Some hint of the attitude of the older transportation companies toward this new rivalry may be found in a circular issued by the Traffic Association under date of June 22, 1892. This circular, after referring to the new Grace line, and after speaking also of the Atlantic and Pacific Steamship Company, and of a new clipper line established by Balfour, Guthrie and Company, continues as follows:
It has already been given out by the old lines that these new competitors in the field will be short-lived, and that shippers who desert the old lines at this time will be remembered when the competitors are out of the way.
For your information we desire to state that the new lines have been thoroughly investigated by the Committee and we are satisfied as to the reliability and stability of the enterprise, and that with our support they are here to stay and deserving of our patronage.[432]
In spite of the attempts of the older companies to crush the new adventure at its inception, the clipper ships thus established in 1892 with the support of the Traffic Association maintained an active competition with the railroad and older sailing lines over a period of more than a year. Short as this period was, there is no question that the effect upon water rates between San Francisco and New York was tremendous. The former rates of the Sutton and Beebe and of the William Dimond and Company lines had been about $15 a ton. The rates charged by all lines during the summer of 1892 were from $3.50 to $6 a ton, a figure certainly below the cost of operation.[433]
This reduction in rates, and the facility which merchants in San Francisco enjoyed in securing through bills of lading by sea and rail from San Francisco to points on the Missouri River by way of Cape Horn and New York, enabled shippers to reach the interior Mississippi Valley at a rate and with a convenience superior to that obtainable by rail. According to the San Francisco Bulletin, indeed, it was $2.15 a ton cheaper to send California canned goods from San Francisco to Kansas City by sea and rail than to ship them by rail direct. On westbound freight the results were the same. The rate on canned meats from Kansas City to New York was $9.40 per ton. The rate from New York to San Francisco by sea, after adding interest and insurance, did not exceed $15 per ton, making a total of about $25, which was $10 less per ton than the direct rail rate from Kansas City to San Francisco.[434]
On heavy iron products the figures were quite as striking. The all-rail rate on a number of such products was $24 from Pittsburgh to San Francisco. From Pittsburgh to New York the rail rate on the same articles was $3 a ton. Adding to this $6 per ton for the clipper rate from New York to San Francisco, $1.25 per ton for insurance, and $2.50 per ton for interest, the total became $12.75, or $10.25 per ton less than the all-rail rate.[435]
No wonder that the business of the water lines increased, and that railroad rates materially declined. Thus the rail rate on canned goods out of San Francisco, which had been $1 per hundred pounds, was reduced to 75 cents to Chicago and to 50 cents to New York. The rate on beans fell from $1.10 to 75 and 50 cents to the same destinations. On wine, brandy, borax, and wool, rail rates declined from 25 to 35 per cent.[436]
So far as the quantity of freight moving by water was concerned, it was estimated in August, 1892, that 42,000 tons of freight were on the way by sea to San Francisco from New York, and that 15,300 tons more were on the way via Cape Horn from Philadelphia. Twenty-four vessels were at sea or loading, bound from the Atlantic to the Pacific coast.[437]
Discontinuance of Pacific Mail Subsidy
The work which fell to Mr. Leeds and to his associates upon the Traffic Association clipper ship committee in this struggle between the rail and the water lines, was largely that of propaganda. This meant interviews with shippers to impress upon them the importance of the contest which was being waged against the railroads and against the Southern Pacific in particular. It meant also the soliciting of subscriptions to the clipper ship guaranty fund. Mr. Leeds threw himself vigorously into the fight, and as the movement progressed he allowed his satisfaction to appear. He wrote the Merchants’ Shipping Association in August, 1892: