To take one more illustration: steamboats ply between Liverpool and Bristol. Goods carried by railway between these two places by one or other of the three available routes must pass through some one of the following places:—Birmingham, Worcester, Hereford, Shrewsbury, Chester or Warrington. The local rates to all these intermediate towns may appear disproportionate to those charged between the extreme points. But is there any real injustice done? Is it disadvantageous to the public that railway companies should compete with sea carriage between different ports in the Kingdom? Should not railway companies be allowed to accept in respect of traffic so carried, which would otherwise be wholly lost to them, a less percentage of profit without being compelled to reduce all their rates to intermediate inland places to the same or proportionately less amounts? What injustice is done to those whoso goods are carried to and from intermediate inland places by the fact that their rates are higher, or higher in proportion, than the competitive rates, provided the rates to intermediate places are in themselves fair and within the Company’s legal maximum?
A third source of complaint of disproportionate rates arises from the competition between ports. Assume, for instance, port A to be 51 miles, port B 72 miles, and port C a greater distance from D, one of the great seats of manufacture and commerce. The merchants and shipowners at C and B desire to compete with A, and they induce the railway company to carry from all three at the same rates. The result is that the rates are lower for the throughout distance than to and from some of the intermediate places. The grounds of grievance would be removed by the railway company ceasing to carry from C and B at the same rates as from A. But the importation of foreign goods would continue; the only difference being that they would be carried through one port instead of two or more. And here a curious fact may be noted. If, in the case supposed, the railways between A and D, B and D, and C and D belonged to separate companies, in all probability no complaint would be made of the rates from A, B, and C to D being the same. On the contrary, competition being always desired by the public, it would be considered in that case advantageous and in the interest of the public. But because the lines between B and D and C and D belong to the same company as that between A and D complaints are made on account of the rates being equal. What is hailed in the one case as a benefit is decried in the other as mischievous and unjust.[18]
The chief explanation of differential rates have been mentioned; another cause less important is in operation. In carriage by road, cost may be roughly measured by distance, though even as to the expenses of cartage that is subject to exceptions. But this test—admitted to be practically useless as regards freight by sea—does not hold good of railway transport. Of the various kinds of outlay on the part of a railway company, a large portion remains fixed, whether the distance run by a train is ten miles or one hundred. Such, for example, are the cost of terminal accommodation, and the services of loading and unloading, and clerical work. Such, too, speaking broadly, are the interest on cost of construction, repairs of bridges and earthworks, the permanent staff of employés, and of signalling. Another kind of expenditure increases directly with the mileage run; for example, the provision of, and wear and tear of locomotives, rolling stock and permanent way, and liability for loss of or damage to goods in transit. Certain kinds of expenditure increase with the distance run, but not in the same ratio. Obviously wages, cost of locomotive power, and cost of haulage generally are not four times as much in the case of a train which has run a hundred miles as in one which has run twenty-five. With the progress of railways, with improved economy in the use of machinery, and in other ways, this tendency—recognised to some extent by the Legislature in the rates for short distance traffic—in expenditure not to increase in the same proportion as mileage distance, becomes an important element. The result of all this is to make mileage less a criterion of cost, and tends to place large towns at a greater distance at an advantage as compared with intermediate towns, and to give rise to differential rates.[19] It is also obvious that from many intermediate towns the quantities forwarded are not so large and regular as from terminal towns, and that from the former there is not a constant traffic to and fro.
The urgent demands of traders and producers have created differential rates; the interests of the public and consumers have maintained them; interests, it may be added, which have been little heard in any of the inquiries which have taken place, but which, if any change were meditated, would probably be found to have more at stake than the railway companies. They would ask,—Why should such special rates be withdrawn? They would be losers by the change. The railway companies also would be losers. So too would the public interested, especially as regards perishable goods, in the more rapid and regular conveyance of merchandise than is possible by water. Who would be the gainer? Not, certainly, the home producer, who would find foreign goods brought direct to London by sea; not the consumer, who wishes cheap goods rapidly conveyed, and to whom it is immaterial how they reach him. The fact is that differential rates have arisen in no small degree out of the same causes as have necessitated a classification of goods. Goods of small intrinsic value will not be conveyed at all unless at low rates; only on special terms can such goods produced at a great distance be brought to market.
Sometimes it is urged as an objection to differential rates, that by reason of them companies sustain, on long distance traffic, a loss which is made up by charges on short distance traffic. Repeated, as if it were an axiom, this statement is generally erroneous; though producing, no doubt, a lower percentage of profits than the latter, the former yields some profit, unless where undue competition operates.
To carry traffic at a rate yielding a small profit, is better for a railway company than to have its permanent way for many hours unused, and its plant not fully employed. It may be expedient to accept traffic producing only a small percentage of profit, if it can be got on no better terms; such traffic will at least help to defray the fixed charges, which must be incurred whether it is carried or not. But is a company bound to do all its business on such terms, or would it be desirable that it should do so? Can the senders of other traffic paying only reasonable rates, yielding the company what would otherwise be admitted to be only a fair profit, justly object? and if a company be deprived of this long distance traffic, will it not be forced to raise rates on other traffic in order to maintain its revenue?[20]
But, it is also objected, differential rates deprive the inhabitants of certain towns of the natural advantages of their geographical position. This argument would be more persuasive than it is if it were not generally expressed in the very language of Protectionists, if it were not so often a claim of an exclusive right to supply certain markets, and a scarcely concealed dislike to the intrusion of competition. Even supposing that low rates, which enable the produce of remote parts of England and Scotland to be conveyed throughout the length and breadth of the land may interfere with the trade of manufacturers nearer London and other great towns; so may the making of a railway. Places which have one, or districts which are left without any, may be injured by railway communication elsewhere being opened. The existence of any such right as is claimed is questionable. Preserving the natural advantages of one town means preventing the removal of the natural disadvantages of others. In truth, the abolition of differential rates would deprive many places of their natural advantages. That Liverpool is on the sea, and that Birmingham is not, that there is sea communication from the former to London, are circumstances which railways did not create, and to which they must accommodate themselves. Railway Companies are not answerable for the fact that certain kinds of traffic come from a point having the advantage of a sea route; that there is competition at one place and not at another; and that goods may be conveyed from New York to London all the way by sea, or partly by sea and partly by land.
If the rates for all traffic between intermediate places were either made the same as or less than those to terminal points, companies would be compelled to consider whether raising the export and import rates, or reducing those on local traffic, would result in the least loss. If the former course were adopted, as, in the majority of cases it would be, the facilities which manufacturers and merchants now enjoy would be withdrawn; it would be to their interest to ship at the nearest port. The railways would suffer some loss. The inhabitants of intermediate places and the port towns would derive no advantage except the removal of what generally is merely a sentimental grievance. What would a London draper gain if the Manchester and London Shipping rate were withdrawn, and if manufacturers shipped all their goods in Liverpool instead of a portion of them being shipped from London? What would it avail an Essex farmer if Dutch and Belgian produce were sent direct from Rotterdam and Antwerp to London, instead of through Harwich? Would farmers in the South of England be any better off if French eggs and butter were sent by sea to London instead of through Southampton or Newhaven?