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.

The railroads make low rates on fertilizer to encourage its use by the farmers, it being, of course, to the interest of a railroad to encourage the production of larger crops that its traffic may be augmented. Fertilizer of different grades brings from $18 and $20 to $55 and $60 a ton. Typical rail rates from the places of manufacture are from Jersey City to Trenton, New Jersey, $1.10 per ton, and from Boston to Portland $1.20 per ton—both rates applying in carload lots. In the South, where fertilizer is extensively utilized, representative rates are from Atlanta to Thomasville $2.50, from Charleston to Columbia $2.00 per ton.

When allowance is made for the elimination of water from pulp and the shrinkage in its manufacture into paper, the average freight rate borne by the material entering into paper at the northern New England mill is about 13½ cents per 100 pounds. The manufacturers consider 17 cents per 100 pounds to be the average freight rate on the paper from the mill to places north of the Ohio and east of the Mississippi Rivers. The aggregate freight charge borne on the average by the 100 pounds of paper which sells at the factory for $2.50 is therefore 30 cents.

As with all things else, the rates on the ores of the far western region have been adjusted under the necessity of the transportation agencies to so serve the mines that their products may be marketed. The rate upon the ore from the mine to the smelter, upon the metal from the smelter to the refinery, and upon the refined lead or refined copper from Chicago to the seaboard market, are all determined by this prime factor. The freight charges, for example, from the Coeur d'Alene district in northern Idaho on the ores from which the extraneous material has been roughly separated, to the Puget Sound refineries, reach a maximum of $6 per ton for a distance of four or five hundred miles, and the rate from Puget Sound to New York is $14.50, the average transportation charge, therefore, being about $20 per ton. The value of a ton of copper at 12 cents a pound is $240, and a ton of lead at four cents a pound is $80. Copper passes through manifold and expensive processes and its extensive consumption has followed the development of electricity. Lead does not require so many or so expensive workings, and it has long been a great staple of general use. The mine farther from a smelter naturally has to pay a higher rate of freight than a mine nearer to it, receiving, therefore, a lesser net price for its product, but the railroads are obliged to so adjust rates that practically every mine can reach a market.

The rate on refined petroleum between New York and Chicago is 27½ cents per 100 pounds, the average rate paid north of the Ohio and east of the Mississippi Rivers being from eight to ten cents per 100 pounds. From Toledo to Atlanta the rate is 48 cents, from Whiting 46½ cents, from New Orleans 35 cents. The rate from Chicago to the Missouri River is 22 cents, to St. Louis 10 cents; while the rate from the Kansas field to St. Louis is 17 cents. One hundred pounds of refined oil contain approximately sixteen gallons which, at an average price of 12½ cents a gallon at the refinery, would aggregate $2. The price per gallon to the consumer is increased one cent with each increment of seven cents in the freight charge.

The principal biscuit company receives from $8 to $16 per 100 pounds for its crackers and cakes, averaging $10 per 100 pounds for its leading brand. From its New York plant to Boston the freight rates are 19 cents per 100 pounds, to Atlanta 62 cents. The rate from Chicago to Montgomery is 69 cents, to Houston 81 cents, to Denver 97 cents. From either New York or Chicago to the Pacific Coast the rate is $1.60. These rates apply to carload lots, all goods being sold delivered, the company absorbing the freight. The retail price is the same all over the United States as it is with shoes, cigars, soap, proprietary medicines and dozens of other familiar articles.

On cotton, the great staple product of the South, the freight rate structure has been in process of development even a longer time than that affecting the movement of grain from the West. From the plantation into Memphis, the largest inland cotton center of the United States, a typical rate is 30 cents per 100 pounds for one hundred and fifty miles. From Memphis to Boston the rate is 57½ cents, and from Memphis to the Gulf 30 cents per 100 pounds. From Augusta, Ga., a central market of the Eastern cotton growing district, the rate to Charleston and Savannah is 21 cents, to Brunswick 23 cents and to Norfolk 26 cents per 100 pounds. A bale of cotton contains five hundred pounds and is therefore worth, at 11 cents a pound, $55. The aggregate transportation charge on this bale from the plantation, one hundred and fifty miles from Memphis, to Boston, is $4.27.

Mainly because of the rapid shifting of the sources of supply, there has not yet been developed a stable structure of rates for the movement of lumber in all parts of the United States. By way of illustration, however, it may be said that a fair average rate on lumber into Memphis from the forests of Arkansas is six cents per 100 pounds, or $2.40 per 1,000 feet. Lumber going from Memphis to New Orleans for export will pay $4.80, or a total transportation charge from the forest of $7.20 per 1,000 feet. A fair average rate to the markets in Ohio and Indiana is $8 per 1,000 feet, a total transportation charge from the forest of $10.40. This is on the kind of lumber that in 1905 and 1906 sold at about $40. The rate on yellow pine from New Orleans to Chicago is 24 cents per 100 pounds.

There is an equalization of rates on the iron ore from the upper lakes in that the rates of the boat lines from the ore mines are the same to each of the Lake Erie ports. From thence to the furnaces they are adjusted under the policy of the railroads to make the transportation charge on the raw material required to make a ton of pig iron approximate the same amount at each of the competing furnaces of southern Ohio, Pittsburg, Wheeling, in the Mahoning and Shenango Valleys, and even as far as the Schuylkill Valley. How closely this equalization is effected is shown by the fact that the transportation charge on the ore, coke and limestone required to produce one ton of pig-iron is as follows in these respective districts: At the furnaces on the Monongahela River in the Pittsburg district, $5.82; at the furnaces of the Mahoning and Shenango Valleys, $5.57; at the furnaces of the Wheeling district, $5.78. These charges compare favorably with those at the furnaces on the Lake Shore in the Chicago district, which aggregate $5.63 per ton of pig-iron, but are higher than at the furnaces on the Lake Shore in the Cleveland district, where they aggregate but $4.72. The rates on coal, which gives return loads to the cars that take the ore south front the Lake Erie ports, are maintained at established differences between the coal fields of Ohio, Pittsburg and West Virginia. The rates in effect in the spring of 1908 were $1 per ton from southern Ohio, 90 cents from southeastern Ohio, $1 per ton from the Pittsburg field and $1.15 a ton from West Virginia.

The claim of the railroads that the rates on foodstuffs are not high enough to enter as a factor in fixing the selling price is fully substantiated by the statements of the dealers in such products. That is, the conditions are, with negligible exceptions, such that if the price obtainable in the markets be sufficient to encourage the growing of livestock, grains, dairy products, fruits or vegetables, the rate of freight, from whatever locality to whatever market, is sufficiently low to allow the producer to enter that market. His profits are, however, as a matter of course, diminished by the amount of freight which he pays, and, as a rule, the farther the place of production from the markets the greater is the freight charge. The differences in the net return to the producer are almost invariably reflected in the value of the land, which is lower as the distance from the markets is greater. Largely because of the defective system of mercantile distribution the grower of foodstuffs obtains a smaller proportion of the price paid by the consumer than accrues to the grower of any other agricultural product. Where, as in this country, the opportunity for the extension of cultivation is practically unlimited, a good market one season leads the farmers of any district to increase their production up to the point of minimum profit and the railroads are then besought for lower rates; when unfavorable weather or other conditions reduce their output they are also disgruntled. It therefore rarely happens that the grower, especially of the quickly perishable foodstuffs, is entirely satisfied with the freight rates.

A controversy, that it is scarcely an exaggeration to designate as typical, occurred several years ago between the growers of watermelons in a Southwestern State and the railroads conveying the melons to the primary markets. In comparatively a few years that region had become so productive that the shipments of watermelons over one road alone ranged from 1,400 to 1,800 cars during a watermelon season, deliveries being made all over Ohio and Indiana through dealers from those States who came down and bought the melons at the farms. The contention for lower rates had waxed so warm that a reduction in the watermelon rate became the issue upon which a legislative campaign was fought. The candidate pledged to secure a reduction in the rate was elected, and introduced a bill, which was enacted by the legislature, making the rate to the nearest primary market 7½ cents per 100 pounds. The railroad companies put this rate in effect and used it as a basis for the lowering of rates to the territory beyond. During the year of this rate reduction the traffic department of the railroad company referred to sent word to the farmers that the company had handled 1,500 cars of melons that season, the prompt shipment of which had been highly satisfactory to the growers. It furthermore said that the movement of these melons from that territory was a one-way traffic entirely, it being necessary to send special cars empty for the crop. These were necessarily stock cars that there might be ample ventilation, but they had to be supplied with extra slats in order that the melons might not fall out. It was necessary for them to be switched in requisite number on side tracks especially built adjoining the farms where the fruit was grown; that switching engines be kept at work, putting cars in and taking cars out all night and all day. The cars of melons, moreover, had to be hauled on special trains at a high rate of speed to get them to the markets before they spoiled. This reduced the tonnage per train fifteen or twenty per cent below the maximum that could be hauled at the normal freight train speed. A car with the average allowable load of 1,100 watermelons would contain but about twelve tons, although its capacity would be eighteen or twenty tons; the weight of the car exceeded the weight of the load. The switching and other special movements necessitated the employment of night telegraph operators and other extra help at the melon fields.

All of these conditions led the assistant to the general manager of the company to make an analysis of the expenditure as compared with the earnings. Waybills were abstracted and the receipts listed. A tabulation was made of the revenue tonnage, the gross tonnage, the tare weight, and the expenses incurred in behalf of the traffic. He found that the handling of the 1,500 cars of watermelons involved a loss to the company of $12,000 if the expenses of operation alone were considered.

The results of this investigation were brought to the attention of the traffic department and the next spring it sent a circular to the farmers in the truck region urging that the watermelon acreage be reduced, as the rates on that business were not remunerative, and stating that the railroad would not undertake to handle it except in the regular cars that were brought into the territory in the ordinary course of traffic; that there would be no special trains, nor special service of any character. The melon growers at once notified the State Railroad Commission, which, in turn, requested the railroad company and the melon growers to attend a meeting to discuss the whole subject. When the meeting convened the chairman called upon the railroads to say why they had caused so much trouble. The railroad representative, who was the aforesaid assistant to the general manager, stated that as he had been invited to attend the meeting it might be proper for whomsoever instigated it to open the discussion. Several shippers made statements of their complaints, all admitting, however, that the melon business had become very profitable,—one grower saying that $300 to $500 per car was being made out of a crop. The railroad representative then made a reply, showing the loss to the company from handling the business for the previous year, and stated that unless cost for the handling and something by way of profit could be obtained, the company would prefer to move other crops. He showed that it had been necessary to park 350 to 400 especially prepared stock cars in the melon territory; that it had taken a month or six weeks to gather these cars, which had to be hauled empty to the melon fields. He then pointed out that the rate per melon was less than a cent and a quarter, whereas it had cost the farmer four or five cents per melon to bring it by wagon the one or two or three miles to the railroad track. The chairman objected to some of the analyses, especially to the contrast of four or five cents per melon for the wagon haul from the farm with the cent or a cent and a half per melon for the railroad haul of two hundred miles. When the railroad man had finished, farmers from all over the room began to ask questions directly of him. They wanted to know how much they should pay to afford the railroad some slight profit. They were told 12 or 12½, cents. The chairman said: "The rate cannot be changed. It has been fixed by law at 7½ cents and that is the rate. I am here to protect the people of these counties." The railroad man suggested that his company might be willing in addition to affix the necessary slats to the stock cars and perform the switching for $5 to $6 per car. The farmers were willing to accept this, but the chairman insisted that it was contrary to law, and finally said in his wrath, "If you men here are going to deal with the railroad company you can do it without me. This meeting is adjourned."

With one exception the farmers remained in the hall and expressed a willingness to pay a rate of 12 cents per 100 pounds.

Returning to the main discussion, we have found that the rates on raw materials are so adjusted as to permit the manufacture of any staple article at any logical place of manufacture. On the raw material of wearing apparel the freight rate is entirely unimportant. On the lumber that enters into building material, on the ore, coke, and limestone used in the manufacture of iron and steel the freight rate is sufficient to become an appreciable factor in the cost of manufacture. On brick, coal and cement the selling price is the higher by the amount of the freight charge, which for distances sometimes not considerable exceeds the value of the commodity at the place of production. The freight charge, even on those heavier commodities, however, is far less in proportion to the wage of the day laborer as well as to the incomes and salaries received in the United States than in any other country. This is obviously a better test of comparison than that based upon rates of freight as expressed in money. To say that a specific rate is twenty cents in the United States, a shilling in Great Britain, a franc in France, or a mark in Germany, conveys an inadequate idea. When it is ascertained that the average wage of the day laborer in the United States is higher in comparison with the average rate of transportation than in any other country, the comparison is significant. In this country a continually increasing amount of railroad transportation can be purchased with the wage of the day laborer. With the sum of money representing the value of a given unit of any of the staple commodities of commerce, also can a continually increasing amount of railroad transportation be purchased.

That which makes possible the low freight rate of the American railroads is the magnitude of the scale upon which the transportation is conducted. The large cars, with a capacity of from thirty to fifty tons, and the powerful locomotives that draw a score or more of these loaded cars in one train, permit an almost infinitesimal freight charge per pound or per yard that, however, yields by the carload or by the trainload no inconsiderable revenue. For example, the average weight of the carload of food products is about 30,000 pounds. If the freight on such a carload be $300 the rate per pound would be only one cent, and there is scarcely a commodity upon which a freight rate of one cent per pound makes any difference in the retail price. As a matter of fact a carload of food products does not bring to the railroad so much revenue as $300 unless it has been moved from a far region; for instance, from the Dakotas or Texas to New York. Specific complaint in regard to the freight rates of the United States for many years has not, except in a small minority of cases, been based on the ground that they have prevented foodstuffs from finding a market, raw material from reaching places of manufacture, or finished products from distribution. While the difference of a cent or two in the rate of freight may not in the least interfere with the conduct of industry or commerce in the aggregate, such a slight difference, may perhaps determine whether a manufacturer obtain his raw material from this or that source of supply, whether a wholesale dealer obtain his stock from the manufacturer in one, or the manufacturer in another city, whether a retail dealer make his purchases from the wholesale dealer in this city or in that city. That is, for example, the prices of the products at the sources of supply being equal, a difference in the rate of freight may determine whether Cleveland, Ohio, obtain potatoes from Michigan or from upper New York; whether a factory in Louisville obtain coal from the fields of southern Indiana or central Kentucky. A carpenter in Des Moines may perhaps pay a dollar for twenty pounds of nails without knowing or caring what the freight rate may have been, or where they may have come from. A difference, however, of a few cents a hundred pounds in the rate of freight may have led the hardware dealer to have purchased the nails in Chicago or St. Louis or even directly from Pittsburg.

As the purchase of raw material tends toward the prosperity of the region where it is produced, as the operation of a factory tends to the increase of population, to appreciation in the value of real estate and the augmentation of business at the place of its location, so also does the growth of a wholesale business or of a retail business aid in the development of its surroundings. Producers, manufacturers, wholesalers and retailers naturally all desire to extend their sales, to reach further markets in competition with their rivals, and are supported in this desire by the communities to whose welfare they contribute. Any difference in freight rates that gives a producer of raw material, a manufacturer, a wholesale distributer, or a retail merchant an advantage over a competitor of another locality is therefore promptly made the subject of complaint.

The pressure brought upon the railroads by such competing producers, manufacturers and dealers has been a very important factor in the development of certain arrangements of freight rates, which we shall term the Regional Rate Structures, each of which has grown out of the various characteristics of a traffic region and has become adapted to those characteristics.

Other arrangements of freight rates which have grown out of the needs entailed by the production and marketing of certain of the principal articles entering into commerce we shall designate as the Commodity Rate Structures.

(End of Chapter VI.)

[THE FREIGHT RATE PRIMER]

Adapted from the Illustrated Pamphlet, So Entitled.

Issued by the New York Central and Hudson River Railroad Company.

The A. B. C. of the Matter.

"There has been much wild talk as to the extent of the over-capitalization of our railroads. The census reports on the commercial value of the railroads of the country, together with the reports made to the Interstate Commerce Commission by the railroads on their cost of construction, tend to show that, as a whole, the railroad property of the country is worth as much as the securities representing it, and that, in the consensus of opinion of investors, the total value of stock and bonds is greater than their total face value, notwithstanding the 'water' that has been injected in particular places. The huge value of terminals, the immense expenditures in recent years in double-tracking and improving grades, roadbeds and structures, have brought the total investments to a point where the opinion that the real value is greater than the face value is probably true."

(From President Roosevelt's Decoration-Day address at Indianapolis, May 30, 1907.)

The X. Y. Z. of the Situation.

"An army of more than 1,500,000 men is employed directly in the operation and maintenance of the railroads in the United States, and millions of other men are furnished employment indirectly in the mines, the forests and the factories, supplying the railroads with approximately one and one-quarter billions of dollars' worth of material and equipment annually consumed.

"These are wonderfully interesting and impressive facts; but the fact of greater interest and worthy of the most careful thought of every citizen of this country is that this vast army of men engaged in producing the commodity of transportation at an average cost more than 40 per cent lower than is shown by any other country is paid an average wage more than 50 per cent higher than is paid in any other country where railroads exist."

(W. C. Brown, before the Michigan Manufacturers' Association, June 22, 1908.)

LESSON I.

Freight Rates and the Clothes We Wear.

Whom have we here?

Eleven different types of American citizens, standing in a row, clad in the varied uniforms or togs of their several occupations or leisure from hod-carrier to the dude in dress suit and opera hat.

These men all live in the Mississippi Valley.

Their clothes were made in New England.

They paid the railroads nine cents apiece for transporting their clothes, including shoes and hats, from the point of manufacture to the Mississippi Valley.

The combined freight charges on all the clothes worn by the eleven men in the group, including shoes and hats, was less than one dollar.

If freight rates were advanced 10 per cent the increased price to these men on their entire wearing apparel would be less than one cent each.

If they have to pay more than that per cent it will not be because freight rates are advanced.

LESSON II.

Freight Rates and Agricultural Implements.

Consider the McCormick harvester. It mows, gathers, binds and stacks the bearded grain, while its proud possessor cracks his whip above the backs of his three-horse team. It has banished the nightmare of farm mortgages from the great prairies of the West.

This particular harvester we are considering is cutting grain one hundred miles west of the Mississippi River. It was built in Chicago and sold for $130.

The farmer paid $1.76 to have it brought to him from Chicago, three hundred miles away.

If freight rates were advanced 10 per cent the cost of the harvester would be increased seventeen and one-half cents.

LESSON III.

Freight Rates and Cooking Utensils.

Next to the harvester the modern kitchen cooking range has added more joys and years to the farmer's life than anything in the cornucopia of modern civilization.

Here is a standard range. It is a thing of beauty as well as a means for cooking everything your mother used to cook and much more.

The freight on a steel range, weighing from 400 to 500 pounds, from Detroit to points in the Mississippi Valley, approximates from $2 to $2.50 per stove on stoves which retail at from $55 to $60 each.

An increase of 10 per cent would add from twenty to twenty-five cents to the cost of the stove, which, divided by the life of the stove, taking the low average of ten years, would add one and one-half to two cents per year to the cost.

On heating stoves the increase would be about one-third less.

LESSON IV.

Freight Rates and Refrigerators.

What are the cold facts about refrigerators?

What cold storage is to the whole people, the modern refrigerator is to the individual family.

It preserves all things sweet and clean and wholesome.

Now the freight on a refrigerator, such as is used by the ordinary family, from Belding, Mich., where they are manufactured in large quantities, to New York is approximately seventy-five cents.

An increase of 10 per cent would add seven and one-half cents to the cost of the refrigerator, delivered in New York City.

LESSON V.

Freight Rates and Household Furniture.

Ever since Grand Rapids became the furniture hub of the Union there has been no excuse for any American family being without its antique or modern dining room set.

Look at this suite consisting of a solid table, six chairs, sideboard and china closet, etc. It could be bought F. O. B. at Grand Rapids for from $55 to $75, according to the wood and finish.

It weighs approximately 750 pounds and the freight from the factory to Chicago would be $1.60.

