897. In 1907.

X 3,133,623,734 11,252,450,440 259.09 12.75 11.63 VII 2,633,860,958 9,300,234,849 253.10 11.48 9.33 VIII 6,333,591,463 17,406,430,971 174.83 10.79 9.66 III 17,587,334,609 47,994,909,002 172.89 6.05 5.98 V 6,802,119,489 17,397,321,360 155.76 8.64 8.27 VI 17,393,471,480 44,318,734,155 154.80 8.55 7.43 IX 3,165,108,561 7,546,655,555 138.43 10.40 10.51 IV 4,936,635,046 11,418,243,141 131.30 6.48 7.03 II 29,579,613,559 63,455,243,659 114.52 6.75 6.55 I 3,573,663,326 6,511,166,971 82.20 12.02 11.45 -------------- --------------- ------ ----- ----- U. S. 95,139,022,225 236,601,390,103 148.69 7.98 7.59

It will be noted from the foregoing that the group in which the average rates were highest in both 1897 and 1907 shows the most rapid increase in traffic movement and that, with few exceptions, the regions of higher rates show more rapid augmentation of ton-mileage. This is exactly what might have been anticipated, for the highest average rates are usually to be found in the regions most scantily populated and, as these regions are filling up and are therefore those most rapidly growing in population and industry, they naturally show the greatest relative increases in freight tonnage. The only notable exception is furnished by New England, a region of high development, but where traffic movement is largely of a character which imposes higher average rates. In the following table the traffic increase is given for the regions that had ton-mile rate averages above and below the average for the whole country, in 1897:

Ton mileage. Increase. In 1897. In 1907. per cent. Ton mile rates above the average 43,035,439,011 113,732,994,301 164.28 Ton mile rates below the average 52,103,583,214 122,868,395,802 135.82 -------------- --------------- ------ Total 95,139,022,255 236,601,390,103 148.69