Railway Rates: English and Foreign

by James Grierson

[ [26] Parte II., Vol. II., Sec. 32.

[ [27] Note—The Montreal Gazette, 1st April, 1886, writes thus on the subject of the Railway Commission Bill:—“These rates are fixed and determined by the Great American Trunk Lines, in competition with which the Tariff of the Canadian roads is necessarily regulated; to interfere with these rates would be to take away from the Canadian Companies a large amount of the gross earnings derived from a source which increases the volume of business in Canada.... The discrimination which is complained of in particular localities arises wholly out of an established competition between lines reaching a favoured point. Destroy the natural consequences and natural advantages of competition—lower rates—and you remove all inducement to the provision of rival routes; put an end to competition, and at once an increase in rates all round will be established. The Railway Act prohibits interference by the Government in the regulation of rates until a Company is proved to earn 15 per cent. upon its invested capital. What Railway Company in the Dominion to-day is earning that profit?... If competition is to be made a positive disadvantage, if every inducement to particular localities to promote rival enterprises is to be swept away, the rates of existing lines will be run up in all directions to the injury not only of every locality now favoured by competition, but of those localities which consider themselves aggrieved by reason of the absence of the low rates which competition enforces.”

It may be mentioned that one of the fiercest enemies of differential rates, in a work recently published, declares that the only remedy is to “restore the character of public highways to the railways by securing to all persons the right to run trains over their tracks under proper regulation!” “The Railways and the Republic” (1886), p. 372, by James T. Hudson.

[ [28] Vol. 5, p. 376.

[ [29] Note.—The evidence of Sir Thomas Farrer, given in 1881, is very deserving of consideration. In answer to the question, “Now turning to the question of inequality of charges, of which the Committee have had many complaints—in fact, the bulk of the complaints have been with regard to the inequality of charges from one place to another—in your opinion, is this inequality productive of injury to the trade of the country?” He replies, “As far as I can judge, it is not.” He is asked:—“I suppose you would say that while on the one hand one portion of the country may be a loser, another portion of the country is a gainer, and that the one may be set against the other?”—He answers:—“I am not quite certain that I should say that one portion of the country is a loser, but I am quite certain that another portion is a gainer.”

Again, in reply to question: “Then looking at the question also from the point of view of the public, the inland towns which are charged higher than towns on the sea-coast are merely paying the natural penalty of being inland towns, and not having an equally good geographical position?”—He states, “Quite so; on the whole I should think the inland towns were proportionately better off than before the railways existed, because, before the railways existed, sea-side towns had the water traffic to themselves, but now the railways afford a kind of competition with that traffic, and bring a great many places into communication with one another which could not have been brought into communication before.”

In reply to the question, “On the whole, do you think the country gains by these rival routes to the outports?” He says, “I do distinctly.” And again, in answer to the question, “According to your view, then, as far as the public is concerned, it is of no consequence that a railway company should so destroy the natural advantages of one place?” He replies:—“I think it is one purpose of the railway companies to annihilate distance as far as they can; I would certainly encourage the railway companies in bringing Shetland fish to the London market, even although the effect of it were to lower the price of the Grimsby fish.” Further, in reply to the question, “As far as that is concerned, you would allow the Railway Companies to make any differential charges they may please for or against other localities?” He replies:—“I would certainly not compel them to charge upon fish from Thurso and fish from Grimsby in proportion to the distances of those two places. I have been accustomed, as a free trader, to consider the interest of the consumer very largely; but it seems to me that this claim for regular mileage has proceeded upon the interest of one special class of producers; but it is very much to the interest of the consumer as well as to one class of producers, that the people at a distance should be able to send to the consuming market.”

[ [30] In the Report made by M. Richard Waddington in the name of the Commission of the Third System of Railway Tariffs, special or differential rates are thus referred to. “These Tariffs are established in compliance with a trade demand which varies, as one can easily understand, according to the locality and district concerned. Like intelligent merchants the administrators of the railway companies have based their rate of charges on the law of Supply and Demand....” The celebrated expression of M. Solacroup, director of the Orleans Company, sums up the considerations which led to the compilation of special tariffs. “In the matter of Transport Tariffs there is only one rational rule, viz., to ask of merchandise all it can pay; any other principle is no principle.”

[ [31] It may be objected that under such a system companies might extort exorbitant sums from traders who must send their goods. But (1) the figures and returns referred to later on show that in fact the companies have not made such charges, but have benefited every industry as well as themselves; (2) the statutory maxima cannot be exceeded; (3) at many points there is effective sea and canal competition; (4) the result of increasing the rates to a height which prevents the producer from earning a fair profit must, in the long run, be to diminish the traffic of the railway; (5) there is always a liability when, high rates exist that Parliament will sanction a new line, even if the chances of its financial success be not great.

[ [32] See Ricardo (Principles of Political Economy and Taxation, 3rd Section, page 144): “Of all commodities none are perhaps so proper for taxation as those which, either by the aid of nature or art, are produced with peculiar facility. Taxes on luxuries have some advantage over taxes on necessaries, they are generally paid from income, and therefore do not diminish the productive capital of the country.”