An increase of 10 per cent would add sixteen cents to the cost of all this furniture.

LESSON VI.

Freight Rates and a Business Suit.

Behold this business suit which no one would be ashamed to wear.

It might cost anywhere from $10 up to $35, according to the reputation of the tailor or the rent and advertising rates he pays.

The freight rate on such a suit of clothes, including hat and shoes, for a distance of 300 miles from any of our large jobbing or distributing centers is approximately three and one-half cents.

A 10 per cent increase would add a little more than one-third of one cent to the cost of this suit, and it would add no more if it cost $50 or $100.

LESSON VII.

Freight Rates and "King Cotton."

"Befo' de wah" cotton was king. Of our exports it still leads all our domestic products, having no second in sight.

If the entire cotton crop of the United States was compressed into one bale its value would be about $750,000,000.

Of this bale in 1908 the railways got a little "jag" worth according to the Interstate Commerce Commission $12,394,000, or less than 2 per cent.

An advance of 10 per cent in rates on cotton could not add more than one-fiftieth of a cent per pound to the price of cotton.

LESSON VIII.

Freight Rates and a Sack of Flour.

Minneapolis, as all good little school children know, is the seat of the flour industry of the United States.

If they do not learn this at school it is impressed upon their receptive minds by every illuminated billboard and painted rock that meets their gaze from Eastport to California.

There are half a dozen brands of flour ground at Minneapolis and every one is better than all others.

The rate on this incomparable product in carloads from Minneapolis to New York is 25 cents per hundred pounds.

That is 12½ cents per fifty-pound sack.

This flour is sold to the consumer in New York at approximately $1.85 per fifty-pound sack (or it was when this was written).

An increase of 10 per cent in freight rates would add but one and one-quarter cents to the price of a fifty-pound sack, or a little less than two one-hundredths of one cent per pound.

The freight rate on a fifty-pound sack of flour from Minneapolis to Chicago is five cents per sack. An increase of 10 per cent in rates would add only five mills per sack between these points, or one one-hundredth of one cent per pound.

LESSON IX.

Freight Rates and Dressed Beef.

The reason cattle are butchered and carried to the consumer as dressed beef rather than driven to market on foot or hauled as live stock, is that the freight charge is less and the beef arrives in better condition.

Little children in New York and Boston appreciate this, if the wise grown-ups of the West sometimes seem to doubt it.

The rate on dressed beef from Chicago to New York is forty-five cents per hundred pounds. The average price of this beef to the consumer in New York is (or was) approximately twenty-five cents per pound. A 10 per cent increase in freight rates would add less than five one-hundredths of one cent per pound.

If freight rates were advanced 10 per cent, the increased cost in New York City of a two-rib roast of the best quality, weighing eight pounds, retailing for $1.92, would be less than one-half cent.

Surely this is not an excessive price to pay for National prosperity and industrial peace.

LESSON X.

Freight on Eggs, Butter and Poultry.

Eggs were cheaper when Columbus experimented with them than they are now, but it cost more to carry a dozen eggs or a firkin of butter ten miles in 1492 than it would to carry them 100 miles now.

The rate on butter and eggs from points in Eastern Iowa to New York—a distance of approximately 1,200 miles—is eighty-four cents per hundred pounds. On dressed poultry from the same points to New York the rate is ninety-six and one-half cents.

The eggs are sold to the consumer by the dozen and the other commodities by the pound; and the consumer pays every farthing of freight that has accrued from the time the egg is laid, which he buys in the "original package," or as dressed poultry, or from the time the cow is milked, from which the butter is made.

An increase of 10 per cent would add eight one-hundredths of one cent per pound to the price the consumer pays for butter and eggs, and it would add nine and one-half one-hundredths of one per cent per pound to the cost of dressed poultry, for which he pays from twenty to thirty cents per pound.

LESSON XI.

Freight Rates and Leather Belting.

Some little children and many of their mothers do not know that a great deal of the power that makes the wheels go round in this industrial beehive is transmitted by belting.

The shops of the Lake Shore & Michigan Southern Railway at Elkhart, Indiana, are equipped with 13,288 running feet, or practically two and one-half miles, of leather belting. This belting cost the railroad company $6,235, or an average of 46.9 cents per running foot. The belting was shipped from Boston to Elkhart, a distance of 937 miles. The total freight charges amounted to $18.37, or fourteen one-hundredths of one cent per running foot. An increase of 10 per cent would add $1.83 to this cost, or fourteen one-thousandths of one cent per running foot.

This belting, moreover, cost the railroad company $1,082 more than it would have cost at the prices prevailing in 1899, representing an increase of 21 per cent. During this same period there was no change whatever in the freight rate.

LESSON XII.

The Railways and National Development.

Now listen to the sober words of the one man who has perhaps given more official attention to the subject than any other citizen of the republic:

"Without regard to the personnel of railroad officials, without regard primarily to the interest of stockholders, but in the interest of public welfare and national prosperity, we must permit railway earnings to be adequate for railroad improvement at advantage and profit.

"To my mind it is a most impressive fact, so great as to elude the grasp of imagination, that the railway traffic of the country fully doubled in the first seven years of this twentieth century. This enormous addition to the volume of transportable goods overtaxed, as you know, the existing facilities, and the resulting condition perhaps accounts for much of the hostility which has been manifested in various quarters. For the man who has raised something by hard labor or made something with painstaking skill, which he could sell at a handsome profit in an eager market, and finds that he cannot get it carried to destination, and so sees his anticipated gains turned into a positive loss, is naturally exasperated and unthinkingly 'blames it' on the railroads, and is ready to hit them with anything he can lay his hands to; and as the state legislature seemed to be the most convenient weapon he wielded it for all it was worth.

"I dwell upon this a moment further, because it seems plain to me that the prosperity of the country is measured and will be measured by the ability of its railroads and waterways to transport its increasing commerce. With a country of such vast extent and limitless resources, with all the means of production developed to a wonderful state of efficiency, the continued advancement of this great people depends primarily upon such an increase of transportation facilities as will provide prompt and safe movement everywhere from producer to consumer; and that we shall not secure unless the men who are relied upon to manage these great highways of commerce have fitting opportunity, and the capital which is required for their needful expansion is permitted to realize fairly liberal returns."

(Hon. Martin A. Knapp, Chairman Interstate Commerce Commission, in "Annals of the American Academy of Political and Social Science.")

LESSON XIII.

Look Upon This Picture.

What is this I see?

Smokeless chimneys! Closed factories. Spiders' webs across the doors of opportunity. Grass growing rankly in the streets of industrial towns. Dejection on the face of nature and of man.

What does it mean?

The railways have ceased to earn enough to meet expenses and provide for the progressive maintenance of their equipment and plant.

Why, are not their receipts greater than ever?

True, but their expenses have increased more rapidly than their earnings and their net revenues have only been maintained by postponing purchases that must be made some time or the railways will be incapable of performing their public service with safety, dispatch and economy.

In 1908 and 1909 the railways scrimped maintenance $300,000,000 and this will have to be made good some time, some how, before they are on as sound an operating basis as they were before the panic of 1907.

What must be done to avert the consequences described above?

A readjustment of freight rates, involving a reasonable increase applied to such articles and commodities as can stand it, without any appreciable hardship either to manufacturer, merchant or consumer, means the difference between grinding economy and a fair degree of prosperity.

The Reverse of the Picture.

Would a 10 per cent increase in freight rates mean such a difference?

It most certainly would.

It would mean the difference between closed shops and suspended improvements and the resumption of improvements with the ability to resume the large purchases of material and equipment, giving full employment to labor and furnishing improved transportation facilities, which, within a very short time the commerce of the country is going to demand more insistently than ever. To hundreds of thousands of workingmen it means the difference between steady, well-paid employment and walking the streets looking in vain for work.

LESSON XIV.

Narrow Margin Between Earnings and Expense.

"I have looked up the statement of about 80 per cent of the principal railroads of the country and find that during the last half of the year 1907, after the tremendous increase in expenses had become effective, while the gross earnings of the railroads increased $57,413,078 over the same period of the preceding year, their expenses increased $80,235,823, showing a net loss for the period, despite the tremendous business handled, of $22,822,745.

"The converging lines of cost and compensation in railroad operation, which for years have been steadily approaching each other, are now separated by so narrow a margin that in order to pay fixed charges, taxes and operating expenses, with even a very moderate return to shareholders, there must be either a moderate increase in freight rates or a very substantial reduction in the wages of railroad employes."

(W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)

LESSON XV.

Which Shall It Be?

"Is it not better, Mr. President, that you and I, and tens of thousands of people who buy and use automobiles, should pay a dollar or two more freight on our machines than that the family of the engineer, the conductor, the brakeman, the switchman or the humble section hand shall be deprived of the actual necessities and comforts of life, which we know they must give up if the monthly pay check is reduced?

"No question of greater importance confronts the people of the country today, for upon its righteous solution hangs the momentous issue of an early return of prosperity or a continuance of the depression of the past six months, emphasized and darkened by a struggle with organized labor such as this country has never experienced."

(W. C. Brown, before the Mich. Mfrs. Assn., 6-22-08.)

LESSON XVI.

Moral.

"Our prosperity came with the prosperity of the railroads; it declined when adversity struck the railroads. We do not believe we can have the full measure of prosperity again until the railroads are prosperous."

(National Prosperity Association of St. Louis.)

[PROGRESSIVE SAFETY IN RAILWAY OPERATION]

By A. H. Smith, Vice-President of the N. Y. C. & H. R. R. Co.

An Address Delivered Before the National Association of Railroad Commissioners, at their Annual Convention, held in Washington, D. C., November 16, 1909.

In examining into the state of an art of such far-reaching importance and such diversified nature as that of transportation by rail, it seems necessary to acquaint ourselves with its beginnings and growth; to determine the elements upon which its development relies and the necessity which has invoked the various steps of improvement in the plant devoted to transportation and the art of employing and controlling it in the performance of a public service.

The lay observer will scarcely appreciate, in the absence of the actual analysis, that there exists so many branches of this subject, each branch of which, by itself, may be considered the object of a separate professional science and a distinct human industry.

EARLY RAILROAD HISTORY.

Railways had their origin in tramways laid over 200 years ago in the mineral districts of England, which conveyed coal to the sea. Animal motive power was used. By the discovery, in 1814, of the adhesion of a smooth wheel to a smooth rail, it became possible to consider the employment of the tractive power of a rolling locomotive, and for some time subsequent to this, to the trial trip of the "Rocket," in 1829, which may be described as the first successful steam locomotive, the experiments were along these lines.

While industrial railroads similar in character to the English existed in this country, the Baltimore & Ohio was the pioneer American railroad built for public use. On July 4, 1828, the first rail was laid by Charles Carroll, the only surviving signer of the Declaration of Independence, and thirteen miles were opened for traffic in 1830. In the same year the West Point Foundry began building locomotives, producing the "De Witt Clinton," in 1831. It weighed three and one-half tons, and was built for the Mohawk & Hudson Railroad, the pioneer company of the present New York Central Lines, which had been chartered in 1826, four years before actual construction was begun.

The line was opened from Albany to Schenectady in 1831; to Utica in 1836, and to Buffalo in 1842. Connections to New York and Boston were built in rapid succession.

About this time, in Pennsylvania, the Columbia Railroad was built from Philadelphia to Columbia, on the Susquehanna River, forming the pioneer division of the present Pennsylvania System.

Several companies were chartered about the same time in Massachusetts.

Following the panic of 1837 there was little industrial development and a lull in railroad construction, but with 1850 begins the era of rapid extension and the welding of short connecting lines under single ownerships. The consolidation was vigorously objected to at first. Originally there were eleven companies owning and operating the line between Albany and Buffalo. Between Buffalo and Cleveland, changes of passengers and freight were made at Dunkirk and Erie. The latter change was made necessary by the difference in gauge; to the east six feet and to the west four feet ten inches. Plans for the consolidation of some of these lines made in 1853 entailed for through operation the change of the gauge east to conform to that west of Erie, to obviate transfer. This proposition so aroused the inhabitants of Erie that they resorted to violence. In December, 1853, they tore down the railroad bridge, no trains going through until February, 1854. This same bridge was rebuilt in 1855, but again torn down and burned by a mob. Finally a compromise ended what is known as the Erie War and the gauge was changed, from which time dates the beginning of definite through operation.

In 1851 the Erie Railroad joined New York with Lake Erie. The Baltimore & Ohio reached the Ohio River. Two years later the Atlantic seaboard and Chicago were connected by rail, which the following year reached the Mississippi River. These extensions to the Western Frontier opened the traffic between the Ohio and Mississippi rivers.

In the early days the public desire for rail transportation facilities led to numerous enterprises securing public financial support, but owing to the disaster that was experienced in some of these enterprises the Ohio law prohibited any town, county or State from rendering such assistance. When the Louisville & Nashville Railroad was built, Cincinnati found it imperative to have railroad communication to the South, but the prohibition of the aforesaid law prevented public assistance, and the scheme was devised of building and owning a line. This line went south through Kentucky to Chattanooga, was built and operated, and eventually leased to the Cincinnati, New Orleans & Texas Pacific.

The railroads played an important part in the conduct of the Civil War, many of them being practically devoted to the transportation of Government troops and supplies. Great damage was done to the many lines in the South owing to the military operations. By the close of the war there had been no pronounced advance in protection by the appliances which are now commonly employed in the control of train operation. This was largely due to the light equipment, slow speeds and sparse traffic.

The first Pacific railroad was begun, with Government aid, in the '60s. With the opening up of the West and the return to industrial pursuits of the people after the close of the war dates a remarkable era in railroad extension. In the decade from 1880 to 1890, 70,000 miles were built in the central and western districts, opening vast unoccupied agricultural, grazing and mineral sections to immigration and development. The panic of 1893 exerted considerable influence on railroad construction during the following decade.

The period since 1900 has been more one of reconstruction and improving existing lines; the growth of industries and population tributary to existing lines necessitating this course.

The vastness of the railroad industry may be imagined when one considers that from fifteen to twenty per cent of the capital of the United States is invested in railroads. As an exhibit of the growth and importance let me quote the following statistics of railroad growth by decades since the first operation:

183023Miles
18402,814 "
18509,021 "
186030,635 "
187052,914 "
188093,296 "
1890163,597 "
1900193,346 "
1909about 250,000 "

Such is the exhibit of progress in the extent of railroads, broadly viewed. With the growth in extent the elements of safety have multiplied and have become very numerous; in fact, an almost indefinite subdivision of railroad property and operation in respect of safety might be conceived. We will consider, however, the beginnings and the growth of a few of the more important and striking items and their relationship to the state of the art, as portraying in a more graphic manner the adjustment, if you may call it such, of safety to progress, or, as the subject has been assigned to me, "Progressive Safety."

AIR BRAKES.

As the density of traffic, and the speed, together with the weight of equipment, developed, following upon the greater transportation to be undertaken, the question of brakes was an important factor. More efficient brakes were needed; the essential characteristics being that they should be continuous throughout the length of the train, simultaneously applied and released, with a single point of control.

In 1869 George Westinghouse, Jr., brought forth what is known as the straight air brake, consisting of a pump, main reservoir, three-way valve, brake cylinder and train line. Application was made by admitting air from the main reservoir into the train line. The brakes were released by reducing the train-line pressure into the atmosphere through the three-way valve. The brakes were useless if there was a leak, a burst in the air line or a parted train.

With these shortcomings in mind, the automatic air brake was produced in 1873, in which the method was reversed. With the addition of an auxiliary reservoir under each passenger car and a triple valve, application of brakes was secured by reducing the train-line pressure, while admitting air from the main reservoir raised the pressure and released the brakes. On the application of the automatic air brake to freight cars it was found the reduction of pressure was not quick enough to set the rear brakes promptly, and in consequence accidents occurred from the bunching of the cars.

The consideration of the brake question by the Master Car Builders' Association in 1885, and public tests under their auspices in 1886, at which time the manufacturers were represented, did not succeed in stopping freight trains without violent and disastrous shocks. So discouraging did these tests seem for the time being, that a report was made, suggesting that the successful application of such brakes on long trains could only be accomplished by electricity. However, the following January witnessed the introduction of the Westinghouse Quick-Action air brake, which corrected the previous trouble and made practicable the application of air brakes to long freight trains. Continuing from this time there has been marked improvement and development in all features of the apparatus, without, however, modifying the essential elements of which it is constituted.

With the solution of a means of train control came a further growth in their size and weight; sooner or later this had to emphasize the necessity for efficient coupling devices. Not only were there accidents due to the primitive link and pin couplers, but the various standards in existence both complicated the operations of coupling and uncoupling of cars and involved the question of interchange and safety.

AUTOMATIC COUPLERS.

Owing to the large number of accidents, Mr. F. D. Adams, of the Boston & Albany Railroad, recommended to the Master Car Builders' Association, at its third convention, in 1869, that a uniform height should be established for couplers; their failure to meet when cars came together being considered the cause of numerous accidents. In 1871 that convention adopted 33 inches as the standard height for standard-gauge cars. At the convention of 1873 Mr. M. N. Forney urged that a committee investigate the cause of accidents and make recommendation. This committee in the following year gave as the principal cause the same as reported by Mr. Adams eight years before. They pronounced the tests of automatic couplers to date a failure. Another committee at this same convention gave the first recognition to automatic couplers by reporting that a great advantage would be derived from a uniform drawbar, such as would be accepted as a standard and which would be a self-coupler. During several years following various models were examined, but nothing was found to meet the demands. In 1877 Mr. John Kirby, of the Lake Shore, reported that his company intended to equip 100 cars with self-couplers, and at the same meeting Mr. Garey, of the New York Central, told of having been waited upon by a committee of yardmasters, asking for dead blocks or some such safety device. This turned the attention of the Association from the coupler to the dead block. In the year following they invited the Yardmasters' Association to act in concert with their committee in reporting upon means of safety for protection of yard and train men in the performance of their duties.

This was the situation when on March 19, 1880, the Massachusetts Legislature instructed the Railroad Commission to investigate and report with recommendation as to means of prevention of accidents in the coupling of cars. They reported that they preferred to be guided by the action of the railroad companies, and any device made standard by them would, in their opinion, be the best recommendation for such device.

In 1882 the Connecticut Railroad Commissioners recommended to the Legislature that automatic couplers be required on all new cars.

In 1883 the Massachusetts Commissioners expressed the hope that the Master Car Builders' Association would at its convention agree upon some type of coupler for freight cars.

In 1884 the Association selected Mr. M. N. Forney to conduct tests of automatic couplers and report. Attention was called at that time to less than a dozen varieties that were worthy of consideration. With this action of the Association as a guide, the Massachusetts Commissioners undertook to solve the problem, and announced that they would not prescribe any coupler that had not been tested in actual traffic, but notified the railroad companies in the State that all new cars, and cars requiring new couplers, should be provided with one of five kinds specified. It happened that the kinds specified would not couple with each other.

In 1885 public tests were held at Buffalo by Mr. Forney. Forty-two couplers were tested, twelve of which were recommended for further tests. In the following year the trials made of power brakes on freight trains made it very evident that the link and pin type of coupling would not suffice, and it was eliminated from further consideration.

In 1887 the Executive Committee reported in favor of the Janney type of coupler and all other forms that would automatically couple with it under all conditions of service. This report was adopted in 1888 by a vote of 474 for and 194 against. The Executive Committee then undertook to establish contour lines, drawings and templates as standard, but found that the Janney patents covered the contour of vertical plane couplers. This was remedied in 1888, when the Janney Coupler Company waived all claims for patents on contour lines of coupling surfaces of car couplers used on railroads members of the Master Car Builders' Association, which enabled the Association to formally adopt in all respects this type of coupler as standard. At the convention of 1889 such action was taken, on motion of Mr. Voorhees, General Superintendent of the New York Central Railroad, and since that time this type of coupler has been the standard, and called the "Master Car Builders' Coupler."

