The choosing of Chicago as the “one hundred per cent” city in the northeastern territory of the United States repeated the compliment to her prowess as a traffic city, that the great yards which hedge her in for miles have paid her for many years. She is one of the very greatest basing points, where multiple rates or percentages are built from the single. Most of the very important commercial cities share this distinction, which is further shared sometimes by comparatively unimportant points that happen to be the terminals of rather important railroads. Thus we find Cincinnati and Henderson, Louisville and Evansville, St. Louis and Davenport, Chicago and Peoria, Omaha and Sioux City, Kansas City and Leavenworth, all possessing this railroad distinction.
So much for the standard rates. Just as certain railroad lines running from New York to Chicago are permitted to charge two dollars less for tickets than other “standard lines,” because of slower running time, so does the same factor make a “differential” in freight rates. Big roads boast that they can haul the first-class freight—the “preference freights”—from one city to the other in sixty hours. Others take a longer time, and are permitted by their larger competitors to make their prices a shade lower because of slower running time in freight service. Such a “differential” is the Grand Trunk, handling New York-Chicago freight by a roundabout route, from New York by water to New London, Conn., and thence over the Central Vermont up into Canada and the Grand Trunk’s main line. Obviously such a longer route adds to the running-time and would be at a keen disadvantage in securing travel, without a lower rate as bait for the shipper. We have used New York-Chicago differentials simply as illustrative cases. The differentials are apt to be found in any corner of the country where there are long hauls and a number of railroads fighting to secure them.
But the Grand Trunk as a factor in Chicago traffic to and from Boston brought one of the earliest and most interesting decisions from the Interstate Commerce Commission. St. Albans, Vt., complained to that board that its local freight rate by Boston & Maine and Central Vermont from Boston was higher than the through rate from Boston to Chicago. On the face of it, it seemed as if justice must have rested with St. Albans, but the railroad was able to prove its case and win a decision. It showed that it could not live on shipments between Boston and St. Albans and other local non-competitive points, or on the business interchanged between these points. To earn its bread and butter it must fight for the rich Chicago traffic; and to be in a position to fight for that traffic, despite some disadvantage of location, it must make very low rates.
It proved that these low rates were possible for business that went through in solid trains, like Boston-Chicago traffic, and that each of these trains earned its proportion of the railroad’s profit. For when you come to handle freight at St. Albans, more particularly the case in still smaller towns, you bring on a new traffic expense, and because of this expense we get what is known as “back haul.”
On the “back haul” small towns suffer and must probably continue to suffer until a still more equitable system of railroad rates can be devised. Sometimes it may come about in such a case at the St. Albans one just cited; in other times because of water competition, as in the famous Spokane case, to which we shall again refer; and sometimes it is merely an arbitrary charge laid by the railroad. In such cases the railroad reasons that it would cost, in time and train delay ten dollars for every dollar’s worth of freight switched off and delivered at certain small towns; and so it figures upon hauling to the nearest large division point with large yards, and sending it back from there on a way-train. When such a small town is nearer the division yard at the far end of the route the back haul charge develops, and the small town must grin and bear it. If the small towns and the small cities, with their vigorous organizations, begin to complain too bitterly of the present system, the traffic experts will turn to them and say:
“Devise a better system. Perhaps you would like the Australian system, where the charges diminish per mile, for each additional mile covered by a consignment?”
That may look good to the Secretary of the Chamber of Commerce, who has come down to headquarters with wrath in his eyes; it looks absolutely equitable to every one; and he nods yes. The traffic-manager gleams with joy. His quarry has stepped into the trap. He turns upon him.
“Where would your dandy little town of 35,000 contented folks be under the Australian system?” he demands. “The Australian system would concentrate all business at water traffic points, along the seaboard and the great lakes and rivers; it would concentrate all manufacturing at the points from which comes the raw material. Where would the seven wholesalers of your town that we are all so proud of be located under the Australian plan? If the railroads were to adopt it, it would save millions of dollars in bookkeeping alone, but there would not be an interior distributing point in the entire country.”
The Secretary of the C. of C. is flustered. He was a young newspaper reporter before he reached his present high estate. He flounders. The traffic man is a man of ready wit and even readier figures. Still the young Secretary feels that he must show a few grains of wisdom, and so he gently makes inquiry about the Spokane case.
That Spokane case, also a famous decision of the Interstate Commerce Commission, shows another factor in railroad rate-making, the serious influence of water competition. Indirectly it also includes the principle of the back haul. Spokane, which is much nearer Chicago than Seattle, was, like St. Albans, paying a higher rate for the “short haul” than Seattle was paying for a much longer haul. But Seattle is a prosperous port, and if the railroad did not make a very low rate to it, all the slow freight would go to it by water, where much lower transportation expense invariably makes much lower rates, and the railroad, to save its own skin, as it were, must make a low through rate there, charging a back haul or higher rate to Spokane from the large eastern points. If it charged Spokane a proportionate rate of the one to Seattle, which would then be lower, all the other inland towns would demand the same privilege, and the railroad would then be hauling property at a loss—a business which can have but one inevitable result.