The thing went from bad to worse as the great land carriers developed. Each made its rate-sheet according to its own sweet will; it classified freight precisely as it pleased, and the man down in New Orleans sending goods to New Hampshire was puzzled as to the charges that would accrue upon his shipment when it finally reached the northeastern corner of the country. The competitive feature grew to be the strongest in the making of the rate-sheet, unless it was the subtle influence of the railroad’s favored friends, an influence that showed its ugly head oftener in the practice of rebating than anywhere else. The fierce competition that ruled between the railroads in the seventies has never been approached at another time. Ruinous rate-war after rate-war followed upon each other’s heels, and little roads kept dropping into bankruptcy, one after another. There was a time in 1877 when a man might ship a carload of live-stock free from Chicago to Pittsburgh, from Chicago away through to New York for five dollars; and there is hardly a more expensive commodity for the railroad to handle, than cattle. To appreciate what these wars meant to the carriers, bear in mind that the week after this particular one was settled it cost the old rate—$110 a car—to ship cattle from Chicago to New York.
Out of such guerilla warfare came the one possible thing—coöperation. The railroads were not then big enough to consolidate their properties, J. P. Morgan had not then developed his fine art of welding them together. So they did the next best thing and made secret contracts—pooling. That is, they established a standard rate-sheet in their mutual territories and bound themselves to abide by it for a certain length of time. They figured out their relative percentages of business at the beginning of any agreement, and took from the combined earnings of the pool, the same percentages of receipts. The bitter outcry that went up across the land against pooling still echoes. That practice with another now also prohibited—rebating—really gave birth to governmental regulation of railroads.
“The inside of any freight-house is a busy place”
St. John’s Park, the great freight-house of the New York
Central Railroad in down-town New York
The great ore-docks of the West Shore Railroad at Buffalo
In 1887 the Interstate Commerce Commission was born, and ruinous rate-warring practically came to an end. The Commission required the railroads to file with it copies of all their rate-sheets, both freight and passenger, and ordered that in almost every case thirty days’ notice should be given of any change in the tariff. This meant that the old practice of tearing a rate-sheet apart in a single night, so as to jab vitally into the heart of a competitor, was at an end. And a dignified rate-war, with the opponents giving thirty days’ advance notice of their strategic intentions, is almost an impossibility.
Now come to the present. The freight-rate system of to-day is intricate, fearfully intricate, but it is a system. It begins by classifying all manner of freight into groups, for it must be apparent to any one that to the railroad the cost of handling different commodities must vary tremendously. Several factors make for such variation: the value of the shipment and the degree of risk for its safe transportation that the railroad must assume; its bulk, its weight, and the cost of handling at terminals, as well as the cost of any special equipment that may be necessary to carry it over the rails. No one would expect a railroad to haul a box-car filled with several hundred thousand dollars’ worth of silk for the same price that it hauled the same car filled with coke. So the railroad has grouped its freight into six general classes—varying from the most difficult and expensive to handle down to the easiest and the cheapest; and the rates for these six different classes also run in a rough proportion.