System of Postal Express.

David J. Lewis.

Mr. Chairman: In December the government issued its first annual report on the statistics of express companies for the year 1909, which developed the fact that the average pay of the express companies to the railways for carrying express matter was about three-quarters (0.74) of a cent a pound, while the postal reports show that the government paid for its letter or mail transportation about 4 (4.06) cents a pound, barring the weight of equipment in both cases. It was apparent to me at once that the parcels function could not be successfully or economically discharged by the government on the basis of letter-transportation rates. And then the economic significance of another fact developed: It was that the express companies’ service was at a disadvantage, even greater than that of the post office, in regard to the nonrailway transportation of its parcels. The express companies have no agency and at present rates can not secure an agency to reach nonrailway or rural points. In short, it appeared that the express companies had exclusive control of one of the absolutely essential conditions of fast package transport, the express rate of three-quarters of a cent a pound, while the post office had equally exclusive possession of the other great agency of necessary service—the rural delivery system. Common sense indicated what the solution must be; these two advantages, the railway express transportation rate and the rural delivery system must be made cooperative; must be united under one control. The express railway transportation rate would, if the government parcels amounted to but one-fourth of the express business, save it, if in its control, at least $50,000,000 a year, while the addition of rural delivery to the express business would add to this great service the farming population of our country at practically no cost to them or the country. The bill I have introduced for postal express is the result of these conditions.

Principal Provisions of the Postal Express Bill

As I have said, the idea of the bill is to unite in one service the two great instrumentalities above named, in order that a greatly cheapened and an even more extended service to the public may be had. For this purpose the bill provides for the compulsory purchase by condemnation of the railway-express company contracts and franchises, as well as the equipment and property devoted to the express business per se, and their subsequent employment by the postal department in connection with rural delivery and the postal system. The express-railway transportation privileges are all the subjects of contracts between the railways and express companies. They constitute the primary condition of the express service, and while the equipment and other facilities are only immediately necessary to a running plant, and their acquisition is provided for, it is the contracts which constitute the conditions sine qua non of the service. Happily, there can be no legal question as to the right of the government to acquire these contracts and other facilities upon providing just compensation.

Necessity for Postal Express

In addition to those grave needs for such a service, which the majority of national communities have recognized, as commending its adoption domestically and internationally, there exist in the United States supplementary reasons which it is believed render the institution uncommonly necessary.

Briefly summarized, they are:

(a) The greater area over which our population is distributed and correlatively greater transportation distances which consume so much time by freight that a fast or express service needs to be resorted to in a larger number of instances than if the journey were short.

(b) The 100-pound minimum and corresponding charge in railway practice and the inadaptability of railway methods to diminutive consignments.

(d) Absence of railway “collect and delivery” service and absence of “collect and delivery” service by express companies as to our farming population and a large portion of our urban population.

(e) Incalculable waste of transportation effort, so far as made, in movement of necessaries of life from the farms to points of consumption, a serious factor in our high cost of living.

Of course, the need for fast service will depend upon the greatness of the distance, when demand is immediate, as much as upon the valuable or perishable character of the shipment. In our country, with an average haul for freight of 251 miles, from three to ten times as long as in Europe, the demand for speed to overcome the obstacle of the time lost in distance, the time-element necessity for an express service is correspondingly increased; and so the disadvantages of inadequate or ineconomical express service are vital. The railway organization of America and its system of practices does not seem adapted to meet this great need; while its refusal, upon adequate grounds, to accept a smaller payment than the rate for its minimum shipment of 100 pounds precludes it from this service even if speed were not prerequisite. The minimum charge of 25 cents (average 27 cents) imposes an equally substantial and serious restriction upon the express service as now conducted; so that when it is considered that the farmers or nonurban, about half of our population, are virtually excluded from the service of this great agency, and the express rates by their prohibitive costliness substantially minimize the service for the urban population, it is apparent that instead of possessing an express service commensurate with its needs, the United States has both unexampled necessity for, and unexampled deficiency in, its dispatch or express agencies. Add to this situation the tremendous waste and corresponding costliness of the unorganized country-to-town transportation of our necessaries, and such almost equally wasteful and quite equally costly express service as we have, and have we not put a finger on one of the big leaks which swallow so much of the unprecedented productiveness of our country?

Prohibitive Express Charges

We should expect express charges to be higher per ton here than abroad, as much higher as our freight-per-ton charges. But no necessary economic cause is known which justifies a substantially higher proportion or ratio of the express to the freight charges here as compared with other countries. The average express charge per ton here is shown to be $31.20, while the average freight charge is $1.90 per ton, giving a ratio of the express charge to the freight charge of 16 (16.42) to 1. This express charge includes the cost of such collect and delivery service as is rendered, covering, it is thought, about 90 per cent of the traffic. In the table now inserted this element of the expense of the express companies for collecting and delivering, amounting to 11.50 per cent, is excluded, because many of the European countries and other data do not include this factor of cost. The table embraces 10 countries, while the specific data upon which the ratios are based are set forth in Appendix B. All countries have been included where the express data is clearly distinguishable from general freight statistics.