In 1893 Congress enacted a law requiring all railroads engaged in interstate commerce to provide on all cars and locomotives a continuous power brake capable of being controlled by the engineman in the locomotive cab, and also automatic couplers which would operate by impact. January 1, 1898, was the date set by which these changes must be made—subsequently extended two years. We now have uniformity in height and contour to insure perfect contact between all classes of equipment, and a positively locked knuckle. The design and attachments to car body are prescribed of a strength in excess of the power of locomotives, and in modern friction draft gear the strength reaches 250,000 pounds.

SIGNALING.

The need of indicating the conditions of the road to trains came with the increasing traffic and speed. As these conditions developed in England before they did here, the first steps were taken in that country. In 1834 the Liverpool & Manchester introduced the first system of fixed signals, consisting of an upright post with a rotating disk at its top, showing red for danger and the absence of indication by day and a white light by night for clear. On the opening of the Great Western Railway this method was improved. Experiments by Messrs. Chappe, the inventors of optical telegraphy, showed that under certain conditions of illumination the color of any body would disappear. This demonstrated that the form, and not the color, of the day signal could be relied on. It was also found that a long, narrow surface could be seen further as projected against the horizon or landscape than the same area in a square or circle. Making use of these results, Sir Charles Gregory, in 1841, designed and erected at New Cross the first semaphore signal. There was no communication between stations; each signalman displaying his signal at danger after the passage of a train until a certain time had elapsed, when it was cleared. The only information conveyed to the engineman was that the preceding train had passed the station at least the required time before him.

The failure or inability to act with sufficient promptness at the display of the danger position, and the consequent collisions, led to the installation of additional signals to give advance information to the engineman of the position of the signal he was to obey. Thus we have clearly portrayed the inception of the present block and caution signals.

Mr. C. V. Walker, of the Southwestern Company, introduced the "Bell Code," which was the first audible method of communication between signal stations. The same year Mr. Tyer supplemented this with electric visual signals, the object being to give the operator indication of the signal having been received and given, and at all times to show the exact position of the signal itself. This suggested the space interval between trains, in place of the time interval, making signal indications definite. In 1858 the positive block system was established in England, based on the space interval system.

Making use of telegraph communication, Mr. Ashbel Welch, Chief Engineer of the United New Jersey Canal and Railroad Company, devised and installed during 1863 and 1864 the first block system of signals in this country, on the double-track line between Philadelphia and New Brunswick. Signal stations were suitably spaced, and at each station a signal was provided, visible as far as possible each way. The signal itself was a white board by day and a white light by night, indicating "clear," shown through a glass aperture two feet in diameter in front of the block signal box. For the "danger" indication a red screen fell to cover the white board or light. On a train's passing a station the signalman released the screen, which fell by gravity, and did not raise it until advised by telegraph that the preceding train had passed the next station, thereby maintaining a space interval. Thus was evolved the telegraph block system, still generally used, with modifications of apparatus and signals, on lines of light traffic. Elaborations of this system were later installed following more closely the English practice, perhaps reaching the most complete development upon the New Haven and New York Central lines, where it is still in use. Notwithstanding numerous improvements in apparatus, the same practice of fixing a positive space interval by means of communication between block stations still holds. The addition of track circuits for locking and indicating purposes and interlocking between stations, more fully effected by the introduction of the "Coleman block instrument," in 1896, has thus evolved the controlled manual block system as now used.

AUTOMATIC SIGNALS.

In 1867 Thomas S. Hall patented an electric signal and alarm bell, used in connection with a switch or drawbridge. Its shortcoming lay in the fact that a break in the circuit or failure of the latter gave no danger indication. To correct this a closed circuit was necessary, although more expensive. In 1870 Mr. Wm. Robinson devised the plan of having the circuit closed at the point of danger, if conditions were favorable, and opened a short distance in advance of the signal. The wheels of the approaching train depressed a lever, which closed the circuit and cleared the signal, unless interrupted at the point of danger. Subsequent modifications were made, whereby the circuit once completed remained so through the agency of an electromagnet, and reopened when the train passed out of that portion of the track governed by the signal.

In 1871 Mr. Hall put in operation the first automatic electric block system, on the New York & Harlem Railroad, between the Grand Central Station and Mott Haven Junction. It was normal "safety." The wheels of a passing train striking a lever completed a circuit, which put the signal to danger, after the train, and held it so until the succeeding signal went to danger, when a separate circuit was completed, which released the former signal, allowing it to return to clear.

The disadvantage in having the wheels of a train strike a lever to complete the circuit led Mr. F. L. Pope to experiment. After a successful attempt in transmitting an electric circuit through an ordinary track with fishplate joints, he made a signal test at East Cambridge, Mass. A section of track was insulated from the rest, with a wire circuit, including a battery and electromagnet for operating the signal, fastened at either end to the opposite rails. The metal wheels and axles completed the circuit, throwing the signal to danger against following trains. A detent served to keep the circuit closed until the next signal was reached, when a separate circuit released the detent, permitting the signal to clear.

In 1879 this system was put in service, and, with some alterations, still remains in some localities.

Following the original manual semaphore and the controlled manual system of operation came the pneumatic and electric systems, for localities which required a great number of signal movements. With the development of motors and batteries capable of economic operation, automatic signals of the semaphore type have been successfully and widely installed.

In the semaphore system numerous failures have occurred, due to the formation of ice and sleet upon the blades. This has led to the introduction of the so-called "upper quadrant" operation; that is, the motion of the signal being from horizontal to an upwardly inclined position and back.

On account of the widespread prevalence of electric lighting and the building up of the territory adjacent to railroads, changes in the color indication of night signals have been adopted, generally in such localities using green instead of white for the safety indication.

INTERLOCKING.

Developing with the manual operation of signals, and as a safeguard against mistakes of the signalmen, interlocking grew up as a means for preventing conflicting signals being given at the same time. As with signals, so with interlocking, England led at first. After a trip to that country in 1869, Mr. Ashbel Welch recommended the advantage derived from the English method of operating switches and signals in large yards and terminals, where the entire control fell to one man so located as to be in touch with the whole situation and equipped with a machine that would not permit of setting up conflicting routes. The plea resulted in the order of a twenty-lever Saxby & Farmer interlocking machine, which was installed in 1874 on the New Jersey Division of his line. Railroads were prompt to see its advantage, and in a short time machines performing the functions were made and installed in this country, not only for the protection of railroad intersections, but for the control of large terminal layouts. In 1876 the first power-operated interlocking system was perfected, which was the pneumatic type. In 1900 an all-electric interlocking system, advantageous where distant functions were to be embraced within the operation of the plant, and applicable to localities where electric traction was in use, was devised.

The more recent development of power-operated interlocking systems, with complete electric indication of the conditions on all tracks, has made it possible for larger systems to be consolidated under the control of a central plant, and thus under the direction of a central authority; these machines, being of a completely interlocked character, insure greater safety by the central control, as well as greater facility of operation.

TRAIN DISPATCHING.

In this country the first radical departure from the time interval and flagging method of operation came in 1851. The New York & Erie Railroad had established a single line of telegraph between Piermont, on the Hudson River, and Dunkirk, on Lake Erie, for company business. The Superintendent of Telegraph, Mr. Luther C. Tillottson, and the Division Superintendent were together in the Elmira depot on an occasion and learned that the westbound express from New York was four hours late. At Corning an eastbound stock train and a westbound freight at Elmira waited for the express. With this information, Mr. Tillottson suggested that the freight train at Elmira could be sent to Corning and the stock train at that point ordered to Elmira, with perfect safety, before the arrival of the express. The move was successful and encouraged similar operation, which shortly led to the adoption, with some modifications, of this train-dispatching method on the Susquehanna Division of the Erie. Its adoption over the entire line followed, in spite of the great opposition which Mr. Charles Minot, the General Superintendent, met when planning for its introduction. Some of the conductors and enginemen went so far as to resign rather than run on telegraphic orders against the time of another train.

This system spread rapidly to other lines and, in company with other features of railroad operation, has been progressively developed and improved. One of the important elements of safety in the dispatching practice has been the tendency to the same words in the same sequence to convey the same instructions, insuring a uniform understanding of the instructions instead of permitting a discretionary phraseology in originating or a misunderstanding in construing the order transmitted. The rules for train dispatching now prescribe the use of standard forms of expression for orders governing the movement of trains.

Within the past few years experiments have been made with a system of train dispatching by telephone, now in successful operation upon some important lines, and growing in extent. Advantage lies in the ability to use trained railroad employes who cannot work under the telegraph system, not being telegraph operators. The telephone-dispatching system not only insures a rapid distribution of information, but by its greater capacity enables a more complete knowledge of the state of the line to be had in the controlling office, as well as in all the offices tributary to the dispatching system.

DEVELOPMENT OF THE LOCOMOTIVE.

While it is not our intention to take up your time with the recital, even in condensed form, of the development of all the items which go to make up the parts of a railroad, we cannot forego the opportunity to speak briefly about the locomotive, the motive power, giving action and effect to transportation.

As early as 1680 Sir Isaac Newton predicted steam-propelled carriages, and even made suggestions bearing on their design. Through the eighteenth century various types of steam vehicles appeared, more as curiosities than anything else, some of them forerunners of the locomotive and others of the automobile. It was not until 1803 that anything really deserving the name "locomotive" was built. Richard Trevithick, a Cornish miner, constructed the locomotive bearing his name, curiously enough as the result of a wager. On trial this machine did convey ten tons of iron for nine miles on a cast-iron tramway by steam power, winning the wager. The desire of Christopher Blackett, a mine owner, to use steam motive power in place of animals led to the practical demonstration of adhesion. On this principle, Blackett's Superintendent, William Hedley, built his "Puffing Billy," a complicated affair of levers, beams and gears. On the completion of the Liverpool & Manchester Railroad, the directors, being undecided as to the motive power, offered a prize of five hundred pounds for a locomotive that would fulfill certain conditions. The test came off at Rainhill, in October, 1829, on a level piece of track about one and one-half miles long, between four competitors. Stephenson's "Rocket" won and gave the world the mechanical combination essentially represented in locomotive practice since that time. American locomotive practice followed the Stephenson model. Among the early builders were Phineas Davis, Ross Winans and Matthias Baldwin. The four-wheel engines of the English type proved injurious to the light rail and sharp curves on our early roads, and to overcome this Mr. John B. Jervis, Chief Engineer of the Mohawk & Hudson Railroad, introduced the four-wheel "Bogie" truck. For some twenty years this design remained, until in the '50s the demand for more tractive power brought about the addition of another pair of coupled drivers, thus evolving the well-known "American" type. Additional drivers were added with the demand for increased tractive power, leading in turn to the development of the "Mogul" and "Consolidated" types.

In the decade between 1880 and 1890 more drivers, such as in the ten-wheel type, began to be used in high-speed service, and the adaptation of wide fire-boxes to the American type necessitated the addition of a trailer truck to support the rear end of the locomotive frame, and brought about the "Atlantic" type, in 1895.

The "Pacific" type, or the most modern high-speed passenger locomotive, is a development of this. In 1888 Anatole Mallett designed the articulated locomotive. In 1904 the first one of this type was placed in operation on an American railroad, and since that time has gained favor where maximum tractive power on heavy grades is required.

There is perhaps no more striking illustration of the progress of the art than can be obtained from an examination of the illustrations of the various types of locomotives built and operated since 1829. It all bespeaks a tremendous growth, based on a tremendous necessity. We can point to the strengthening of all parts commensurate with the work to be done; to the perfection of detail in materials; manufacture, maintenance and inspection; and possibly observe with pride that the motive power of the railroads of the present contributes an almost negligible part of the difficulties of modern railroad operation, due to features of design or control.

CAR CONSTRUCTION.

One of the early problems in transportation was to secure the carrying capacity of cars as well as safety. We have pointed out how it was necessary to add a guiding truck to the English locomotive, designed to adapt the same locomotive safely to American conditions. Both the excessive wheel loads on four-wheel freight cars and the greater liability to accident or derailment led at an early time to the use of four-wheel trucks under cars. Between 1831 and 1834 Mr. Ross Winans, of Baltimore, made improvements on cars on the Baltimore & Ohio Railroad. He applied the swivel four-wheel truck, the outside bearing for axles, and the application of the draft gear to the car body and not to the trucks. The increase in lengths of passenger cars, with corresponding increases in weight, led, about 1880, to the quite general employment of a six-wheel truck instead of a four-wheel truck, and even eight-wheel trucks were used for a time, but rejected on account of the excessive length of wheel base and other complications.

In 1879 the Allen wheel, consisting of built-up construction with forged-steel tire, was introduced and rapidly became applied to cars in the most exacting service. Originally the tires were imported from the Krupp Works, in Germany, but later were manufactured here.

Great interest attaches itself at the present time to the manufacture of solid-steel forged wheels, on account of the reduction in parts.

In the latter '80s experiments were made in the development of steel framing for car construction, and built-up steel underframes were introduced shortly after; at first on cars for mineral traffic, where excessive weights and capacities were required. The success of this type of construction has led to its adaptation at the present time to all classes of equipment, and not only steel underframes, but complete steel construction in certain classes of service where the conditions require.

With the increase in through passenger service we note the appearance of the vestibule, protecting the communication between cars. Originally this vestibule was narrow, about the width of the car door, and was introduced about 1882, although experimented with as far back as 1845. The equipment of the "Exposition Flyer," operated from New York to Chicago during the World's Fair, was the first, we believe, to appear with full-width vestibules, these being originally designed as offering less atmospheric resistance to high-speed trains, but having subsequently been found a more economical, attractive and safer form of construction.

The question of steel cars and composite steel and wooden cars is having very careful investigation and experiment at the present time. While considerably used, the results of the use of these cars must be awaited. After the factor of safety has been determined the question of tare weight per passenger carried will naturally arise. In this country our weights are now far in excess of all foreign railroad practice. This enters into the resistance and cost to produce the service.

CAR HEATING.

The original method of heating passenger cars by direct radiation from coal or wood stoves was a source of discomfort to the passengers as well as a menace in case of disaster. This brought about in the late '80s the introduction of the "Baker Hot-Water Heater," which was a great improvement for the comfort of passengers, but still left a fire in the car. In many instances of collisions and derailments during this period, especially in winter, the cars were set on fire and the wreckage consumed from the fire scattered from the stoves or heaters. Experimentally, steam from the locomotives was used, but the difficulties in securing satisfactory couplings between the cars, the drain on the boiler, and the fact that the locomotive was sometimes detached from the train, were obstacles. One of the Western roads even attached a separate car for the sole purpose of supplying heat and light. The growth in the capacity of locomotive boilers, and the perfection of the couplings between cars, have led to the present practice of car heating, which entirely eliminates the presence of any fire or source of danger from that source.

CAR LIGHTING.

Car lighting has passed through the same stages as house lighting, possibly more gradually, on account of the greater difficulties. The old low-roofed passenger cars were illuminated by candles about two inches in diameter, placed in racks along the sides of the car. With the advent of mineral oil, just before the Civil War, the candles gave place to oil lamps. Great difficulty was experienced in maintaining a steady flame, until the principle of the student lamp was adopted. The flame was shielded from the outside air by a chimney, and the central draft to the burner provided the air necessary, at the right point, to insure combustion. For more than fifteen years this method prevailed, and while the presence of oil lamps in wrecks contributed fuel to the flames, the proof that they were in any way the principal cause was lacking. Still, to eliminate this contributory feature, attempts were made to use ordinary coal gas, compressed in tanks on each car. This, however, proved unsatisfactory. In 1870 a system of compressed gas made from crude petroleum had been invented by Julius Pintsch, of Berlin, and by 1887 had been put into a number of cars on European railroads. The light was too dim to satisfy American conditions. It was only a question of time, however, for its proper and adequate development to our needs, when its use became general, on the perfection of the lamp and burner.

For the last fifteen years electric lighting of various types has been in use on cars in an experimental way. While possessing advantages, perhaps, in safety, owing to low voltages and small quantity of current, its general use has not yet been entirely practicable, owing to the complications involved, either in generating and satisfactorily controlling the current upon the cars, or in supplying it at terminals through storage batteries.

So far we have been considering largely features either of equipment or train control. Perhaps more important than these is the permanent way. Compared with engines, cars, signals and dispatching, the variety of problems presented in the construction and maintenance are many. We perhaps owe to the ancient beginnings and highly scientific development of the profession of civil engineering and its branches the fact that these problems of construction and maintenance are so well met and the source of so little anxiety in connection with railroad transportation at the present time. American engineering ingenuity and courage have devised structures to meet every requirement of railroad development. In bridge construction for centuries the simple beam or the arch were the only spans employed. The natural barriers to construction of railroads required something more than either. Between 1830 and 1850 many wooden trusses were built in the Eastern and Middle States after the design of Burr and Palmer. S. H. Long's introduction of counter-braces in truss construction in 1830 was a long step in advance, and after ten years the celebrated Howe truss was brought out by the inventor. Four years later came the Pratt truss. In 1859 several riveted lattice trusses were built for the New York Central, varying from 40 to 90 feet in length, by Howard Carroll. The Lehigh Valley built a Whipple-Murphy pin-connected bridge of 165-foot span.

This progress in truss construction enabled the railroads to bridge streams and secure continuous roadway.

As an interesting historical note in connection with railroad bridges, we find that the first railroad bridge was built across the Mississippi River at Rock Island in 1856. It had hardly been completed, at great expense, before St. Louis steamboat interests demanded its removal as a nuisance and an obstruction to navigation. The United States District Court so adjudged it, and ordered its removal within six months. The presiding judge in his opinion stated that "if one railroad is able to transfer freight and passengers without delay and expense of changing at the river, financial necessity will compel competing roads to provide themselves with the same facilities," which led him to foresee great interference to river traffic and great mischief in the establishment of such a precedent.

The case was appealed, and Abraham Lincoln was the counsel for the bridge company before the United States Supreme Court. He argued that both the river and the railroad were great highways for the people, and while at the immediate time the water traffic was possibly greater, he predicted that the time might come when the railroads might equal or exceed the traffic on the river, and he consequently felt that each interest was entitled to equal consideration. His broad grasp of the subject secured for his company a reversal of the decision of the lower court, and the bridge remained.

With the advent of steel the possibilities of bridge construction may be said to have become almost unlimited, and their design exceedingly simplified and standardized.

EVOLUTION OF THE RAIL.

Equally important is the evolution of the rail and its fastenings. The type of metal rails of which the bottom served as the running surface for flat wheels guided by a flange on the rail gave place to "edge" rails on which flanged wheels used the upper surface of the rail before the day of the steam locomotive.

Of the edge type, the first were cast iron, fish-bellied, in sections about three feet in length. They were supported by stone blocks or in cast-iron chairs which were in turn made secure to the stone. Later the same type was made of wrought iron by John Birkinshaw, in England, who rolled it up to 15 or 18 feet in length.

From 1820 to 1850 the flat strap rail, spiked to longitudinal timbers, in turn supported by cross-ties, was largely used in this country, as it was the only shape that could be rolled here. In 1834 Mr. Strickland designed the Bridge, or "U"-shaped section, which was used on some of our earlier roads and was the first style of edge rail rolled in this country, in 1844.

The present "T" section was invented in 1830 by Colonel Stevens, Chief Engineer of the Camden & Amboy Railway, and until 1845, when it was first rolled in this country, had to be imported from England. The poor quality of the iron at this time required such a broad support, in the design of the rail, for the head, that no satisfactory plate fastening could be secured. Iron shoes, into which the rail ends fitted, were the means of connection.

The greatest improvement dates from 1855, when the first steel rails were rolled in England. Ten years later they were experimentally rolled here. In 1867, through the introduction of the Bessemer process, which made possible their manufacture at a greatly reduced cost, began a revolution in track construction.

While the decade from 1880 to 1890 witnessed the greatest rate of railroad building in this country, it also witnessed the substantial substitution of steel rails on our lines. The earlier rails weighed from 50 to 70 pounds per yard. The increasing weight of equipment brought out a heavier section, and fifteen years ago there was a large percentage of mileage on which weights of 90 pounds and over—and even 100 pounds—per yard had been introduced. Under special conditions rails weighing as high as 140 pounds per yard are used.

With the increasing weights of rails, and the development of steel manufacture, greater attention has been paid to details of analysis, process of manufacture, shape and laying, and it may be briefly stated that all these matters are uniformly prescribed at the present time.

