THE RATE SYSTEM OF THE CENTRAL PACIFIC
City and Country in California
For more than forty years the Southern Pacific interests sought with varying success to modify the intensity of water competition by agreement with or by purchase of competing lines. During all this period the existence of alternative water routes was probably the principal influence determining the relative adjustment of rates between different towns upon the Pacific Coast. In deciding upon the rates which they should charge, the Southern Pacific interests had other factors to consider, however, besides the presence of water competition—factors which can be understood only after a careful study of local conditions in the Far West.
The state of California is characteristically a country of great distances, occupied by a relatively sparse and unequally distributed population. Its industry is primarily agricultural and mining. Although some manufactures have developed since 1870, such as foundries, woolen and sugar mills, glass, paper, cordage, powder, tobacco, tin, and hardware manufacturing concerns, yet even today the absence of adequate supplies of good coal, the smallness of the local market, and the distance from the great centers of population in the East hold manufactures within narrow limits. As explained in the previous chapter, the state is best fitted to produce and export products of the soil, and raw materials such as grain, fruit, wool, hides, and later wines, lumber, and oil. To this list should also be added salmon.
In such an economy, the cities of California play the part of distributing agencies rather than that of centers of industry. Such was the first function of Stockton, Sacramento, Los Angeles, and indeed of San Francisco itself, and the work of distribution still remains these cities’ principal means of support. Originally the chief profit of the northern towns came from supplying the mining population of the Sierras with supplies brought by sea from Europe or from the Atlantic Coast of the United States. The nature of California imports has somewhat changed since the early days; a larger commerce with the Orient and with the west coast of South America has developed, and a large part of the freight handled on the Pacific Coast now comes in by rail. This has multiplied the number of distributing points, and has to some degree built up the interior of the state. The character of the cities has not, however, changed and they remain as before—trading and consuming rather than producing centers.
Conflict of Interest
It follows from this division of labor between town and country on the Pacific Coast, and from the rivalry of different cities in the distribution of finished goods, that striking divergencies in point of view have arisen, both between individual cities, and also between the city communities as a whole and the farming and manufacturing interests of the state. These differences have received free expression in the discussion of railroad rates. Inasmuch as the articles distributed by the towns are in large part imported goods, the cities as a group have demanded low westbound carload rates from eastern sources of supply. The larger centers of population, however, have opposed low rates on small consignments, because that tends to deprive them of a rehandling profit by promoting direct relations between the consumer and the eastern wholesale house. As compared with the cities, on the other hand, the farming interests have been relatively indifferent to the level of westbound rates, so long as they have enjoyed low eastbound rates on the product of the farm and field; while the struggling manufacturers have resisted low rates westbound, because these have exposed them to the competition of eastern factories. The interests of the consumer have not until quite recent years been represented.
No Settled Rate Policy
Owing to these persistent conflicts between various classes of shippers, public opinion in California has not been easily enlisted as a whole in support of any concrete proposals for the readjustment of railroad rates, although complaints from all sections have been numerous. There has been, on the contrary, a persistent series of appeals to the railroad, now to favor one set of interests, now to favor another—appeals which, when granted, often have resulted in gross discrimination, and which, when refused, have swelled the tide of protest against the transportation lines. The serious side of this situation in California is that the conflict of interest between buyers of transportation has exposed the railroad to temptations which it has had neither will nor ability to withstand. Where there is constant demand for favors there is likely to be discrimination unless the person or institution to which demand is made is fortified by a clear view of public policy and a sense of morality more than ordinarily acute.
It is no secret that the Southern Pacific has had neither the one nor the other of these qualifications. For its part, it has acknowledged no duties other than those generally incumbent upon private business. It has insisted upon complete freedom to follow its own advantage. In a speech to the men in the railroad shops at Sacramento in September, 1873, Stanford explained his position by asking: “Does Governor Booth sell at the same per cent of profit his sugar, pork, beans, bacon, lard, candles, soap, spice, coffee, whiskey, brandy, and other articles? So with the mechanic, the manufacturer, the farmer, and others. The market price governs. A farmer takes two and one-half cents for his grain as justly and as cheerfully as one and one-half cents, the cost of producing being the same.”[359] “The Southern Pacific,” said Mr. William B. Curtis, of that company, in 1894, in the same strain, “sells transportation precisely as a merchant disposes of his wares, adjusting its tariff to conform to the situation with the object in view of inducing the largest amount of transportation at fair rates.”[360]