The amount of these savings can only be roughly surmised; but in 1912, Mr. David J. Lewis estimated that they would amount to at least 40% of the total operating expenses. In this connection, it may be remarked in passing that Mr. Lewis's qualifications for throwing light upon the express service problem include not only theoretical knowledge gained by years of study of the problem, both here and abroad; but also practical knowledge of ways and means, as attested by general belief that the establishment of a parcel-post in the United States was due to his analyses more than to the efforts of any other one man; and also by the fact that when the Government in 1918 assumed responsibility for the management of the telephone and telegraph systems of the land, Mr. Lewis was made, and at the time of writing is, the general manager in charge of those systems while under Government control. Certainly, in view of the economies enumerated above as inherent in Government ownership and control of the express companies, on the face of it Mr. Lewis's statement seems extremely reasonable.
THE CONSEQUENT REDUCTION IN RATES
So that, if Mr. Lewis's estimate were accurate, and remembering that the operating expenses of the express companies in 1917 represented one-half of the total charges made by the express companies for transportation, a reduction of 20% in the express rates should accompany the acquisition of the express companies by the Government, other things being equal. But other things are not equal. Lower rates mean increased business; and in an agency which has developed the field at its disposal so inadequately as have the express companies, each additional unit of business can be handled at a lower cost and hence at a greater profit than each previous unit. This consideration was the primary one advanced by the Interstate Commerce Commission in ordering 16% reduction in the express rates in 1914. So that, the lower amount of profit per parcel being counterbalanced by a greater number of parcels, the economy in a Government postal express should be represented by a lowering of express rates anywhere from 25% to 35% of the present rates.
But up to this point our calculations have assumed that under a Government postal express the railroads would continue to obtain their 50% of the charges on each package transported by express. This method of calculating the return due to the railroad is certainly ingenious in its simplicity and lack of scientific basis, but it is just as certainly unfair to the shipper of parcels by express. Let us consider, for example, two shipments of similar articles under similar conditions—one from New York City to Yonkers, New York, a distance of some 20 miles; the other from New York City to San Francisco, a distance of more than 3,000 miles. In each case, the express companies collect the parcel and deliver it to the railroad in New York City; and collect the parcel from the railroad and deliver it to the consignee, in the first case in Yonkers; and in the second case in San Francisco. In both cases, the services rendered by the express companies are about identical, aside from the different lengths of time during which space and protection in express cars must be afforded. But the services rendered by the railroad companies are far different in the two cases. In the first case, the parcel is carried for less than an hour; in the second place, for some days. Obviously, the share of the railroad in the entire service rendered in transporting the parcels is less in the first case than in the second, but in each case it gets the same share of the total express charge—namely, 50%.
Such a system in its very nature must thwart any attempt to make express rates reflect the value of express service. For, of course, the rates actually fixed endeavor to do justice to both the express companies and the railroads in each case considered above. In the first case, the rate must be high enough so that 50% of it will not be too glaringly little for the express companies to retain for their relatively more important and more costly service of collecting a parcel in New York and delivering it in Yonkers. In the second case, the rate must be high enough so that 50% of it will not be too glaringly little to turn over to the railroad for their relatively more important and more costly service of carrying the parcel across the continent. The railroad directors and express company directors cannot be expected to have reached a fair compromise after fighting for their own interests when the contracts were originally made, for, as has been seen, their interests are largely identical. It would seem, then, that only the shipper sending a parcel several hundred miles is charged a fee commensurate with the value of the service rendered him. It would seem that shippers sending parcels shorter distances must be charged too much and that shippers sending parcels longer distances must be charged too little. A glance at parcel post rates proves the validity of this surmise, for parcel post rates are lower than express rates for shorter distances and higher for longer distances. Under the present system of competition between the parcel post and the express companies, the nature of the contracts between the express companies and the railroads compels express rates which unfairly discriminate against the express companies at the shorter distances and unfairly discriminate against the parcel-post at the longer distances.
However, there is no evidence in all this that the express rates as actually levied may not strike a just and equitable average between the rates too low and the rates too high. Let us therefore compare for a moment the railroad costs of the express traffic with the railroad costs of the Postal System. It has been seen that in 1917 the express companies paid the railroads for transporting some 280,000,000 parcels the sum of $113,535,059. In the fiscal year ending June 30, 1917, the Post Office Department paid railroads and other transportation lines for services in transporting all postal matter, including almost 1,120,000,000 parcels, the sum of $63,358,997. (The basis for remuneration to the railroads for transporting postal matter is the size and the weight of the matter transported.) Of course, it must be remembered that for the postal service the railroads furnished the cars. It must be remembered also that the parcels of the express companies averaged heavier weights and travelled longer average distances than the parcels of the parcel-post. Nevertheless, the enormous discrepancy between the two figures cannot be thus entirely explained away. Some of the discrepancy, and obviously a considerable part of it, can be traced only to an unjustifiably high return paid the railroads by the express companies. ([Note 4].)
Moreover, the amount thus obtained by the railroads in 1917 from its express traffic was equivalent to about 3½% of the total railroad revenues, although it represented 50% of the total express revenue. Accordingly, even a radical slashing of express rates, with its resulting beneficial stimulation to the express service of the country, could hardly disturb the well-being of the railroads to any serious extent.
Again, the various functions performed by the express companies as subsidiary to the express business proper are on the whole paralleled by similar functions of the Government or other agencies. Money orders, both domestic and international, are issued by the Post Office Department, and in 1917 were issued to the extent of $854,963,806 as against $145,934,982 of the express companies. Telegraph and cable transfers are readily issuable by the telegraph companies themselves. Similarly, the travelers' cheques issued by the express companies could without difficulty and with no less convenience be issued by our large banking institutions performing that service.