Our rail fastenings, ties and ballast have kept pace with the development of the rail and equipment. An orthodox part of the rules governing the maintenance of railway property places in the hands of the maintenance force standard plans and specifications, not only for the elements, such as rail and ties, but for the complete make-up of the finished track structure and roadbed, and these plans are the result of current experience and study of the several railroads, and of the various associations of engineers, maintenance officers and manufacturers, and it is safe to say that these plans, specifications and standard practices represent the best known state of the art.

GRADE-CROSSING ELIMINATION.

In the early days both the railroads and public ways used the natural surface of the ground, as a matter of economy. The public question then was how they were to get the railroads, and not how they were to restrict them in the manner of their construction. The districts traversed were sparsely settled and trains were few and slow in their movement; the highways were little used; all of which made for freedom from accident where the two crossed.

The conditions in England were vastly different. There the country was thickly settled and an assured traffic was evident from the inception of the enterprise, which would warrant expenditures on original construction that could not be entertained by the promoters of our first companies. So it was not through any blindness that made grade crossings grow up in this country, but it was purely the result of economic conditions which precluded their elimination.

With the increase in population and the development of the country came the need of increased transportation facilities. More frequent, faster and heavier trains were moving up the railroads and a greater number of people came to use the highways. The inevitable result followed, and at length the great number of accidents occurring at the grade crossings attracted public attention.

The Legislature of Massachusetts took the first action in 1869, when it provided for the appointment of a Railroad Commission, to investigate and report upon "Safer and Better Methods of Construction and Operation." They very promptly took up the Grade-Crossing question.

At this time in

Massachusettsthere was 1 mile of track to5.47square miles
New Yorkthere was 1 mile of track to14.12square miles
United Statesthere was 1 mile of track to46.72square miles
Great Britainthere was 1 mile of track to8.60square miles

This showed that the railroad network in Massachusetts was more extensive in proportion to the area of the State than existed in Great Britain. In their report the Commission suggested the avoidance of future crossings of railroads and highways at grade, and the propriety of the railroads changing some existing crossings which presented no great difficulty or expense.

In 1873 a law was passed providing for the separation of grade when a town and railroad effected an agreement. The cost was to be apportioned by a Commission appointed by the Superior Court. This law did accomplish something, but hardly abolished existing crossings as fast as new ones were built. Under it the Fitchburg Railroad did away with twenty-five between 1875 and 1890, bearing varying portions of the expense.

In 1885 an Act provided that the County Commissioners could order the abolition of a grade crossing on a petition of twenty legal voters if the cost would not exceed $3,000. Again, in 1888 the Legislature asked the Governor to appoint another Commission to investigate and report upon a scheme for gradual abolition and the method of apportioning the expense. In February, 1889, this Commission, composed of Kimball, Weber and Locke, submitted systematic plans, with estimates, etc., in which they fixed forty years as not an unreasonable length of time for the completion of the work. The next step came in 1890 with the passage of the Grade Crossing Law, which provided that the directors of a railroad or the authorities of a town or city could petition the Supreme Court for a Commission on the Abolition of a Grade Crossing. This Commission was to determine the manner of the separation and by whom the work was to be done, and how the expense was to be divided as between the railroad, city and State. Before the report was presented to the Court for approval it was incumbent upon the Commissioners to ascertain that the aggregate proportion of the State's liability in this connection would not exceed $500,000 per year for ten years. While on the one hand the Legislature authorized this expenditure of $5,000,000 to abolish the crossings of highways with railroads at grade, they granted charters indefinitely to electric lines to cross steam roads at grade.

The New York State Board of Railroad Commissioners was created in 1882 and its membership appointed by the Governor. Among the functions which they immediately assumed was the question of public safety in connection with crossings at grade of railroads and highways. The consideration which this received and the complaints of unsafe conditions, as well as the complications and adjudications involved, led to the passing of the Grade Crossing Law, which went into effect July 1, 1897.

Not only by the New York State law, but by the Massachusetts law, the method of elimination, as well as the apportionment of expense, is specific. The initiative is open to both the railroad and to the community, and the rapid progress of eliminations in these two States may be taken as an endorsement of the wisdom of such legislation, paving the way, as it does, for more progress on the question of eliminations than it is believed would ordinarily take place where no specific rule existed for the undertaking.

While the exact conditions throughout the country are not definitely known, it is believed that progress is being made quite generally in this direction. The influence of grade-crossing elimination upon the safety of operation is of such importance as to deserve serious consideration, as I will further suggest. Perhaps the elimination of grade crossings, thereby separating the public from the railroad except as authorized in connection with their patronage of it, is one of the most important factors as safety.

HUMAN ELEMENT IN OPERATION.

Notwithstanding the great improvements in roadbed, track, bridges, signals, equipment and other respects, all securing increased service and safety in railroad operation, the human element is a vital factor. With a view of raising the standard of individual service, a system of physical and educational examinations has been adopted. In the early days of railroads the individual service was possibly less definitely classified and qualified than must prevail under the exactions of modern conditions. In keeping with the progress in mechanical and safety devices and the necessity of a better system, we have today a preliminary examination, both physical and as to fitness. Employes must pass examinations as to vision, color sense and hearing, and their knowledge of the fundamental rules and regulations, as well as the fundamental knowledge of road, appliances and equipment. These examinations are repeated from time to time as the class of service and further advancement of the employes may require. Many of the large railroads have established schools, with capable instructors, where employes may receive instruction upon the performance of their duties, as well as affording them an opportunity to fit themselves for promotion.

Beginning with the General Time Convention some thirty years ago, the need to standardize railroad practices and systematically qualify employes began to be realized.

The Convention, largely through the efforts of Mr. W. F. Allen, saw that, as time is the term in which railroad schedules are expressed, it was a fundamental necessity that there should be standard time, and that the timepieces of employes which should govern their observance of instructions and schedules must conform to the standard. This led to the present system of standard time; to the system whereby employes must compare watches with standard clocks; must have watches inspected regularly and record taken of same; must compare watches and register before trips.

The General Time Convention led to the formation of the American Railway Association, consisting of the executive and operating officers of the railroads of the United States and Canada. The Association considers problems of railroad operation, construction and equipment, and recommends practices for their solution. Their investigations, conclusions and recommended practices embrace train operation, dispatching, block-signal operation, air-brake operation, physical and educational qualifications of employes, regulations for the transportation of dangerous articles, clearances, rail manufacture, safety appliances, inspection, car construction, track gauge, train heating and lighting, methods of loading, etc. Marked progress has been made in co-ordinating the work of the various organizations of railroad officers with the work of the Association, to secure the benefit of the broadest and most careful consideration of the subjects.

Assurance, therefore, exists that the experience and knowledge of railway management and officers will be brought from time to time into the text and fact of standard practices, promoting convenience by close interline relationships and uniformity of regulation, and causing a uniform, systematic and careful regard for safety.

BY WAY OF RECAPITULATION.

So, to recapitulate:

From a few miles of crude tramways the world has in a century built 500,000 miles of steam operated and 100,000 miles of electrically operated roads; instead of spragging the wheels we rely on the automatic high-speed brake; the coupling of cars has become an imitation of the action of human hands instead of risking their destruction; each train finds the condition of road ahead and protects itself by the agency of electric circuits and semaphores, the sequence of whose operation discloses on behalf of safety any obstruction of the route; four-wheel barrows are replaced by steel cars, larger than the miner's cabin, and carrying more than his month's output; instead of traveling on a tramway stage coach, the passenger finds available for his comfort a modern hotel on wheels, with every luxury known to-day—electrically lighted, steam heated, weather-proof; the old strap iron, which became detached and penetrated the car floor, frequently impinging passengers to the roof, is replaced by the bar of steel weighing 100 pounds to the yard, whose manufacture, installation and maintenance is prescribed with every degree of refinement known to the chemist and engineer; we have learned to treat sub-grade, drainage and ballast as an architectural science, and our bridges, from the single-log span, now make continuous roadbed for high-speed operation, even over the continental rivers.

Some one has said that the builders' art consisted in making the structure proclaim the purpose for which designed, and to my mind there is nothing which quite so dramatically fulfils this as the modern steam locomotive. How many of you have seen a huge Pacific locomotive, drawing a train of 600 tons at a speed of 70 miles an hour, yet under control of one man, just the same as Stephenson's "Rocket," which could have been lifted off its track and set on the ground by four strong men, and which was a world-wonder when for a short distance it attained a speed of twenty miles an hour? We know that our engineman with a Pacific locomotive and the high-speed train can stop his train with the air brake in a definite distance.

These comparisons, briefly as might be, between, we will say, the beginnings of the nineteenth and of the twentieth centuries, show how the commercial growth and increase of trade have produced a demand for transportation to be performed, and with the performance an economic revolution. We have, in a general way, though with far less than the thoroughness of which the subject is worthy, outlined what might be called the "state of the art," of railroad plant and operation, in a relative sense.

Progress of a pronounced character has occurred. That this progress has been accomplished by increased safety is demonstrated by common knowledge and confirmed by the records, both of the railroads and the public authorities. As an illustration, take the statistics of the Interstate Commerce Commission. The increased safety of railroad operation is indicated in part by the following figures:

For the decade following the beginning of the records, namely, 1888 to 1897, the fatalities were 1 in 45,300,000; for the next decade, bringing it down to the present time, the fatalities were 1 in 54,900,000; the gain in ratio being, for the nation at large, fully 20 per cent.

Looking at the conditions in the State of New York, where the density of travel is considerably in excess of that of the country as a whole, we find a report of the State Engineer in the year 1862 showing ratio of fatalities of 1 in 28,200,000; the average for six years, 1902 to 1907, inclusive, shows 1 in 200,000,000; an increase in relative safety of 800 per cent.

We may assume that never before in the history of railroad transportation was there presented a bigger problem than to-day. The weights are greater; the distances are greater; the speed is greater; the population is more dense; prices and wages are higher, and the public service more exacting. A gathering of the official representatives of the nation and of every State, possibly with a desire for uniform and concerted action, even though it may be unofficial, points with emphasis to the attitude from which the public contemplates the employment of the railways in their behalf. It is, I believe, an accepted fact of our political constitution at the present time that the public, through its authorized representatives and through lawful channels, has a right to be reasonably assured in this respect. I believe that the co-operation manifested, as well as the inquiries by the various railway boards, has in a great sense aided in reaching our present standard of excellence, to which we can point with pride in comparison with any other national railway system of the globe. We are becoming more familiar—the railroad management and employes—with the standpoint of the public, and the public is becoming more familiar with the problems of the railroads. The mutual aim is: First, safety and service; and, second, economy. The public concern for the safety and service is for its own protection, and the railroad management must give both with economy.

So far we have been dealing largely with the progressive safety of railroad operation as furthered by the action of the railways, either initiatively or responsively, as the case might be. We have described the improvement in roadway, equipment and appliances; the standardizing of regulations for operation; the selection of employees and their government.

With the better understanding of the problem of the railroad by the public through and in connection with the special boards represented here today, it might not be amiss to express the hope that such needs as cannot be met without the active support of public opinion and perhaps legislation will be clearly brought out. One of the thoughts that occurs to me was suggested by a recent exhibit, from the records, of the loss of life, damage to railroad property, as well as injury to persons and property conveyed, due to the presence of unauthorized persons upon railroad property, whether wilfully or carelessly trespassing. As an illustration of its seriousness: during last year over 5,000 trespassers lost their lives on railroads besides a large number injured. Numerous mishaps have been traced to acts of trespassers, which may be the secret of many unexplained casualties. The railroads are a highway for the migration of tramps and unemployed persons, who commit petty depredations, jeopardize the safety of trains and the lives of employees and passengers. It seems of no avail that thousands of the worst class are arrested by railroad police forces and convictions secured, as the sentences in the majority of cases serve rather to aggravate, than to mitigate, the evil. One line arrested over 9,000 trespassers during the past year, and secured convictions in 75 per cent of the cases; but in half of them sentence was suspended, which usually meant that the offender used the railroad to escape from the scene. I do not wish to be understood to asperse the administration of justice, nor to insist that offences of a serious character are always committed by railroad trespassers, but the hazard involved is one that should not be permitted to exist, the railroad property destroyed or damaged bearing no relation to the risk of persons and property transported, and to the enormous loss of life involved.

I feel that the attention of those accustomed to broadly viewing problems of public concern should be brought to bear upon these facts, with the hope that measures may be taken to insure greater safety in this respect, as well as to save the waste of life and property now resulting from or incident to the practice. I might venture to suggest that the loss of life is far greater than entailed through decades by boiler explosions or rear-end collisions, the seriousness of which I do not wish to deprecate; and the situation might warrant special record of the facts being obtained in behalf of the public through the regular channels.

Wherein lies the increased safety of the future may perhaps be the query in many minds. It is universally sought.

It would be mere conjecture on my part, and, with your indulgence, I am not inclined to prophesy. As I see it, the great problem is to make our progress sure, taking no doubtful measures, adopting no specious devices which may appeal to us at first blush until we have satisfied ourselves that no greater risk is involved by the change.

The multiplication of rules enjoining obedience, together with devices for additional protection, may yield a false sense of security if fundamental obedience to existing rules and efficiency of existing appliances is one bit impaired by the addition. We must not embrace paper reforms, even though clamor and pressure be great. An "ounce of prevention is better than a pound of cure," we grant, but reverse the proverb, and the pound of prevention may over-whelm us. The public official would seem to be in a judicial position, mindful of public justice and safety, basing his judgment and acts upon facts alone. Improvement in general safety and character of railroad operation must be the product not only of an enlightened public opinion and the conservative wisdom of public representatives, but progressive and careful management, coupled with a sense of discipline and responsibility and industry of railroad employees, who must jointly share the obligations of the problem.

Speaking of the compliance we have cheerfully made to the suggestions of the public representatives—the Commissions—in regard to improvements of service, facilities and conditions of operation, etc., we believe in the long run that these things mean a better standard and greater security for railroad property, as well as the enormous benefit that accrues to the public by reason of proper and efficient railway service, and we have only thoughts of admiration for the attitudes of the Commissions as we have found them. They have a large problem. We are glad to avail ourselves of their wisdom, and believe it to be the means whereby the responsibility of the carriers to the public is secured, and through whom the responsibility of the public to the railroads must be voiced.

Gentlemen, I thank you for your kind attention, and the favor, which I acknowledge, of being permitted to address you as best I may upon a subject to which we are all devoted. In the absence of a distinct literature on the subject that your worthy President assigned to me, my efforts are perhaps a bit crudely devised, having no pattern. In another generation we may perhaps evolve a distinct species of railroad statesman and an encyclopedia from which we will be able to point back to the beginnings and the efforts at mutual advice, and to the growth and knowledge that have ensued, just as we have seen the day of small things in railroads to be the beginning of a constant growth to the wonders of today. I am sure that the American people can congratulate themselves upon an institution of the character of your Convention and of your several honorable bodies, and trust that this meeting will be such that you will feel that you have made definite progress in your concurrent aims.

[RAILWAY MAIL PAY]

by
Julius Kruttschnitt,
Director of Maintenance and Operation
of the Union Pacific System
and Southern Pacific Company.

The question of compensation to the railroads of the United States for carrying the mails has been under review before Congress at different times during the past ten years. The subject was exhaustively investigated by a Joint Commission of the Senate and House of Representatives in 1898 and 1899, which reached the following conclusion after full consideration and taking of a mass of testimony on all sides of the question:

"Upon a careful consideration of all the evidence and the statements and arguments submitted, and in view of all the services rendered by the railroads, we are of the opinion that the prices now paid to the railroad companies for the transportation of the mails are not excessive, and recommend that no reduction thereof be made at this time."

(See Report 2284, House of Representatives, 56th Congress, 2d Session.)

This Commission also concluded as to the pay for railway postoffice cars:

"Taking in view all these facts as disclosed by the testimony filed herewith, we are of the opinion that the prices paid as compensation for the postal car service are not excessive, and recommend that no reduction be made therein so long as the methods, conditions and requirements of the postal service continue the same as at present."

Since the above recommendations were made, the operating costs on railroads, and, consequently, the cost of handling the mail, as hereafter shown, have been largely increased, through higher prices for both material and labor, so that if the railways were not over-paid ten years ago, the present rates, being lower than those paid at that time, would be too low and should really be increased to give the railroads a reasonable return. Far from doing this, legislation enacted in the past few years has had the effect of cutting down the mail pay of the railroads, whilst the special requirements as to service and equipment have been made more severe and exacting.

Recent acts of Congress or orders of the Postoffice Department, which have the force of law, that have caused reduction of railroad revenues, are the following:

1. Act of Congress of March 2, 1907, reduced pay on all routes moving in excess of 5,000 pounds per day. This reduced the pay for handling mails $1,740,494.63, or 3½ per cent. of the total earnings. The same act reduced the rental rates for railway postal cars $935,974.09 per annum, or 16 per cent. The total reduction in pay to the railroads under this act was $2,676,468.72, or 6 per cent. of the total compensation for both classes of service.

2. Act of Congress of June 26, 1906, effective July 1, 1906, withdrew from the mails empty mail bags and certain supplies, to be thereafter shipped as freight or express. It may be conservatively estimated that the annual loss in mail revenue to the railroads by withdrawing these shipments from the mails is at least $1,000,000, with practically no reduction in space furnished because of this change.

3. Order of Postmaster-General of June 7, 1907, changing with each mail weighing thereafter the method of computing average weights on which pay is based from that always previously used and theretofore regarded as the proper interpretation of the law. The effect of this on the mail weighings of 1907 and 1908 was to reduce railway mail pay in two sections of the country, $2,222,108.92, or 9½ per cent., or at the rate of $4,500,000 per annum for all roads of the country.

4. Orders of Postmaster-General reducing railway postal car pay by allowing "shorter-car" pay on certain lines than heretofore authorized and changing certain full lines to half lines; that is, reducing pay for return movement, thus causing an annual loss to the railroads of $345,287.06. (Second Assistant Postmaster-General's Annual Report 1908, page 13.)

The effect of all of these reductions on the mail revenue of the railroads aggregate $8,500,000 per annum, or 17 per cent. of the total pay received by them in the year ending June 30, 1908, for handling the mail and furnishing railway postal cars.

These reductions were made without justification and for the purpose of reducing railroad revenues—and, incidentally, the expenses of the Postoffice Department, at a time when the net earnings of the carriers seemed large to the public mind, although under these favorable conditions the returns to the shareholders approximated but 4 per cent., whilst farmers were receiving 10 per cent., manufacturers 15 per cent. and National banks 18 to 20 per cent.

It is true that there has been a large increase in the gross revenue of the railroads in the last ten years, but this has accrued from traffic other than carriage of the mails and has been accompanied by great increase in operating expenses. In fact, were it not for the economies of the carriers, effected by the use of more powerful locomotives and larger freight cars, the increase in operating expenses would, without doubt, have fully neutralized the growth in revenue. In the months preceding the panic of October, 1907, the railroads were quite generally showing decreases in net earnings in face of the largest gross earnings in their history. It was costing them much more than a dollar to handle every dollar increase in gross earnings.

Since the hasty enactment of ill-considered legislation reducing mail pay, the revenues of the roads have been seriously affected by a change in business conditions which has reduced traffic without reducing prices of materials and labor. At the same time, legislation has increased labor costs by reducing hours of service.

In 1898 rates for transporting the mails were too low to cover the cost of service, they are much too low now, and the losses on the mail service as a whole—there are some routes that pay—are borne by freight traffic entirely.

RECEIPTS FROM MAIL AND OTHER RAILROAD TRAFFIC.

The latest statistics of operations of all railroads of the United States are for the year ending June 30, 1907, issued by the Interstate Commerce Commission, July 9, 1908. From them we compile the following exhibit comparing results of 1907 with 1898—when a Commission of Congress, after complete investigation of the subject, recommended that mail rates be not reduced.

