The standard of rate-making just described, which may be summed up as a policy of charging what the traffic would bear, was not peculiar to the Southern Pacific at the time it was adopted, nor was it particularly repugnant to public opinion in California, taken as a whole. The error must not be made of ascribing to the western communities of the seventies and eighties a clear conception of the reasons of public policy which are properly urged today against the unlimited recognition in railway rate schedules of the competitive forces which still have free play in private business. Such ideas have slowly developed only during the last forty years.
Limited Encouragement of Business
Nor was the policy of adapting rates to the ability of shippers to pay inconsistent with the rendering of important service to business men in California and elsewhere who were seeking to expand their sales. Only a few illustrations need be given of the promotion of business by rate adjustments, but they will serve as examples of many more about which information is on record.
One case of this sort, which shows the willingness of the Southern Pacific management to respond to what they considered a reasonable request, had to do with the shipment of beer from a place known as Boca, in the state of Nevada, to San Francisco. It appears that a gentleman named Hess once conceived the idea of establishing a brewery at Boca. This town was 220 miles from San Francisco, and yet all of Mr. Hess’s beer had to find a market in the latter place, in competition with beer from Milwaukee and St. Louis. Mr. Stubbs, general traffic manager of the Central Pacific, welcomed the proposal to build a brewery in the West, and put in special rates to help shut out the eastern product. Every pound of brewery supplies, he reasoned, would have to go over the Central Pacific. It was all clear gain, like so much money picked up out of the ditch. In another case the Southern Pacific quoted special rates on sugar from San Francisco to the Missouri River, to enable the California Sugar Refining Company and the American Sugar Refining Company to sell their sugar at the Missouri River in competition with sugar reaching New York by water and thence moving westward.[384]
Still again, in 1884 an attempt was made to persuade the St. Louis-Kansas City lines to participate in a rate of 75 cents per hundred pounds on cast iron pipe from St. Louis to the Pacific Coast in order to encourage production in the Middle West in competition with that on the Atlantic seaboard. The matter of the 75-cent rate was taken up with J. W. Midgley, Trunk Line commissioner, who declined temporarily on December 24, 1884, on the ground that the rate would be a special one, and that there was an understanding that no special rates should be made prior to January 31 next ensuing, pending an anticipated agreement between the Transcontinental Association and its eastern connections.[385]
In the instances which have been given, the impelling motive of the Southern Pacific was frankly to increase its profit by increasing the movement of freight over its line. Yet the shipper was also benefited because his interests were substantially identical with those of the railroad company, and he warmly welcomed the powerful support of the railroad lines. These cases are not unimportant. The enumeration of such isolated instances, however interesting as they may be, affords no very clear picture of the aggregate of local rate adjustments with which the Southern Pacific interests were concerned. For this purpose a more systematic survey of the rate system administered by the Southern Pacific is necessary, and to this attention is now directed.
Distance the Governing Factor
The foundation of any system of railroad rates is the distance which commodities are carried. Generally speaking, the Southern and Central Pacific railroads, like other companies in the United States and Europe, varied their local charges with the distance between point of origin and point of destination. To illustrate this point briefly, two charts are here presented.