Ratios of average express charges to average freight charges in 11 countries.

Countries	Average express charge per ton.	Average freight charge per ton.	Ratios of average express and freight charges.
Argentina	$6.51	$1.95	3.2-1
Austria	3.77	.74	5.0-1
Belgium	[A]4.92	.53	[A]9.3-1
Denmark	5.49	.87	6.3-1
France	6.88	.95	7.2-1
Germany	3.80	.76	5.0-1
Hungary	3.68	.93	3.9-1
Netherlands	2.43	.67	3.6-1
Norway	1.90	.49	3.8-1
Prussia	4.32	.86	5.0-1
Average for 10 countries			5.23-1
United States	27.61	1.90	14.53-1

[A] Belgium delivers parcels.

From this table it appears that while Argentina charges three times, Austria five times, Belgium nine times, Denmark six times, France seven times, Germany (including Prussia) five times, Hungary, the Netherlands, and Norway, about four times as much for carrying a ton of express as of freight, the express companies of the United States charge nearly fifteen times as much.

No further statement need be made to show that the charges of American express companies are prohibitively excessive, and such as to disqualify this service as a national economic agency. The instances given represent merchandise carried by passenger trains in all instances, and while higher charges for both the express and freight tonnage in America are justified by the longer haul, there is no necessary economic reason for a higher ratio of express charges to freight charges. The presence of the “express company” is the only circumstance distinguishing express transportation here from that of the instances cited. In those the “express company” has no part; the work is done exclusively by the railways. As we shall see later, the deficiencies of the express companies are constitutional, not gratuitous merely, and are such as can not be remedied through corporate agencies.

Inadequacy of Various Proposals—Regulation

We have seen that the present express fails to reach the farm, in itself a fundamental objection to its adequacy. It may be suggested that where its high charges are such as to inhibit the traffic, they might be corrected by appeals for reductions to the Interstate Commerce Commission. A glance at the express report for 1909, it is true, will show that the profits of the companies are clearly out of normal proportion to the investment. But it will also show that such profits amount to but 8.44 per cent of the gross receipts, i. e., to only 8.44 per cent of the rates charged. So that even if all the profits were taken away, the modified rates would show but a wholly inadequate reduction; so that the desired relief could not thus be obtained. As a matter of course, no such reduction would even be asked. No one would wish that they conduct the business without a profit. But in practice even when the justification for a reduction is present, and the power and purpose active, the regulating board will always hesitate to even substantially reduce a rate in the fear of unduly trenching on private rights.

It was this principle which Bismarck had in mind when in connection with a similar subject he spoke of—

The attempts to bring about reform by (regulatory) laws have shown the futility of hoping for a satisfactory improvement through legal (regulatory) measures, without trenching materially on established rights and interests. (Parsons, The Railways and the People, p. 318.)

With a margin of but 8 per cent of the rate to work on, the board would feel this constraint in a marked way; for under substantially reduced rates a very slight perturbation of the customary traffic might place in danger the whole net return. Substantial relief in the way of regulation is thus shown to be wholly impracticable.

Various Parcels-Post Schemes

There remains to discuss the numerous proposals for limited carriage of parcels up to 11 pounds, and so forth, by the postal department. These all concern the present railway status quo of the post office. It is apparent that such proposals can only result in two things—the express companies taking the major portion of the short-haul, profitable traffic and the postal department getting the long-haul and losing traffic. But there is another fact recently disclosed by the express report—a fact rendering any of these proposals, so far as they involve railway transportation, wholly untenable.

The Post Office Department pays an average of 4 (4.06) cents per pound to the railways for carrying the mail, excluding equipment.

The express companies pay an average of three-quarters (0.74) of a cent per pound for carriage of express matter, excluding equipment.

It is manifest that not even the government could render substantial service under conditions so utterly unequal. It could not pay—what we shall see when we come to consider the length of the express and the mail hauls amounts to—about three times as much as the express companies pay to the railways for carrying its parcels. One is mail service, which is naturally more costly; the other more closely resembles a fast freight service, which lies midway between the mail and the freight in the weight cost of railway movement.

Other difficulties in such proposals, based on the status quo of the post office, need only be suggested:

(a) The government would have to install urban delivery wagons at a cost its traffic might not justify.

(b) The express companies still in the field, the wastes of service would merely be increased by the entrance of the Postal Department, and the people would have to pay it all.

(c) The government, being a moral agent with the inelastic rate proposed, would be at the mercy of its unrestrained competitors.

(d) The express companies’ contracts with the railways permit them to reduce their compensation to the railways to the point of 150 per cent of the freight rate—i. e., from the present ratio of about 8 (7.80) to 1 of the freight rate to about 1½. Of course, they could not go to this extreme without destroying their own profits, but their contracts permit them to go as far as they might wish. Thus, while the government in the beginning might have to pay about three times as much to the railways for its parcels per pound, in a struggle the express companies could exaggerate this disparity to any point they wished for the purpose of destroying the postal department as a competitor.

Essential Elements of an Adequate System

For the sake of brevity we state these elements categorically:

(a) Fast service.

(b) Greatest economically feasible extension of delivery and collect service, necessitating coordination with both urban and rural free delivery systems.

(d) Cheap capital charges.

(e) Reliable public-service motive.

(f) Economies of single organization, in which all existing serviceable plants should be merged.

With regard to the element of fast service, discussion is unnecessary. It is now commonly rendered by the railways for the express companies in connection with the passenger service. It seems worthy of suggestion, however, that a single organization like the post office might on the strong lines of traffic, where carload lots might be regularly obtainable, employ for certain kinds of matter the fast freight service, profiting enough on the carload rate reductions to fully cover the expense of delivery and collection, the regular railway 100-pound charges to be paid to the postal express by the shipper. It is further suggested that in this way agricultural products might be received through the rural free delivery in small allotments from the truck gardeners and farmers, consolidated into carload lots and conveyed on the trunk lines to the branch lines and distributed over the branches to destination by passenger trains. The Prussians do, in fact, have this latter service, for which the charge is based on a tariff of twice the freight rate, the regular service by passenger train calling for a charge of four times the freight rate. The railways would now perform such service if, of course, the collect service existed to gather the shipments from the country and assemble them.

It is obvious that the element most wanting is the service described as “collect and delivery,” necessary between consignor and railway at the beginning and railway and consignee at the conclusion of the act of transportation. Our country is utterly deficient in this respect as to the “country” or farming population. In towns of about 3,000 or 4,000 population up the present express companies do render this service for such traffic as their rates permit to move; but what is required is a service as extensive as the postal agency, which reaches cities, towns, and country with the degrees of efficiency of the urban and rural deliveries, conceded to far excel such delivery as the express companies give.

There can be no doubt that with regard to this collect and delivery the postal department is the only agency to which we can look for a service sufficiently extensive to be really efficient. It only remains to observe that with regard to the farming part of the country the service already exists in the form of rural free delivery, equipped and paid for, and actually waiting with empty wagons to receive and execute the work.

Advantages of Postal Express

In three years under a postal administration it is believed that the reformed system will produce:

(a) A minimum charge of 7 cents for the first pound, graduated to 17 cents for a 11-pound package, for average distances.

(b) General reductions of about 28 per cent in all merchandise charges.

(d) The elevation of the employees to the plane of the postal service.

(e) The coordination of country supply of the vital necessaries with urban demand by a cheap and regular collect and delivery service.

(f) As a result, a greater attractiveness in rural life and improved highways.

(g) In 10 years’ time, with the development of the traffic, a reduction of rates to about one-half of the present rates.

It is as difficult to describe in detail the manifold economic and social results of a great agency like this as to give a bill of particulars of the benefits of the postal system. And in this connection it seems not irrelevant to suggest that a proper coordination of the railway mail with the railway express service may indeed render penny postage feasible. As things are now the rural free-delivery agency does not bring a direct fiscal return to pay for itself. In a few years, as the traffic develops in parcels and agricultural products, the proposed system would enable it to do so. This would assure a considerable financial gift to the account of penny postage.

The Agricultural Post

In the present state of things the truck farmer must devote a large part of his time to marketing; that is, to the transportation of his product, however little it may be, to the place of demand. He must also for this purpose provide himself with transportation facilities, however small his business. These involve a horse, and its maintenance and care, and a barn; and the expense of both during the unproductive seasons. And yet in a socio-economic sense his work and expense of transportation is the smallest element in his service to the public, although it requires the maximum of upkeep work and expense, if not of capital. The proposed postal collect and delivery eliminates all these, and would enable the truck farmer to enter into the business on a minimum of capital, and pursue it on a minimum of labor and expense. The field service of a horse he could hire as occasion might require. Thus the truck-farming industry would receive a necessary impetus and the cost of such foods be greatly reduced to the consumer, saying nothing of the advantage in quality coming from a speedier forwarding to the market by daily allotments instead of the delays now incurred to garner a worth-while load.

This application of postal express, with its thoroughly articulated service and regular schedules, may be taken as illustrative of the close relations which may be established between the rural producer and town consumer, as well as between producers and merchants generally.

It is manifestly unfair to the proposition to judge its social value on a mere computation of the savings in rates which may be made. While this saving would amount to some $35,000,000 a year on the traffic of 1909, and from seventy to a hundred millions a year when the traffic reaches its normal dimensions, yet as large benefits will follow in clearing the prohibitive rate clogs from this necessary conduit of commerce that it may freely discharge its normal output, in placing the 50,000 express employees on a postal basis, in rendering it easier to engage in and market food production, to relieve the towns and cities of high prices for necessaries of life, and relieve them, too, of the overplus of labor, and, perhaps, too, in aiding in reversing that tendency of population movement from the country to urban centers to which is due the most aggravated and most discouraging social problems of our time.