Pct.Pct.
Year ending June 30th—1907.1898.Inc.Dec.
Earnings from passengers$ 564,606,343$266,970,490111—
Earnings from express$ 57,332,931$ 25,908,075121—
Earnings from mails$ 50,378,964$ 34,608,35246—
Earnings from freight$1,823,651,998$876,727,719108—
Operating expenses$1,748,515,814$817,973,276114—
Passenger train mileage541,439,176(a)341,526,76958—
Freight train mileage662,106,857(a)503,766,25831—
(a) Including mixed trains.
Earnings per passenger train mile (cents):
Pct.Pct.
1907.1898Inc.Dec.
From passengers105.779.431—
From express10.77.738—
From mails9.410.310
——————
Total125.897.429—
Number passengers carried per train51 39 31—
Tons of mail carried per train.86.807—
Earnings per freight train mile (cents):
Earned from freight274.0173.158—
Tons of freight carried per train357.35226.4558—
Operating expenses per total train mile (cents)147.095.654—
Net earnings per train mile (cents):
Passenger trains21.2(Loss) 1.8
Freight127.077.564—
Passenger earnings per passenger mile (cents)2.0141.9732—
Mail earnings per mail ton mile (cents)10.6612.57—15
Freight earnings per freight ton mile (cents)0.7590.7531—

Note.—Bear in mind these figures do not, of course, show effect of cut of $8,500,000 in mail pay effective July 1, 1907, or losses in net revenue through depression in business conditions commencing in latter part of 1907. As an index of the latter, the Commercial and Financial Chronicle of September 5, 1908, showed that 141 roads, aggregating 168,839 miles or 70 per cent. of all roads in the country, had suffered a loss of $63,484,902, or 24.97 per cent., in net earnings in the first half of the calendar year 1908, as compared with same period of previous year.

The foregoing statement clearly shows the difference between the revenue obtained from passenger trains as compared with freight trains. The control of the former is largely out of the hands of railroad operating officers, as to meet competitive and traffic conditions, heavier and more luxurious passenger cars must constantly be furnished, which, of course, means largely increased expense with very little increase in the paying train load. In fact, as to the mails, notwithstanding an increase in tonnage carried on the average train, the mail earnings per passenger train mile were actually less in 1907 than in 1898, due largely to the automatic reduction of railway mail pay per ton mile. Considering the freight train mile, the composition of which is almost entirely within the control of the railroads, which institute methods for reducing cost of transportation, it will be observed that by such methods the railroads have been enabled to place 58 per cent. more tonnage in a train, bring them 58 per cent. more earnings, which can be applied as an offset to the increase of 54 per cent. in the cost of running a train one mile.

This increase in operating expenses per train mile last referred to has been brought about largely because of the increased cost of labor and materials, which, as is well known, has been general throughout the country.

Comparing results of operation of all railroads of the United States for the year ending June 30, 1907, with 1898, when this question was last up, it is shown by reports of the Interstate Commerce Commission that gross revenue from operations, as well as income from investments, increased $1,380,000,000. This is a very large sum, but let us see what becomes of it. Increased wages paid to employes consumed $577,000,000, or 42 per cent., purchase of material included in operating expenses, $354,000,000, or 26 per cent. of the increased income, and these material purchases represented largely labor involved in their production. Increases in betterments and miscellaneous deductions consumed $77,000,000, or 6 per cent. of the increased income. Larger payments for interest on funded debt and current liabilities consumed $96,000,000, or 7 per cent., and larger taxes 2.5 per cent., leaving $240,000,000, or 16.5 per cent. of the increased income for the owners of the properties, the stockholders. In 1898 dividends were less than 2 per cent. of the capital stock, and in 1907, even with the large increase noted, they were only 4 per cent. Contrast this with the manufacturers' returns of 15 per cent., the farmers' of 10 per cent., and the National banks' of 18 to 20 per cent. on their capitalization.

Reduction in railway mail pay was not justified in 1898; it was far less justified in 1907. On the contrary, there has been a large fall in mail pay per ton mile, and conditions under which mails are transported are becoming more and more onerous. The cost of building a railway postoffice car to the present plans and specifications of the Postoffice Department is at least 50 per cent. more than it was in 1898, although pay received for handling these cars, that weigh from 25 to 30 per cent. more than formerly, has been arbitrarily cut over 16 per cent. by the Act of Congress of 1907, and has since been further cut through readjustment of routes. For the year ending June 30, 1908, the railroads received gross $48,155,379, including railway postoffice pay, for carrying 80 per cent. greater tonnage of mails than in 1898, a sum $12,747,629 less than it would have been but for the reduction of rate from 12.59 cents in 1898 to 9.94 cents in 1908. In face of this, as we have shown, arbitrary cuts of $8,500,000 more have been made, a grand total of over $21,000,000 less paid now than ten years ago.

About eighteen months ago the conclusion was reached that heavier and stronger cars were demanded by changed conditions resulting in heavier trains, greater speed and increased frequency and consequent risk of accident to clerks and mail in collisions and wrecks. After careful investigation and expert testimony the specifications were revised so that full 60-foot cars would weigh about 100,000 pounds instead of 80,000 pounds, and be greatly strengthened by the free use of steel plates and oak timbers. To meet the views of car builders, east and west, two plans and specifications, slightly differing, were adopted as standard, and railroads were given the option of conforming to one or the other. The best known anti-telescoping features were adopted in both plans, producing in the judgment of responsible car builders a car of exceptional resisting and carrying power. When new lines of cars are authorized by the Department, or new cars are ordered to take the place of old cars in service, companies operating the routes are furnished copies of these specifications and the superintendent of division is instructed to see that cars are built in conformity therewith. Inspections are made while the car is in the shop, and when it is completed a full report is made and forwarded to the Department. A decision is then reached as to whether the car is satisfactory and can be accepted.

(Annual Report Postmaster-General for 1905.)

This increase in weight of a postal car might not be thought of much moment, but it means to the railroads the movement of 1,000,000 additional gross ton miles per car per year, costing them $10,000 per annum in operating expenses, whilst, as shown, they receive 16 per cent. less railway postoffice pay now than formerly.

United States Postal Laws and Regulations, Section 1164, provide that the average weight of the mails used in fixing rates shall be established by the actual weighing of the mails for a period of not less than thirty days and "not less frequently than one in every four years." The construction placed upon this by the Department has been the one which reduced to the minimum the pay which the railroads receive for services rendered. If mail traffic were stationary, weighing every four years would not matter much, but the increase of mail matter throughout the United States has been very great, and, because of the policy of the Department, to weigh the mails not more frequently than every four years, heavy losses have resulted through the railroads having to haul tonnage for three successive years following each weighing for which they receive no pay.

As a result of this policy of quadrennial weighings, the roads in Interstate Commerce Groups 7, 8, 9 and 10 (including the territory west of the Missouri river and the Mississippi below St. Louis) between 1878 and 1905 suffered a loss of $19,200,000, or 12 per cent. of the aggregate railway mail pay, compared with what they should have received if the mails had been weighed annually. In other words, this loss is equivalent to a reduction in the rate received per ton mile in these groups of states of 12 per cent. The loss to roads in the western part of the United States is most striking, due as it is to the rapid growth of that section. The same reduction, though to a slightly less degree, obtains in other parts of the United States.

COMPARATIVE RETURNS TO THE RAILROADS FROM CONDUCTING MAIL. PASSENGER AND FREIGHT SERVICE IN THE UNITED STATES.

In order to make a fair comparison of operating results from different classes of traffic, it is necessary to consider them under substantially similar conditions. The best measure of railroad service is work done, or weight multiplied by distance carried; in other words, the ton mileage. A comparison of services differing so widely as the mail, passenger and freight on the basis of ton mileage of such business is, however, unfair, because in the two former an excessive proportion of dead weight must be transported for each ton of paying load, whilst with freight traffic the proportion of dead weight is small. The hauling power of a locomotive is measured not by revenue ton miles, but by ton miles of gross weight, it making little difference to the locomotive as to what this gross ton mileage is composed of, the gross tonnage and the speed at which it must be moved being the factors that consume the energy of the locomotive.

A computation has been made of ton mileage on each individual mail route by multiplying weight carried by length of route; to the sum of these we add the dead weight of cars. The report of the Second Assistant Postmaster-General for year ending June 30, 1908, page 32, gives the number of cars engaged in mail service, which we have multiplied by the average mileage made by the average car, based on experience of the Union Pacific and Southern Pacific Systems, to ascertain total car mileage for the United States. Multiplying this by the dead weight of a car gives the ton mileage of dead weight, which, added to the ton mileage of mails, gives the gross ton mileage, measure of work and cost imposed on the railroads in return for the pay they receive for handling the mails. These computations are shown in the following statements, the results being conservative, as for want of accurate data it has been necessary to omit some work which the railroads do, which, if ascertainable, would increase the cost. For example, we have made no charge for the dead weight of that portion of baggage cars devoted to the handling of pouch mail, such pouch service, according to the Postmaster-General's report, covering annually on railroads and express trains 122,027,597 miles; nor for the dead weight of storage mail cars provided by the railroads. Neither has any account been taken of the value of transportation given mail clerks, which, based on the Postmaster-General's report of 1908, amounted to 629,778,443 miles, which at 2 cents a mile would be $12,500,000; nor for the value of transportation or postal commissions of Postoffice Department officials; nor does it take into account special service rendered by the railroads, such as delivering mail at stations, value of space furnished by the railroads and required of them by the Postoffice Department at important junction and terminal points for mail distribution and accommodation of government transfer clerks.

The statistics of passenger service in the following statements are based on the 1907 Annual Report of Statistics of Railways published by the Interstate Commerce Commission (1908 figures, which would show higher operating cost, not available), with the exception that the average mileage per car per annum run by passenger cars is based on the experience of the Union Pacific and Southern Pacific Systems.

Statistics of freight service are likewise based on the 1907 Report of Statistics of Railways, freight car mileage being actually reported by the Interstate Commerce Commission, dead weight per car being computed from all freight cars handled on Union Pacific and Southern Pacific Systems.

MAIL SERVICE.

Year Ending June 30, 1908.

Paid to the railroads for railway postoffice cars$ 4,567,366
Paid to the railroads for mail transportation43,588,013
—————
Total$48,155,379
Ton mileage of mails handled by railroads484,683,135
Pay per revenue ton mile, including railway postal pay car9.94c
Pay per revenue ton mile, excluding railway postal car pay8.99c
R. P. O.Apartment.Total.
Number of cars (Postoffice Department Report)1,3423,5684,910
Average length (special mail weighing 1907), feet of mail apartment5927—
Equivalent full R. P. O. cars1,3421,6332,975
Miles run per car per annum (experience of U. P. System and Southern Pacific Company)100,00060,000—
Total equivalent R. P. O. car miles134,200,00097,980,000232,180,000
Miles traveled by R. P. O. clerks (miles reported as traveled by crews multiplied by average number of men per crews)—629,778,443
Gross ton mileage—
Equivalent railway postal clerks, 232,180,000 miles, at 45 tons per car10,448,100,000
Ton miles of clerks at 160 pounds per man50,382,275
Revenue ton miles of mail, including pouch mail484,683,135
———————
Total gross ton miles(a)10,983,165,410
Average weight of mail per equivalent full R. P. O. car (tons) (a)2.09
Average weight of clerks per equivalent full R. P. O. car (tons).22
Average weight of car per equivalent full R. P. O. car (tons)45.00
Rate of mail and R. P. O. car pay per gross ton mile (cents)0.438
Ratio of paying to dead load(a)1 to 21.7

(a) No portion of mileage or weight of storage cars or cars handling pouch mail has been considered.

PASSENGER SERVICE OTHER THAN MAILS.


Number
of cars.		Miles run
per car
per annum.		Total car
miles run
per annum.
(a)(b)
Baggage and express, excluding 2,975 equivalent postal cars7,40460,000444,240,000
Sleepers, diners and parlor cars2,000100,000200,000,000
Coaches, etc.31,59440,0001,263,760,000
—————————
Total40,9981,908,000,000
Passenger train miles, including mixed trains541,439,176
Cars per train mile—
Mail0.43
Others3.52
——
Total3.95
Gross ton mileage—
Baggage and express cars, 444,240,000x30 tons13,327,000,000
Sleepers, diners and parlor cars, 200,000,000x50 tons10,000,000,000
Coaches, etc., 1,263,000,000x40 tons50,550,400,000
———————
Total ton miles dead weight73,877,400,000
———————
Ton miles of passengers, 27,718,030 (a) passenger miles at 150 pounds per passenger2,078,891,552
Ton miles of baggage and express, 444,240,000 car miles estimated at only 3 tons average load in a car1,332,700,000
——————
Total ton miles revenue load3,411,591,552
Total gross ton miles77,288,991,552
Total revenue received from passengers and express$621,939,274
Total revenue received per gross ton mile (cents)0.805
Total revenue received per revenue ton mile (cents)18.23
Ratio of paying weight to dead load1 to 21.7
FREIGHT SERVICE.
Total miles run by freight cars (a)17,122,259,754
Total ton miles dead weight, each car estimated at 15 tons (b)256,833,896,310
Total ton miles revenue freight (a)236,601,390,413
———————
Total gross ton miles510,557,546,477
Ratio of paying to dead load1 to 1.1
Total revenue received for transporting freight$1,823,651,998
Total revenue received per gross ton mile (cents)0.369
Total revenue received per revenue ton mile (cents), (a)0.759
Tons per car revenue freight (loaded and empty)13.8
Revenue per car mile (cents)10.5
(a) Statistics of Railways of United States, 1907.
(b) Experience of Union Pacific and Southern Pacific Systems.

RELATIVE COST OF SERVICE.

To determine the relative costs to the railroads of performing mail, passenger and freight service, we must allocate the expenses to freight and passenger service as a whole, afterwards apportioning the latter to mails and other service. Railroad operating expenses apply jointly to both passenger and freight trains, so that, with few exceptions, it is impossible to determine exactly from any published statistics the cost of passenger train service as distinguished from freight. There are some items of train mile expense directly connected with movement which are less for passenger than for freight trains, whilst, on the other hand, many other expenses are greater for passenger than for freight, such as danger from casualties, necessity of expensive terminals, delays to other traffic through preference given to passenger trains, additional main tracks, and, particularly, higher standards of maintenance of roadbed required for high speed passenger train movement.

On account of the impossibility of separating the expenses, we assume that the above factors about balance each other and that the average cost of running all trains can be taken as either passenger or freight train mile cost, respectively, without serious error.

We allocate a proportion of the passenger train cost to the mails on the basis of the gross ton miles handled in each class of passenger traffic.

The relative revenues and expenses are shown on opposite page, mail revenues being as shown by 1908 Report of Postoffice Department, and other statistics as given in the 1907 Statistics of Railways of the United States, published by the Interstate Commerce Commission, or are computed therefrom.

ALL RAILROADS IN UNITED STATES.

Summary of Mail, Passenger and Freight Service.

Mails.Other Passenger.Total Passenger.Freight.
Gross revenue$ 48,155,379$621,939,274$670,094,653$1,823,651,998
Operating expenses$ 96,322,357$677,614,637$773,936,994$ 974,577,820
Taxes and interest on bonds$ 23,503,973$165,582,552$189,086,525$ 235,468,467
Total expenses$119,826,330$843,197,189$963,023,519$1,210,046,281
Surplus———$ 613,605,711
Deficit$ 71,670,951$221,257,915$292,928,866—
Ton mileage (thousands)—
Revenue weight484,6833,411,5923,896,275236,601,390
Dead weight10,498,48273,877,40084,375,882256,833,896
Total gross10,983,16577,288,99288,272,157493,435,286
Tons dead weight per ton revenue21.721.721.71.1
Per gross ton mile (cents)—
Gross earnings0.4380.8050.7590.369
Operating expenses0.8770.8770.8770.197
Earnings over operating expenses———0.172
Operating expenses over earnings0.4390.0720.118—
Taxes and interest on bonds0.2140.2140.2140.048
Surplus———0.124
Deficit0.6530.2860.332—
Per cent of operating expenses to earnings20010911553
Gross expenses to earnings24913514467
Figures exclude dividends, betterments and additions, etc.

The above shows that whilst passenger service as a whole is unremunerative, the mail earnings are hardly what they should be to pay a fair share of the railroad operating expenses only, regardless of taxes and interest.

Or, put in another way, our computations have shown that in each passenger train run the railroads haul an average of 43/100 of a mail car, and the contents of this car yielded average earnings of 9.4 cents for each mile run. The computation just made shows that each freight car run, loaded or empty, yields a revenue to the carrier of 10.5 cents per mile. Incredible as this may seem, it is understandable when we reflect that the railroads transport 1.1 tons of dead weight for each ton of freight for which they are paid; with mail they transport 21.7 tons, or twenty times as much. The freight rate is .759c per ton mile, the mail rate 9.94c, or only thirteen times as much.

Arguing in still another way: Average number of cars in each passenger train handled in United States is 3.95, of which mail cars amount to 0.43, or 11 per cent. Eleven per cent. of the average earnings of a passenger train is 13.8 cents, but mail contributed only 9.4 cents. That is, it should pay 47 per cent. more than it does to be made to contribute a fair share to the insufficient earnings of a passenger train. Mails are fairly responsible on basis of space used for 11 per cent. of the cost of running a passenger train, or 16.17 cents, and as dead weight per foot of space is greater with mails, their proportion of train mile cost is even larger. They pay little more than one-half this cost.

By building larger capacity cars and larger engines, the cost of handling freight traffic, entirely in the control of the carrier, has been reduced to follow rate reductions and increased expenses.

On the other hand, because methods of conducting passenger traffic are largely—and mail traffic entirely—beyond their control the cost of handling mail and passengers has been steadily increasing, and, as revenue has not increased, the net revenue or margin of profit has been cut to a point where it is unremunerative.

The argument advanced by advocates of reduced mail pay, that increasing density permitted economies and that lower rates would yield more net, is not applicable when the carriers' hands are tied and measures of economy so successfully applied to handling freight are prohibited. The following will illustrate this:

On routes where pouch service is used mail is handled with express and baggage without much increase of cost over other passenger traffic. A somewhat greater mail traffic obliges the railroads to furnish apartment cars, at increased expense and dead weight for the postoffice feature, but still permitting the railroads to carry other traffic in the same car. A still further increase in weight means the establishment of full R. P. O. lines for which the railroads receive extra, but inadequate, compensation, these cars being used for no other class of traffic and adding largely to the weight and cost of train service. Even after the route has been made an R. P. O. route, the railroads are not permitted to economize by carrying more mail in the car, and as traffic density grows the roads must under the requirements of the Department add more cars, almost in proportion to the business, as the loads carried in R. P. O. cars, as shown by recent special weighing, average only 2¾ tons, and many of them return empty—for which empty haul the railroads often receive no pay. When the mail business has assumed very large proportions and the R. P. O. cars have multiplied in ratio therewith, special trains are then added to carry the bulk of the mail, being run at very high speed and adding to the railroad expense account in a far higher degree per unit of business than any other class of traffic.

In contrast to the above, baggage and express are very generally hauled in the same and a much lighter and less costly car than the mail car, and increase in tonnage is accommodated by hauling greater loads per car. In the case of freight, increased density means larger car and train loads and greatly reduced costs of operating per ton mile.

Despite these differences in conditions, the automatic scale has secured to the Government a larger reduction in mail rates per ton mile in the last ten years than the percentage of fall in freight rates, despite higher labor and material costs of railroad operating. As a result, the mail business—which, according to evidence introduced before the Congressional Committee of 1899, was unprofitable at that time, has been made more unprofitable at the present time by the heavy rate reductions of 1906-7.

As the greatest reduction made deals with mail routes on which traffic is heaviest, a consideration should be given to the following conditions of handling mail on such routes:

HEAVY TRAFFIC MAIL ROUTES.

On very many of the heavy traffic routes where the principal reduction in pay occurred a large part of the mail is now handled in special mail trains run at excessively high rates of speed. Such trains introduce the following conditions:

1. A very much greater liability to accident. A large proportion of the deplorable accidents that have occurred on the American railroads in recent years have occurred to excessively high speed trains, accidents to such trains being almost invariably destructive to life and property. An examination of serious accidents on the Union Pacific System and Southern Pacific Company for the calendar year 1906 shows that 36 per cent. of the property damage from all causes, including negligence, as traceable to trains not under control and excessive speed, whilst 30 per cent. additional damage was due to causes that might prevent inferior trains getting out of their way, such as keeping main line on time of superior trains, failure to observe signals or orders, etc.

2. Mail trains run at excessive high speed are much more expensive to operate than other trains, for the following reasons:

(a) Fuel consumption per traffic unit is very much greater at high speed because of diminished tractive power of locomotives.

(b) A relative greater hauling capacity of locomotives must be consumed in moving trains at higher speeds.

(c) Excessive speed requires higher standards of track maintenance, double-tracking, block signals, heavy rail, better ballasted roadbed, etc., etc.

(d) High speed means increased wear and tear on equipment and track.

(e) High speed trains are expensive, delaying and adding to the cost of other traffic.

3. Speed of trains carrying mails has been constantly increased, a study made of the speed per hour made on fastest trains on which R. P. O. cars are handled on seventeen of the principal mail routes giving the following results:

Average of fastest train on seventeen mail routes:

Speed
Year.(Miles per Hour.)Relative.
190542.21136
189939.23126
189034.35110
188531.34100
Average increase per year0.55

With the above increase in speed, rates paid the railroads have automatically decreased whilst expenses have largely increased to provide for the above greater speed and because of increase in prices of labor and materials of all kinds in the past five or six years. This increase in speed has been made coincident with growth of freight traffic, which is the railroads' profitable business, the non-profitable high speed trains delaying the profitable ones, increasing their cost and incurring liability to accident.

4. Earnings of mail trains supposedly high are not higher than other passenger trains, which, as a whole, earn very much less per mile run than freight, relative figures being as shown by last report of the Interstate Commerce Commission—as 100 is to 218, whilst the cost of running passenger trains is as much, if not more. This is particularly the case with high speed passenger trains, which is the most unprofitable business in which railroads are engaged. (On Union Pacific System last year earnings per passenger train mile were $1.71, per freight train mile $4.31.)

5. Passenger engines in hauling fast passenger trains on principal main lines at the present time have assumed, on account of increased weight of equipment and excessive speed required, enormous proportions. We now have in such service on our lines engines weighing exclusive of tender 222,000 pounds, this power being 60 per cent. heavier and twice as costly as locomotives used in the same class of service ten years ago, burning double the amount of fuel. Engineers running these locomotives receive higher pay because of the greater size of these engines—to say nothing of recent increases made in their schedules. Such heavy power moving at fast speed is extremely destructive to the roadbed, requiring a much higher standard of maintenance than formerly, maintenance of way cost in the past few years having gone up 50 per cent. Engine failures are largely confined to fast passenger trains, and, in general, expenses are increased all along the line because of their introduction.

6. As illustrating the additions to expenses because of increased track maintenance on account of fast passenger and mail trains, we have made a study of statistics, using the Interstate Commerce report of 1906 as a basis, of seven roads having a large proportion of fast passenger service and seven roads having a moderate speed passenger service, but with a large proportion of freight service. On the roads first named the average cost of maintenance of way per mile was $2,951, and on roads in the latter class $1,565. The operating expenses per train mile in the former class were $1.47, and in the latter $1.33. The roads in the former class, on account of large number of excessively high-speed trains, were obliged to double-track their lines, which directly increased maintenance expenses.

PAY FOR RAILWAY POSTAL CARS.

The large reduction made by Act of March 2, 1907, in pay for railway postal cars was made in face of large increase in the cost of constructing such cars, due to higher prices of labor and material and greater cost of meeting the more exacting specifications of the Postoffice Department. Changing to steel construction, increases in weight, and generally heavier operating expenses, have created an extremely large increase in cost of moving these cars. The standard railway postal car of only a few years ago, 60 feet long, weighed 80,000 pounds and cost about $5,500. The standard railway postoffice cars, 60 feet long, of wooden construction, used on the railroads with which I am connected, weigh over 100,000 pounds each, or one-fourth more weight, and costs 40 per cent. more, whilst our new standard postal cars of steel construction weigh 108,000 pounds and cost over $9,000, or 60 per cent. more than the car of a few years ago.

An argument sometimes made in favor of a lowering of R. P. O. car pay is that for apartment cars used in runs where mail density does not require a full car, no additional compensation is allowed. But we feel that a fair consideration of the circumstances under which mail is handled as compared with other traffic will justify the conclusion that this is not an argument in favor of reducing R. P. O. pay, but rather for allowing the railroad additional compensation for the apartment cars as well. Both services require the furnishing of special features in the way of traveling postoffices not required except for the convenience of the Postoffice Department to enable it to do work while mail is in transit, such as ordinarily performed in office buildings. The full postal car is more expensive to the roads, as it always means additional car service, whilst in some cases of apartment cars the space not occupied by the traveling postoffice is adequate to take care of baggage and express, though very frequently this service also means additional car movement that would not be necessary but for the postoffice feature.

The saving to the railroads from reduction in car mileage that would be possible if it were not obliged to furnish traveling postoffices, but could use the space occupied by racks and other postoffice features by loading additional mail in cars, would be many times the revenue allowed by the railway postal cars.

To illustrate: The car mileage of postal cars (changing apartment cars to full cars on basis of length) is 232,180,000 per annum; the ton mileage of mail 484,683,135, or 2.09 tons per car. From figures obtained from the Postoffice Department, average car weights shown on page 59, table "EE," special mail weighing of 1907, it is ascertained that storage mail cars, which, of course, contain no postoffice features, carry an average of 7.04 tons of mail. At this rate the whole mail business could be carried by the movement of 68,844,000 car miles, or 163,336,000 less than actually employed, due to the postoffice features. The total railway postal car pay is only $4,567,366, or only 2.8 cents per additional car mile, whilst the operating expenses chargeable to running these 163,336,000 car miles, of 70 per cent. of the total movement, amount to $67,000,000.

But for the postoffice feature, the combined weight of an entire route could many times be handled in a single car such as is used for express instead of several heavy and expensive postoffice cars, whilst often extra cars for storage mail must be added, for which no extra pay is allowed, the cost of running these storage cars also not being included in the computation of cost of service, as no accurate statistics of their number or car mileage are available.

In addition to the furnishing of storage cars, although many R. P. O. routes are paid for on a basis of 40 foot cars, it is not economical for the railroads to construct such cars which are not interchangeable with other equipment and which would have to be thrown aside if through growth of traffic larger cars are afterwards required. As a result, full 60-foot R. P. O. cars have for years been furnished on many 40 and 50-foot routes, the railroad getting no credit for this, whilst on many other routes R. P. O. cars have been run in advance of the fixing of R. P. O. pay for them.

On a number of routes postal car pay has been allowed for running full cars in one direction only, classing such routes as half-lines. This obliges the railroads to move the car in the opposite direction without pay, the small additional compensation of less than 4 cents per mile run received in one direction being entirely inadequate to compensate the road for the empty haul—to say nothing of allowing anything for moving it in direction for which pay is received. To illustrate: The Union Pacific Railroad in one case between Council Bluffs, Iowa, and Ogden, Utah, 1,003 miles, receives no pay for handling east-bound a 60-foot mail car, which is paid for west-bound only, six mail cars being required on this line. The R. P. O. pay per car mile, including movement in both directions, is only 2.24 cents, or about what would be received for transporting a single passenger, although a standard passenger coach has a capacity for 70 passengers.

In connection with the railway postoffice, an item not often considered is the value of transportation furnished clerks in the railway mail and compartment cars. Figuring this at 2 cents per mile, which is about the lowest passenger fare, the total value of this transportation for clerks in railway postoffice cars would be $8,600,000 per annum, or $4,000,000 more than the railroads receive for the handling of these cars, and the value of transportation in the case of apartment cars would be $4,000,000 per annum additional. In addition to this, a large amount of free transportation is required annually by the Postoffice Department for inspectors and other officers of the Department.

The Postoffice Department issues annually about six hundred traveling commissions to postoffice inspectors and other postal officials, and requires railroad companies to honor such commissions for free transportation on all trains on all lines on which mails are carried. In some cases these commissions are issued to Government officials whose official duties are in no way connected with the transportation of mails on railroads. The railroads have no control whatever over the issuance of these commissions and can not even secure from the Postoffice Department a list of them, the Department holding that the list is confidential. These commissions are frequently used for personal travel in violation of the rulings of the Interstate Commerce Commission. In brief, the Postoffice Department in effect arbitrarily issued about six hundred annual passes over every mail carrying railroad in the United States, which is equivalent to about 200,000 annual passes.

POSTAL DEFICIT.

In investigating the subject of railway mail pay, we have been struck very forcibly with changes which have taken place in the revenues and expenditures of the Postoffice Department since 1899, when this subject was last reviewed. Although postal operations still show a deficit, it is a fact that its revenues have increased in a remarkable degree, and the deficit is certainly not due to the amounts paid to the railroads for hauling mail, as these payments are relatively far less now than formerly. Revenues of the Postoffice Department have grown from $102,000,000 in 1900 to over $191,000,000 in 1908, or 87 per cent., this increase in revenue in eight years being as great as the entire increase in the previous thirty-five years.

But in this same period of eight years there was an increase of $100,600,000, or 93 per cent., in Postoffice Department expenditures, of which only $10,900,000, or 11 per cent., was paid to the railroads, $33,935,000, or 34 per cent., going to Rural Free Delivery, $25,000,000, or 25 per cent., to postmasters and their clerks, and the balance to other items.

The following statement shows for the year 1895 and for the years 1899 to 1908, inclusive, postal revenue and postal expenditures divided between amounts paid the railroads, cost of rural delivery and other expenditures:

REVENUE.EXPENDITURES.
Year.Paid
Railroads.		Rural
Delivery.		Other.Total.
1895$ 70,983,000$31,189,000(a)$ —$57,637,000$88,826,000(a)
189995,021,00035,775,000150,00065,607,000101,632,000
1900102,355,00037,315,000420,00070,005,000107,740,000
1901111,631,00038,161,0001,778,00075,616,000115,555,000
1902121,848,00039,519,0003,998,00081,269,000124,786,000
1903134,224,00041,377,0008,102,00089,305,000138,784,000
1904143,583,00043,971,00012,682,00095,709,000152,362,000
1905152,827,00045,482,00020,824,000101,093,000167,399,000
1906167,933,00046,953,00024,774,000106,543,000178,270,000
1907183,585,00049,831,00026,643,000113,754,000190,238,000
1908191,479,00048,155,00034,355,000125,842,000208,352,000
(a) Includes $1,646,741 accrued in favor of Pacific Railroads in 1895, but not charged to postal expenditures.
The railroads are themselves large contributors to the revenues of thePostoffice Department. It is ascertained that nine roads, covering 27,500miles, pay annually $261,000 for postage stamps, or at the rate of $2,000,000for the entire railroad mileage of the country.

The next statement shows clearly that the ratio of expenses to receipts of the Postoffice Department would in 1908 have been but 91 per cent. and no deficit but for the expenditures made for Rural Free Delivery, the amount paid the railroads being now only 25 per cent. of the total revenue as compared with 41 per cent. in 1895.

RATIO OF EXPENSES OF POSTOFFICE DEPARTMENT TO POSTAL REVENUES 1895-1908.

PercentagePercentagePercentage
of Postal Rev.Paid toPaid to
Year.Paid to R'ys.Rural Free Del.Other Expenses.Total.
189541075116
189938069107
190036069105
190134169104
190232367102
190331666103
190431966106
1905301466110
1906281563106
1907271562104
1908251866109

In order to avoid a deficit, attention has been concentrated on this 25 per cent. of the postal expenditure, which we contend is at least not an unfair compensation to the railroads for services rendered. Though the proportion of the total revenue going to the railroads has fallen one-third in ten years, the deficit still remains, and is it reasonable to suppose that any reduction in railway mail pay would not be speedily absorbed in other directions? On the contrary, ought not efforts be concentrated to bring within reasonable figures the other expenses of the Department, which now absorb 84 per cent. of its revenue as compared with only 69 per cent. in 1900—despite an actual growth in postal revenue in the same time of $89,000,000, or 87 per cent.?

It will be noted from these figures that a reduction of 10 per cent. in the ratio of railway mail pay to total revenue can be entirely wiped out by an increase of only 3 per cent. in other postal expenses, whilst a retrenchment of 10 per cent. in the latter would have put the Department almost on a paying basis, notwithstanding the heavy cost of Rural Free Delivery. From 1895 to 1908 actual totals show that the railroads' pay has increased 54 per cent. for handling 114 per cent. more mail tonnage, whilst in the same period other expenses of the Postoffice Department have grown 178 per cent., revenues increasing 149 per cent.

Increased mail business means a direct increase in postal revenue, as postage remains the same regardless of tonnage, but carrying this increased business on the part of the railroads means less proportionate revenue to them according to volume of tonnage, so that the proportion of the postal revenue they now receive is very much less than formerly. Labor, material, and the price of everything sold in commerce have advanced materially, as we all know, in the past seven or eight years; railway mail pay being practically the only thing that has decreased in the face of conditions that should have raised it.

As a large increase in mail tonnage means to the Postoffice Department about an equal increase in revenue with a decreased payment per ton to the railroads through lower rates, the avoidance of a deficit would seem not a difficult matter if other postal expenses were kept at least within sufficient control, so they would not increase faster than the increase in volume of mail handled.

The Postoffice Department enjoys this peculiar advantage of receiving with the growth of the country an increase in revenue directly in proportion to the increase in business handled. In disbursing this revenue, it must pay less to the railroads in proportion to the density of business, thus retaining to apply on other expenses a larger net revenue year by year. It is reasonable to suppose that the cost of many branches of the Department should not increase in the same ratio as tonnage of mail (for example, that expenses of individual postoffices and administrative and general expenses should not grow in this proportion). Yet, regardless of these favorable influences, expenditures in other directions have absorbed the great net revenues after paying the railroads, and it is in these directions that the cause of the postal deficit must be looked for.

The growth of these expenditures, which since 1900 has been much faster than the rise in mail tonnage, is shown in the following comparison of 1908 with 1898:

1908.1898.Increase.Pct.
Ton mileage of mails handled by railroads484,683,135272,714,017211,969,11878
Postal revenues$191,478,663$89,012,619$102,466,044115
Less paid to railroads48,155,37934,379,22713,776,15240
Net applicable to other expenditures143,323,28454,633,39288,689,892162
Other expenditures160,196,50763,654,29796,542,210152
Deficit16,873,2239,020,9057,852,31887
Per ton of mail handled by railroads (cents)—
Postal revenues39.532.6+6.9
Paid to railroads9.912.6-2.7
——————
Net applicable to other items29.620.0+9.6
Other expenditures33.123.3+9.4
——————
Deficit3.53.3+0.2
Note.—The increase in gross postal revenue per unit of mail handled by railroads is no doubt due to increase in city mail not handled by railroads.

Chicago, Ill., March 1, 1909.

[THE DIMINISHED PURCHASING POWER OF RAILWAY EARNINGS]

By C. C. McCain.

Chairman of the Trunk Line Association, New York, 1909; Formerly Auditor Interstate Commerce Commission.

INTRODUCTION.

The ten years or more which have elapsed since the resumption of industrial activity that began some time in 1897 have been characterized by changes in rates of wages for substantially all kinds of labor, and in the prices of most commodities which amount to a profound and material alteration in the value of money. Wages of railway labor, prices of railway materials and supplies and prices of commodities carried by railways and of those produced by the purchasers of railway transportation have rapidly increased. This is equivalent to a decrease in the value of the money in which railway charges are paid for the appreciation of commodities is the depreciation of money. Commodities cannot have generally augmented value without money having diminished value. Railway rates have not been adjusted to this diminished value of money. The involuntary and unsolicited reduction in railway rates has gone so far as seriously to threaten the stability of railway wages and that of the whole railway industry. Some adjustment through compensatory advances in money rates (i. e., nominal rates) is, therefore, absolutely necessary. The extent of the changes which have taken place, their relation to the problem of railway rates and the adjustments which they have made necessary are set forth in the following pages.

TYPICAL UNCHANGED RATES.

A fifteen-ton car-load of fourth class freight carried all-rail between Chicago and New York at any time during the year 1897 would have brought the railways transporting it $105.00 in gross receipts.

There has been no change in the class-rates between Chicago and New York since 1897 and the same quantity of freight, classified in the same way, produces the same gross receipts now that it did in 1897.[E]

The rates between Chicago and New York, as is very well known, are the basis of all rates in the region north of the James, Potomac and Ohio Rivers, and east of the Mississippi River and of a large proportion of the rates applicable to traffic originating or destined to any point in that region. Without a change in rates between Chicago and New York there could have been, during the continuance of the system of rate adjustment that has been in force since long prior to the year 1897, no general change in the rates based upon those in force between those cities.

WAGES OF RAILWAY EMPLOYEES.

More than forty per cent. of the gross receipts of the railways of the United States are expended in the payment of employees, the sums annually paid out for that purpose since 1897 being as follows:

Amount paid to
Year.employees.
1897$465,601,581
1898495,055,618
1899522,967,896
1900577,264,841
1901610,713,701
1902676,028,592
1903(a)776,321,415
1904817,598,810
1905839,944,680
1906(a)927,801,653
19071,072,386,427
———————
Total$7,781,685,214
(a) Includes $19,000,000 estimated for Chicago, Milwaukee & St. Paul in 1903 and $27,000,000 for the Southern Pacific in 1906.

It is a matter of common knowledge and of frequent comment that a given sum of money will now buy very much less in labor or commodities than it would in 1897. The change has been gradual but substantially continuous and the aggregate result has been enormous. The consequence of this change has worked great hardship to those whose incomes have not been adjusted to the changed purchasing power of money but fortunately the rates of wages of nearly all workmen and the prices of practically all products of labor expended upon farms or in factories or otherwise have been raised sufficiently to more or less completely offset it. The principal sufferers are those salaried employees whose salaries have not been readjusted and those whose incomes are received under contracts covering long periods of time or are derived from the marketing of commodities or services at prices more or less effectively controlled by custom or statute. Many of the owners of railway bonds are in the second class and all interstate railways are, as to the disposal of their services, in the third class.

As already noted, the gross revenue derivable by the railways from the transportation of a carload consisting of fifteen tons of fourth class freight between Chicago and New York is the same now that it was in 1897—i. e., $105.00. But $105.00 is worth much less to any railway now than it was in 1897 for money is worth at any time what it will buy at that time. The reports of the Interstate Commerce Commission show the following increases in rates of average daily wages paid to railway employees:

Wages per day.
Class of Employees.
1897.1907.Increase,
per cent.
Station agents$1.73$2.0518.50
Other stationmen1.621.789.88
Enginemen3.654.3017.81
Firemen2.052.5423.90
Conductors3.073.6920.20
Other trainmen1.902.5433.68
Machinists2.232.8728.70
Carpenters2.012.4019.40
Other shopmen1.712.0620.47
Section foreman1.701.9011.76
Other trackmen1.161.4625.86
Switchmen, flagmen and watchmen1.721.878.72
Telegraph operators and despatchers1.902.2618.95
Employees, account floating equipment1.862.2722.04
All other employees and laborers1.641.9217.07

The foregoing affords a means of ascertaining the real value of $105.00 of railway gross receipts in 1897 and 1907 and the decrease from the earlier to the later year. The following table shows the number of days labor of each of the different classes of railway labor which $105.00 would buy in each of the years indicated:

Number of days labor
purchasable for $105.00.
Class of Employees.
1897.1907.Decrease,
per cent.
Station agents60.751.215.65
Other station men64.859.08.95
Enginemen28.824.415.28
Firemen51.241.319.34
Conductors34.228.516.67
Other trainmen55.341.325.32
Machinists47.136.622.29
Carpenters52.243.816.09
Other shopmen61.451.016.94
Section61.855.310.52
Other trackmen90.571.920.55
Switchmen, flagmen and watchmen61.056.18.03
Telegraph operators and despatchers55.346.515.91
Employees, account floating equipment56.546.318.05
All other employees and laborers64.054.714.53
——————
Average16.27

The foregoing shows that on the average the gross railway receipts derived from the service assumed as the basis of the calculation would purchase 16.27 per cent. less of the necessary services of railway employees, in 1907 than in 1897 and what is true of the receipts from this service is true of every dollar received by a railway—that is, no railway dollar will pay for more than eighty-four per cent., on the average, as much railway labor as it would in 1897.

The change in railway rates necessary fully to offset this decrease in the value of the money in which rates are paid would amount to an apparent advance of 19.43 per cent, of the money rates now in force.

COST OF FUEL FOR LOCOMOTIVES.

Next to labor the principal single item of expense incurred in the operation of the railways of the United States is for the fuel used in their locomotives. The expenditures for this purpose now constitute about eleven per cent. of the cost of operation and since 1897 have been as follows:

Cost of fuel
Year.for locomotives.
1897$65,044,670
189872,469,777
189977,187,344
190090,593,965
1901104,926,568
1902120,074,192
1903146,509,031
1904158,948,886
1905156,429,245
1906170,499,133
1907200,261,975
———————
Total$1,362,944,786

Thus, from 1897 to 1907, the cost of fuel for locomotives, in spite of the economies in its use partially suggested by the contemporaneous increase in the train-load of freight from 204.62 to 357.35 tons, or 74.64 per cent., increased 207.88 per cent., while passenger traffic increased but 126.15 per cent. and freight traffic by 148.69 per cent. Thus while there was one dollar spent for locomotive fuel in 1897 for each $17.25 of gross railway receipts the ratio had declined by 1907 to one dollar for locomotive fuel for each $12.93 of gross receipts—a difference which must plainly be productive of profound changes in the proportion of gross receipts remaining after the payment of necessary operating expenses. The average prices of coal, per ton of 2,000 pounds, at the mines, in the several states, in the years 1897 and 1907, as given by the United States Geological Survey, were as follows:

Price per ton.
State.Increase,
1897.1907.per cent.
Alabama$0.88$1.2946.59
Arkansas1.061.6856.49
California(a)2.55(a)3.8149.41
Colorado1.171.4019.66
Georgia(b)1.03(b)1.3833.98
Idaho(c)3.33(c)4.1023.12
Illinois.721.0748.61
Indiana.841.0828.57
Iowa1.131.6243.36
Kansas1.181.5228.81
Kentucky.791.0634.18
Maryland.761.2057.89
Michigan1.461.8023.29
Missouri1.081.6451.85
Montana1.761.9410.23
New Mexico1.381.465.80
North Dakota1.081.6149.07
Ohio.781.1041.03
Oklahoma1.342.0452.24
Oregon3.092.34Decrease
Pennsylvania—
Bituminous.691.0450.72
Anthracite1.511.9126.49
Tennessee.811.2554.32
Texas1.521.6911.18
Utah1.191.5227.73
Virginia.671.0252.24
Washington1.942.097.73
West Virginia.63.9957.14
Wyoming1.211.5628.93
(a) Includes Alaska.
(b) Includes North Carolina.
(c) Includes Nebraska.

It will be noted that the cost of coal increased in every state of considerable production. In California much of the locomotive fuel used consists of petroleum, and the same fuel is used to some extent in Oregon and New Mexico.

The number of tons of coal purchasable at the mines in the several states with $105.00, the gross revenue from the typical shipment which has been used for illustrative purposes, in 1897 and in 1907, would have been as follows:

Tons of coal purchasable
for $105.00.
State.Decrease,
1897.1907.per cent.
Alabama1198131.93
Arkansas996237.37
California412831.71
Colorado907516.67
Georgia1027625.49
Idaho322618.75
Illinois1469832.88
Indiana1259722.40
Iowa936530.11
Kansas896922.47
Kentucky1339925.56
Maryland1388836.23
Michigan725819.44
Missouri976434.02
Montana605410.00
New Mexico76725.26
North Dakota976532.99
Ohio1359529.63
Oklahoma785134.62
Oregon3445Increase
Pennsylvania—
Bituminous15210133.55
Anthracite705521.43
Tennessee1308435.38
Texas696210.14
Utah886921.59
Virginia15710334.39
Washington54507.41
West Virginia16710636.53
Wyoming876722.99

In this connection it should be noted that the United States Department of Labor reports an increase, between 1897 and 1907, in the price of anthracite of 29.23 per cent., and in bituminous coal from the Georges Creek region of 85.54 per cent.

COST OF RAILWAY SUPPLIES.

Bulletin No. 75, of the United States Bureau of Labor, shows average prices for the following articles used by railways, or, as raw materials, for the manufacture of railway supplies:

Price.
Articles.Increase,
Unit.1897.1907.per cent.
Axes, M. C. O. YankeeEach.39.6874.36
Coke, Connellsville, furnaceTon1.622.8374.69
Bar iron, best refined, from millPound.011.017559.09
Barbed wire, galvanizedCwt.1.802.6346.11
Copper wire, barePound.1375.240274.69
Doorknobs, steel, bronze, platedPair.166.450171.08
Files, 8-inchDozen.811.0023.46
Hammers, Magdole, No. 1½Each.38.4723.68
Lead pipeCwt.4.326.7155.32
Locks, common, mortiseEach.0833.20140.10
Nails, cut, 8-penny, fence and commonCwt.1.332.1662.41
Nails, wire, 8-penny, fence and commonCwt.1.492.1242.28
Pig iron, BessemerTon10.1322.84125.47
Pig iron, foundry No. 1Ton12.1023.9097.52
Pig iron, foundry No. 2Ton10.1023.87136.34
Pig iron, gray, forge, southern, cokeTon8.8020.99138.52
Steel billetsTon15.0829.2593.97
Steel railsTon18.7528.0049.33
Steel sheets, black, No. 27Pound0.0190.02531.58
Tin, pigPound.1358.3875185.35
Tin, plates, domestic, Bessemer, cokeCwt.3.184.0928.62
Zinc, sheetCwt.4.947.4951.62
Brick, common domesticM4.946.1624.70
Cement, RosendaleBbl..75.9526.67
Doors, pineEach.811.88132.10
Lumber, hemlockM feet11.0022.25102.27
Lime, commonBbl..72.9531.94
Linseed oil, rawGal..33.4330.30
Lumber, maple, hardM feet26.5032.2521.70
Lumber, oak, white, plainM feet36.2555.2152.30
Lumber, oak, white, quarteredM feet53.8380.0048.62
Lumber, pine, yellowM feet16.4430.5085.52
Lumber, poplarM feet30.6758.0889.37
Shingles, cypressM2.354.2380.00
Lumber, spruceM feet14.0024.0071.43
Window glass, American, single, firsts,
6 by 8 to 10 by 15 inch50 sq. ft.2.202.8127.73
Window glass, American, single, thirds,
6 by 8 to 10 by 15 inch50 sq. ft.1.962.2414.29

The bulletin indicates that putty, Portland cement and Ames shovels are about the only exceptions to the general rule of greatly increased prices of railway supplies. It is plain that as to all of the important supplies and materials included in the foregoing list the $105.00 of gross receipts from the typical shipment heretofore used as an example would show the same, or a greater, loss in purchasing power which has characterized the comparisons previously shown.

Evidence from official sources thus shows that in purchasing the same quantities either of labor or of supplies the railways have now to expend much larger sums than they did ten years ago. The official statistics already quoted are fully supported and their pertinence to the problem in hand is fully proven by the accounting records of the purchasing departments of the several railways. The Trunk Line Association has obtained detailed information concerning purchases in 1897 and 1907, by important railways represented in its organization, and this information has been carefully and accurately tabulated. A table showing the largely increased cost of articles which this tabulation reveals has been made Appendix B and will be found at pages 194 to 198 of this pamphlet. An examination of this appendix and, particularly of the classes of labor and of the articles shown to have greatly increased in cost, discloses the unquestionable fact that the increased cost pervades the whole aggregate of operating expenses and that there is no considerable exception to the rule that every item of operating expenditure is now very much greater than it was in 1897.

OTHER COSTS OF SUPPLYING RAILWAY SERVICES.

The cost of railway transportation which must be borne out of the receipts for railway services includes operating expenses, interest on capital and taxes. Before discussing the increase in the rate of interest demanded it is worth while to note that the exactions made by the taxing power upon the railways have also notably increased.

The sums annually paid as taxes on railway property since 1897 follow:

Taxes paid.
Miles operated
and includedAverage
in reports Amount.per mile
of taxes paid.operated.
1897183,284.25$43,137,844$235.36
1898184,648.2643,828,224237.36
1899187,534.6846,337,632247.09
1900192,556.0348,332,273251.00
1901195,561.9250,944,372260.50
1902200,154.5654,465,437272.12
1903205,313.5457,849,569281.76
1904212,243.2061,696,354290.69
1905216,973.6163,474,679292.55
1906222,340.3074,785,615336.36
1907227,454.8380,312,375353.09
——————————————
* *$625,164,374* *

Thus in the years from 1897 to 1907 railway taxation per mile of line has increased from $235.36 to $353.09, or no less than 50.02 per cent.

COST OF REGULATION.

Closely akin to taxation of railway property are the additional expenses which have to be met out of railway revenues on account of public regulation. The increased and, in many cases, minute regulation imposed by the Hepburn law of 1906 and the rules and requirements established thereunder by the Interstate Commerce Commission and by various State enactments have caused the railways many new and augmented expenditures. Among the many purposes for which these expenditures have become necessary are those enumerated below:

1. Preparation, publication, filing, posting, etc., of rate schedules.

2. Compilation and tabulation of statistics, preparation and filing of annual reports of operation and finance.

3. Litigation under regulatory statutes including cases before National and State commissions and including legal and incidental expenses thereof.

4. Appliances and special equipment required by safety appliance laws.

5. Additional employees and additional wages paid on account of laws regulating the hours of labor.

Besides these and other positive additions to the expenses of operation there have been considerable reductions in revenue brought about by the various regulative statutes. Thus there have been reductions in revenue caused by the following:

1. Orders, or suggestions having practically the force of orders, requiring changes in the classification of freight.

2. Orders, or suggestions having practically the force of orders, requiring reductions in rates.

3. Statutory reduction in the rates of compensation for carrying the mail.

4. Reduction of compensation for carrying the mail made by executive order.

A painstaking effort to secure accurate statistics concerning recent increases in these expenditures and losses has been made and data for that purpose have been supplied by many of the railways operating east of the Mississippi river. These data are necessarily incomplete and fragmentary, the accounts of many of the companies not being kept in such form as fully to disclose the items desired. In few cases were the data which could be obtained for any line complete—some companies were able to report particular items while other companies could not give these, but could supply others. Generally speaking, it should be realized that the tabulation of these reports makes a showing which is incomplete mainly in the form of omissions. A conservative computation discloses that the costs due to increases in expenses or reductions in revenue imposed by statutes or by Commissions acting under Federal and State regulatory laws costs the railways of the United States approximately $200,000,000 in two years. That this is not an exaggerated estimate will be appreciated by reference to the principal general items of expenditures as enumerated on the preceding pages. Until these items shall have been assigned a proper classification in the accounts of the railroads the accurate results may not be ascertained, but it will at once occur to those in any measure informed that there has been an enormous increase of work and expense placed upon the carriers to conform to the innumerable requirements of State and Federal laws and the rulings of the Commissions thereunder, and that this burden has extended to all departments of the carriers. Litigation and miscellaneous expenses appear as a large part of these new costs, and in addition the carriers' revenues have been greatly depleted either directly by the laws, orders of Commissions or suggestions having practically the force of orders, resulting in reductions of freight and passenger charges.

COST OF OBTAINING NEW CAPITAL.

In the matter of interest on the capital employed the railways have apparently enjoyed an advantage which would seem to offset the natural tendency of interest rates to rise in response to the stimulus of augmented cost, in dollars and cents, of the commodities entering into the budget of expenditures of the average recipient of interest—that is to say, the advantage growing out of the fact that a large proportion of railway capital is secured under long-time contracts and that many of the contracts now in force unquestionably run back to a time before the extensive depreciation of the American dollar began. This advantage is a real one, but its extent is easily exaggerated. For the purpose of throwing light upon the effect upon the cost of railway transportation of the rise in interest rates which has characterized recent years an analytical study of railway indebtedness (including guaranteed dividends) amounting, in the aggregate, to $9,499,099,065 has been made. This sum represents indebtedness now outstanding and includes some duplication owing to the fact that certain of the securities represented in the aggregate are themselves based upon other securities deposited as collateral or held in the treasuries of the corporations making the secondary issues; duplication which could not be eliminated without adding vastly to the difficulty of the inquiry with no corresponding gain in the accuracy of the result. These data are also subject to the qualification necessarily due to the fact that all of the issues included were not sold at par. In some cases a small premium was doubtless obtained and in other cases a slight discount was required, but, nevertheless, it is believed that the data fairly indicate the general change in interest rates on capital loaned to railways. Of the total outstanding indebtedness of $9,499,099,065 the portion incurred during the years 1897 to 1908, inclusive, amounts to $5,466,340,252, or 57.55 per cent. The following table shows the amounts incurred at the different rates during each of the years named:

Rate of Interest and Amount Incurred During Year and Outstanding.
Year.6½ per cent.6 per cent.5 per cent.4½ per cent.
1897—$11,039,000$42,126,000$7,700,000
1898—487,0007,486,700207,000
1899—13,094,00029,197,00015,896,000
1900—1,133,00015,926,3517,979,000
1901—1,777,77538,840,00037,845,378
1902——44,949,50819,949,600
1903—1,552,00053,592,03022,092,500
1904—256,00061,191,56130,241,729
1905—1,810,00066,346,00073,996,100
1906$350,0001,180,579141,786,51140,922,181
1907—30,325,000289,458,892177,805,962
1908(a)—114,504,97047,546,3852,850,000
——————————————————————
Total$350,000$177,159,324$838,446,938$437,485,450
Rate of Interest and Amount Incurred During Year and Outstanding.
Year.4 per cent.3¾ per cent.3½ per cent.3 per cent.
1897$205,882,500—$221,663,000$4,998,275
1898187,898,000—194,724,325—
1899277,784,400—126,734,00043,231,272
190083,735,500—62,577,00043,689,000
1901382,131,250330,00051,635,000—
1902348,038,050—58,641,500—
1903317,948,000—22,308,0009,866,435
1904193,499,500—39,890,000—
1905364,507,404—112,645,15516,000,000
1906251,037,68148,262,54831,098,670—
1907210,399,075—423,000—
1908(a)101,380,000———
———————————————————————
Total$2,924,181,360$48,592,548$922,339,650$117,784,982
(a) January to July, only.

Even a cursory examination of the foregoing statement shows that the average rate of interest demanded by those who supply railway capital has greatly increased. In 1897 and 1898 the largest aggregate of new indebtedness was incurred at the rate of three and one-half per cent. per annum; in 1899, 1900, 1902, 1903, 1904, 1905 and 1906 the preponderating portion was at four per cent.; in 1907 the largest aggregate was at five per cent., while in the months of 1908 for which data are available the greater portion was obtained at six per cent. Loans at three and three and one-half per cent., which supplied a considerable aggregate during all of the years to and including 1906 and particularly in the earlier years of the period, had substantially disappeared before 1907 and no funds were procured at less than four per cent. during the portion of 1908 which is included. The increased volume of loans at five and six per cent. is equally marked. The following table makes this analysis clearer by showing the total borrowings of each year and the percentage at each rate:

Rate of Interest and Proportion of Total Indebtedness
Incurred During Year and Outstanding.
Year.Borrowed.6½ per6 per5 per4½ per4 per3¾ per3½ per3 per
cent.cent.cent.cent.cent.cent.cent.cent.
1897$493,408,775—2.248.541.5641.73—44.921.01
1898390,803,025—.121.92.0548.08—49.83—
1899505,936,672—2.595.773.1454.91—25.058.54
1900215,039,851—.537.403.7138.94—29.1020.32
1901512,559,403—.357.587.3874.550.0710.07—
1902471,578,658——9.534.2373.80—12.44—
1903427,358,965—.3612.545.1774.40—5.222.31
1904325,078,790—.0818.829.3059.53—12.27—
1905635,304,659—.2810.4411.6557.38—17.732.52
1906514,638,1700.07.2327.557.9548.789.386.04—
1907708,351,929—4.2840.8625.1029.70—.06—
(a)1908266,281,355—43.0017.861.0738.07———
Total5,466,340,2520.013.2515.348.0053.490.8916.872.15
(a) January to July, only.

The foregoing table shows that while, in 1897, the railways borrowed 87.66 per cent. and in 1898, 97.91 per cent. of the new capital obtained in the form of loans at four per cent. or better, they were compelled, in 1907, to promise more than four per cent. on 70.24 per cent. and in the first six months of 1908 to promise six per cent. on 43.00 of their borrowings. The significance of these figures is made still more apparent by the following table, which shows opposite the aggregate borrowings of each year, the interest charges thereon and the average rate upon the portion of the capital which it represents:

Aggregate
interestAv. rate
Year.Borrowed.charges.interest.
1897$ 493,408,775$ 19,258,5933.90
1898390,803,02514,744,1413.77
1899505,936,67219,804,8143.91
1900215,039,8518,073,6383.75
1901512,559,40320,856,5594.07
1902471,578,65819,119,1824.05
1903427,358,96517,561,5774.11
1904325,078,79013,571,9454.17
1905635,304,65925,758,6014.05
1906514,638,17021,964,2154.27
1907708,351,92932,722,0814.62
1908(a)266,281,35513,431,0675.04
———————————————
Total$5,466,340,252$226,886,4134.15
(a) January to July, only.

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 capitalInterest onpaym'ts new
Year.(a)borrowed.funded debt.borrow'gs.
1898$ 390,803,025$ 237,578,70660.79
1899215,039,851241,657,53547.76
1900215,039,851242,998,285113.00
1901512,559,403252,594,80849.28
1902471,578,658260,295,84755.20
1903427,358,965268,830,56462.90
1904325,078,790282,118,43886.78
1905635,304,659294,803,88446.40
1906514,638,170305,337,75459.33
1907708,351,929323,733,75145.70
——————————————
Total$4,706,650,122$2,709,949,57257.58
(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.
ClothsFuelMetals
Farmandandand
Year.Products.Food.Clothing.Lighting.Implements.
1890-1899100.00100.00100.00100.00100.00
189785.287.791.186.486.6
189896.194.493.495.486.4
1899100.098.396.7105.0114.7
1900109.5104.2106.8120.9120.5
1901116.9105.9101.0119.5111.9
1902130.5111.3102.0134.3117.2
1903118.8107.1106.6149.3117.6
1904126.2107.2109.8132.6109.6
1905124.2108.7112.0128.8122.5
1906123.6112.6120.0131.9135.2
1907137.1117.8126.7135.0143.4
Lumber andHouse
BuildingDrugs andFurnishingMiscell-All Com-
YearMaterials.Chemicals.Goods.aneous.modities.
1890-1899100.00100.00100.00100.00100.00
189794.494.489.892.189.7
189895.8106.692.092.493.4
1899105.8111.395.197.7101.7
1900115.7115.7106.1109.8110.5
1901116.7115.2110.9107.4108.5
1902118.8114.2112.2114.1112.9
1903121.4112.6113.0113.6113.6
1904122.7110.0111.7111.7113.0
1905127.7109.1109.1112.8115.9
1906140.1101.2111.0121.1122.5
1907146.9109.6118.5127.1129.5

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 power
Relative prices.to purchase
railway
Commodities.Increasefreight services
1897.1907.per cent.per cent.
Farm products85.2137.160.9269.19
Food87.7117.834.3241.22
Cloths and clothing91.1126.739.0846.23
Fuel and lighting96.4135.040.0447.24
Metals and implements86.6143.465.5974.10
Lumber and building materials90.4146.962.5070.85
Drugs and chemicals94.4109.616.1022.07
House furnishing goods89.8118.531.9638.74
Miscellaneous92.1127.138.0045.00
All commodities89.7129.544.3751.79

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
Prices.to purchase
railway
Product.Value ofIncreasefreight services
crop of 1907.Unit.1897.1907.per cent.per cent.
Corn$1,336,901,000Bushel$0.263$0.51696.20106.28
Wheat554,437,000".808.8748.1713.73
Oats334,568,000".212.443108.96119.70
Barley102,290,000".377.66676.6685.74
Rye23,068,000".447.73163.5371.94
Buckwheat9,975,000".421.69865.8074.32
Potatoes184,184,000".547.61812.9818.79
Hay773,507,000Ton6.6211.6876.4485.51
Cotton613,630,436Pound.066.10457.5865.68
———————
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
Prices.to purchase
railway
January 1,January 1,January 1,Increasefreight services
1908.1897.1908.per cent.per cent.
Horses$1,867,530,000$31.51$ 93.41196.45211.69
Mules416,939,00041.66107.76158.67171.97
Milch cows650,057,00023.1630.6732.4339.24
Cattle, except
milch cows		845,938,00016.6516.891.446.65
Sheep211,736,0001.823.88113.19124.15
Swine339,030,0004.106.0547.5655.14
——————————————————
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.189718981899190019011902190319041905190619071908(a)
I.A12.0211.7611.2311.5211.5111.7211.6711.9611.7911.7211.4511.10
II.B6.756.175.826.136.466.646.676.866.656.506.556.43
III.C6.055.785.295.465.685.766.076.206.075.945.985.94
IV.D6.485.925.945.956.416.507.147.166.916.907.036.96
V.E8.648.358.078.088.028.168.278.518.398.138.278.25
VI.F8.558.268.218.067.897.877.747.797.667.457.437.35
VII.G11.4811.5711.0110.6410.439.949.809.649.008.949.339.42
VIII.H10.799.619.689.649.719.789.629.989.889.479.669.53
IX.I10.4010.4210.659.3810.189.849.7410.0010.9610.0910.5110.02
X.J12.7511.4611.3610.6710.5510.3710.0510.3610.9811.0311.6312.04
United States7.987.537.247.297.507.577.637.807.667.487.597.5
(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.
X3,133,623,73411,252,450,440259.0912.7511.63
VII2,633,860,9589,300,234,849253.1011.489.33
VIII6,333,591,46317,406,430,971174.8310.799.66
III17,587,334,60947,994,909,002172.896.055.98
V6,802,119,48917,397,321,360155.768.648.27
VI17,393,471,48044,318,734,155154.808.557.43
IX3,165,108,5617,546,655,555138.4310.4010.51
IV4,936,635,04611,418,243,141131.306.487.03
II29,579,613,55963,455,243,659114.526.756.55
I3,573,663,3266,511,166,97182.2012.0211.45
—————————————————————
U. S.95,139,022,225236,601,390,103148.697.987.59

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 average43,035,439,011113,732,994,301164.28
Ton mile rates below the average52,103,583,214122,868,395,802135.82
——————————————-———
Total95,139,022,255236,601,390,103148.69

The region with rates above the average in 1897 had 45.23 per cent. of the total ton-mileage in that year, and 48.07 per cent. in the year 1907. Of the total increase in traffic movement 49.98 per cent. was in this region. The precise effect that these changes in the geographical distribution of ton-mileage would have had upon the average ton-mile rate for the whole country is shown by the computation set forth in the following table:

Product of
ton-mileage of
Ton mileageTon-mile rates of1907 and ton-mile
Groupof 1907.1897 in mills.rates of 1897.
I6,511,166,97112.02$ 78,264,226.99
II63,455,243,6596.75428,322,894.70
III47,994,909,0026.05290,369,199.46
IV11,418,243,1416.4873,990,215.55
V17,397,321,3608.64150,312,856.55
VI44,318,734,1558.55378,925,177.03
VII9,300,234,84911.48106,766,696.07
VIII17,406,430,97110.79187,815,390.18
IX7,546,655,55510.4078,485,217.77
X11,252,450,44012.75143,468,743.11
—————————————————
United States236,601,390,103—$1,916,720,617.41

By dividing the aggregate of the products in the last column of the foregoing by the total ton-mileage shown in the second column, an average is obtained which represents the ton-mile rate that would have resulted in 1907 had the traffic of each group in that year moved in precisely the same volume in which it actually moved and had the average rates in each group been exactly the same as they were in 1897. This shows that, under the conditions assumed, the average ton-mile rate for the whole country would have been 8.10 mills or 0.12 mill higher than in 1897. This advance of 1.50 per cent. would have been wholly due to the more rapid growth of traffic in the regions of normally higher rates. The chief significance of so small a change in so long a period is, really, to indicate that the ton-mile unit, so far from being of rapidly changing character, is actually, at least as far as it might be assumed to be affected by changes in the location of traffic movement, a fairly stable unit and thus an excellent measure of the rise or fall in rates. Whether the same conclusion is to be derived from a study of the changes in the proportion of the total movement made up of commodities of different grades and naturally taking different rates is now to be made the subject of inquiry.

Publication of the classified statistics of tonnage necessary for such an inquiry was begun by the Interstate Commerce Commission with the report for the year 1899. Consequently it is not practicable to extend the inquiry to a period prior to that year. The following statement shows the number of tons of freight of each of the classes of commodities named which were received by the railways for transportation in 1899, 1903 and 1907 and the proportion of the tonnage in each class to the total number of tons carried:

Percentage of
Tons.total tonnage.
Class of commodity.1899.1903.1907.1899.1903.1907.
Products of agriculture50,073,96361,056,21277,030,07111.339.568.62
Products of animals13,774,96416,802,89320,473,4863.122.632.29
Products of mines227,453,154329,335,621476,899,63851.4751.5653.59
Products of forest48,122,44774,559,980101,617,72410.8911.6711.38
Manufactures54,415,20591,980,903137,621,44313.4514.3915.41
Merchandise19,844,73529,949,02234,718,4874.494.693.89
Miscellaneous23,197,15535,116,02744,824,1235.255.505.02
—————————————————————
Total441,881,623638,800,658893,184,972100.00100.00100.00

It should be observed that the foregoing statement represents tons received for shipment regardless of the distance carried and, in consequence, does not throw the light upon traffic movement that would be available if it were possible to know the ton-mileage of each class of commodities. Nevertheless, the data undoubtedly convey some information as to the character of the ton-mile unit during the different years and the nature of the changes in its quality which are in progress. This will be made more evident by the following table showing comparisons for the years 1899 and 1907:

Tons.
Increase.
Class of commodity.1899.1907.Amount.Per cent.
Products of agriculture50,073,96377,030,07126,956,10853.83
Products of animals13,774,96420,473,8466,698,52248.63
Products of mines227,453,154476,899,638249,446,484109.67
Products of forest48,122,447101,617,72453,495,277111.16
Manufactures59,415,205137,621,44378,206,238131.63
Merchandise19,844,73534,718,48714,873,75274.95
Miscellaneous23,197,15544,824,12321,626,96893.23
—————-—————-—————-———
Total441,881,623893,184,972451,303,349102.13

Obviously the effect of the increases shown in the foregoing upon the quality of the average ton-mile must be in proportion as they have exceeded or fallen short of the average increase shown at the foot of the last column. There is no question that, in general, products of agriculture, animals, forests and mines are low-grade commodities, or that, on the other hand, the commodities classed as manufactures, merchandise and miscellaneous are high-grade articles. An increase in excess of the general average increase in the first four classes named would tend to lower the quality of the average ton-mile while the opposite effect, that is, a raising of the quality, would result if the last three classes should increase more rapidly than the increase in all tonnage. Adopting this classification, the following shows the respective increases in high-grade and low-grade tonnage:

Tons.
Increase.
Class of commodity.1899.1907.Amount.Per cent.
High-grade102,457,095217,164,053114,706,958111.96
Low-grade339,424,528676,020,919336,596,39199.17
——————————————————
Total441,881,623893,184,972451,303,349102.13

The considerably greater increase in the tonnage of high-grade articles indicated by the foregoing is scarcely within the possible margin of error in the classification, but, in any event, what the figures certainly prove is the absence of any actually far-reaching change in the typical or average unit of traffic. That this conclusion extends to traffic movement is clearly probable.

PRICES AND ACTUAL RATES.

Comparisons between actual prices of commodities shipped by rail and typical freight charges on the same articles, for 1897 and 1907, demonstrate the fact that while prices have almost uniformly advanced the greater number of rates have remained stationary while among those which have changed the reductions are as numerous as the advances and exceed the latter in extent and importance.

[Mr. McCain here presents a table compiled from reports of the Bureau of Labor of the actual prices of commodities and the rates between principal points of shipment, occupying pp. 50-58 of his pamphlet.]

Examination of prices collected and reported by the Bureau of Labor, giving the prices in 1899 and 1907 of 229 articles, shows that among these 204 prices or 89.08 per cent. of the total were increased. The rates on forty-nine of these articles were advanced an average of 13.14 per cent. and the rates on forty-eight of them were reduced an average of 16.44 per cent. Other conclusions are shown in the following summary table:

AggregateAverage
Per cent.percentagechanges,
Item.Number.of total.of changes.per cent.
Prices—
Advanced20489.0811,34055.59
Reduced135.6833025.38
Unchanged125.24——
Total229100.00——
Rates advanced—
Prices advanced4419.2260613.77
Prices reduced31.313010.00
Prices unchanged2.8784.00
Total4921.4064413.14
Rates reduced—
Prices advanced4218.3470816.86
Prices reduced31.313311.00
Prices unchanged31.314816.00
Total4820.9678916.44
Rates unchanged—
Prices advanced11851.52——
Prices reduced73.06——
Prices unchanged73.06——
Total13257.64——

The foregoing shows that while prices were advanced for 204 out of 229 articles, or 89.08 per cent. of the entire number included in the table, the freight rates on the same articles, as expressed in money, were advanced in but forty-nine instances, or 21.40 per cent. of the total, money rates were reduced in forty-eight instances, or 20.96 per cent. of the total, and remained stationary in 118 instances, or 57.64 per cent. of the total. Of the rates advanced forty-four were in cases in which the prices had also advanced, and of the rates reduced forty-two applied to articles which had advanced in price. Even as to the commodities which had advanced in price, the average advance being over fifty-five per cent., money rates were advanced in but forty-four instances out of 204 and the average advance was but 13.77 per cent. and there were forty-two reductions in money rates, such reductions averaging 16.86 per cent.

SIGNIFICANCE OF THE DEPRECIATION OF MONEY.

It has now been fully demonstrated (first) that the railways have to pay much more, probably not less on the average than twenty-five per cent. more, for everything they require in the conduct of their business, including labor, than they did ten years ago, (second) that those who make use of railway services receive much more, probably not less on the average than twenty-five per cent. more, for their labor or for the commodities which they produce than they did ten years ago, (third) that average rates per ton per mile for railway freight transportation, expressed in money, that is to say, in dollars and decimal fractions of dollars, are now somewhat lower than they were in 1897 or formerly, and (fourth) that the ton-mile unit is a highly stable one as to quality and that in consequence of this stability the ton-mile rates accurately answer the question whether rates, expressed in money, have remained stationary, have advanced or have declined. The latter conclusion has been supplemented and re-enforced by data from the classifications and rate schedules which tend strongly to prove the same fact. Therefore, it has been made plainly apparent that there has been a decline in money rates since 1897. But railways require money only to remunerate the highly skilled labor they employ, to purchase necessary materials and supplies, to pay taxes and to compensate the capital they use. Consequently money is worth to the railway corporation, as to the wage-earner, only what it will buy for the satisfaction of wants. A dollar which will pay for less labor or buy less fuel for locomotives is worth less to the railway just as a dollar that will buy less bread or clothing is worth less to the man who works for wages or receives it as interest on his savings. It has long been realized that any effort to study the question of wages, throughout an extended period, which fails to take into consideration the purchasing power of the money received is worse than valueless, because it is deceptive and misleading. It has been generally recognized also that any effort to consider the condition of particular classes of producers by comparisons of the prices obtained for their products at different periods, as that of farmers by the prices of corn and wheat, is similarly dangerous unless these prices are turned into quantities of the commodities which such producers must purchase.

[In elucidating this obvious point Mr. McCain cites such authorities as Adam Smith, John Stuart Mill, President Hadley of Yale, Professor Frank W. Taussig of Harvard, and then continues.]

A rapid decrease in the purchasing power of the money they receive has brought about, within a single decade, a reduction in railway freight rates that cannot be less than twenty-five per cent. This reduction began almost imperceptibly at a time when American railway rates were already lower than ever before in the history of railways and lower than anywhere else in the world. It has proceeded, concurrently with the fall in the real value (that is in the purchasing power) of the American dollar, but in such subtle form that only when its consequences threaten the stability of the American railway system, the wages of railway employes and the prosperity of the great rail-manufacturing, car-building and other allied industries is its real significance and extent perceived even by those most immediately interested. That such a threat now hangs over the railway industry of America and every employe and industry dependent upon it is too plain for argument. The situation is acute and nothing but a prompt adjustment of the rates obtained for the services rendered to offset, partially, at least, the loss in the value of the money received will prevent disaster. That such an adjustment, if effected now, will, at best, be tardy and belated is evident from the facts herein presented, which show that prices in every other industry and the wages of all artisans were long ago adjusted to this fundamental condition.

APPENDIX B

Statement showing prices of railway supplies purchased in 1897 and 1907 as disclosed by the records of various Eastern railways. It should be noted that the quality of the supplies, made the basis of this statement, may have changed somewhat between 1897 and 1907, but in few instances would the allowance for this source of variation materially affect the results.

Prices.
Increase.
Class.1897.1907.Per cent.
Locomotives—
Mogul$10,181.00$14,111.0038.6
10-Wheel passenger11,026.0015,734.0042.7
Atlanticnot built16,236.00
Pacificnot built19,580.00
Prairienot built16,468.00
8-Wheel passenger10,243.0013,581.0032.5
6-Wheel switcher9,392.0012,098.0028.8
Cars (1899-1907)—
Hopper475.001,185.00
Box783.001,110.00
490.00844.00
519.00897.00

Note.—The prices of cars shown above are typical prices paid by differentroads in the respective years and employed in the same service.As the cars purchased in 1907 are of more modern construction, betterquality and larger capacity than those purchased in 1899, no accuratecomparison can be made or percentage of increased cost shown.

(1902-1907)—
100,000 lbs. Capacity Box Car with Steel Underframe and wood superstructure$1,043.49$1,148.8810.09
100,000 lbs. Capacity Composite Gondola Car with Steel Underframe and wood superstructure1,021.621,148.4512.42
100,000 lbs. Capacity Composite Flat Car with Steel Underframe and wood floor953.231,010.606.02
100,000 lbs. Capacity, all steel Hopper Cars1,002.221,076.057.47
Angle BarsCwt.1.021.5552.0
Axles—
LocomotiveCwt.$ 2.75$ 2.957.2
Cwt.2.722.854.7
TenderCwt.1.402.3567.8
CarCwt.1.601.9521.9
Cwt.1.452.2051.7
Cwt.1.682.2534.0
Bar IronCwt.1.191.7849.5
Cwt.1.101.8063.6
Cwt.1.051.5042.8
Brick—
CommonM4.506.0033.3
PavingM8.0011.0037.5
Castings—
BrassLb.0.110.25127.3
BrassLb.0.120.25¾114.6
SteelCwt.3.506.0071.4
M. IronCwt.2.504.2570.0
Cwt.2.703.6033.3
Cwt.2.352.8521.2
GrayCwt.1.152.0074.0
Cwt.1.201.6537.5
CoalTon1.461.7620.5
Ton1.321.8238.0
Ton1.171.5229.8
Ton1.832.0713.1
Run of MineTon.651.0561.5
¾Ton.751.1553.3
Couplers—
FreightSet14.0015.007.1
PassengerSet20.5027.0031.7
TenderSet18.0018.502.8
FencingM. Ft.12.0025.00108.3
M. Ft.10.0018.1581.5
FluesFt.0.130.15½19.2
Ft.0.140.157.1
Forgings—
AxlesLb.0.020.0350.0
Crank PinsLb.0.050.10100.0
Piston RodsLb.0.060.1066.6
Main RodsLb.0.080.1025.0
Side RodsLb.0.080.1025.0
Lead—
WhiteCwt.4.956.2526.3
Lumber—
Large Bridge TimbersM. Ft.$ 13.12$ 25.6295.3
M. Ft.23.0038.0065.2
M. Ft.20.0033.0065.0
M. Ft.17.0028.0064.7
M. Ft.22.5038.0068.9
M. Ft.15.0027.0080.0
Car SidingsM. Ft.17.0035.00105.9
M. Ft.18.0033.0083.3
StringersM. Ft.18.0028.0055.5
M. Ft.16.0034.00112.5
M. Ft.18.0026.0044.4
M. Ft.17.0028.0064.7
Car FlooringM. Ft.17.0024.0041.2
M. Ft.20.0033.0065.0
M. Ft.11.0025.00127.2
M. Ft.14.0019.7140.8
Piles (Soft)Ft.0.080.1475.0
Ft.0.080.1137.5
(Hard)Ft.0.120.1741.7
Heavy PlanksM. Ft.14.0022.0057.1
M. Ft.14.0030.00114.3
M. Ft.16.0027.0068.8
Cross Ties (Hardwood)Each0.470.8070.2
Each0.600.8541.7
Each0.550.7536.4
Each0.370.7089.2
Each0.450.6033.3
Each0.450.5522.2
Each0.480.9087.5
Each0.380.80110.5
Each0.380.6776.4
SoftwoodEach0.220.60172.7
Each0.200.2840.0
Each0.230.48108.7
Each0.480.5820.8
Nails—Cwt.1.602.2037.5
Cwt.1.332.1662.4
Cwt.1.102.15104.5
WireCwt.1.271.8545.7
Cwt.1.482.1142.6
Oil—
KeroseneGal.$0.06$0.09½58.3
SignalGal.0.280.3628.6
Gal.0.200.3680.0
300 degreeGal.0.090.1011.1
Paint—
Gal.0.771.0333.8
Gal.0.500.6530.0
Cwt.4.756.6239.4
Cwt.5.506.5018.2
Pipe—
Cast IronTon16.0034.00112.5
Ton16.7529.1574.0
Ton13.5021.0055.6
Ton16.0032.00100.0
CopperLb.0.310.349.7
Lb.0.300.3310.0
Lb.0.300.3516.7
Rails—
SteelGross Ton19.0028.0047.4
Gross Ton18.0028.0055.6
Gross Ton18.0526.6047.4
Rubber Hose—
1 InchFt.0.340.4120.6
1¼ inchFt.0.400.4615.0
Springs—
Loco.Cwt.4.054.101.2
Switches—
Comp. 8031.9040.7727.8
Frogs 8018.7527.5046.7
Switch LampsDoz.45.0065.0044.4
TileRod0.400.6050.0
Track BoltsCwt.1.702.4544.1
Cwt.1.652.6057.6
Cwt.2.202.7525.0
Cwt.1.652.4548.5
Cwt.1.752.7657.7
Track SpikesCwt.1.852.5236.2
Cwt.1.351.7025.9
Cwt.1.502.6073.3
Cwt.1.652.2536.4
Cwt.1.501.9026.7
Cwt.1.451.9031.0
Cwt.1.752.0014.3
Track Tools—
AxesDoz.$8.00$9.0012.5
DrillsEach0.350.4631.4
RatchetsDoz.5.136.6529.6
ShovelsDoz.5.005.6513.0
Lamp BarsEach0.520.6525.0
Waste—
ColoredLb.0.0470.05517.0
WhiteLb.0.060.0833.3
Wheels—
CarEach5.607.8039.29
Each6.008.3539.17
Each7.509.3024.0
Each4.788.4676.9
Each4.509.00100.0
Each6.758.0018.5
Each6.509.0038.5
Each6.009.0550.8
33-in SteelEach50.0056.0012.0
Each42.5044.504.7
36-in. SteelEach42.5050.5018.8
Each54.0060.0011.1
Wire—
BarbedCwt.1.702.5047.0
IronCwt.1.502.2046.7
CopperLb..13.26100.0
Lb..13.1838.5