The American Railway: Its Construction, Development, Management, and Appliances

by Thomas Curtis Clarke

Of the questions arising between the railroad and its employees we are just beginning to realize the full importance. They are not matters to be settled by private agreement or private war. If they involve a serious interruption of the business of the community they concern public interests most vitally. The community cannot afford to have its business interrupted by railroad strikes. On the other hand, it cannot allow the men to make this public duty of the railroads a means of enforcing their own will on every occasion, to the detriment of all discipline and responsibility, or in disregard of investors' rights. How to compromise between these two conflicting requirements is one of the most serious problems of the immediate future.[29] Little progress in this direction has as yet been made, or even systematically attempted.

The questions arising from the relations of the railroads to those who use them are wider and older. From the very outset attempts were made to regulate railroad charges by law in various ways. The fear at that time was that they might be made unreasonably high. This fear proved groundless. From the outset the rates were rather lower than had been expected, and much lower than by many of the means of transportation which railroads superseded. These low rates caused a great development in business; and this, in turn, gave a chance for such economy in handling it that rates went still lower. Each new invention rendered it easier to do a large business at cheap rates. The substitution of steel rails for iron, which began shortly after the close of the war, had an enormous influence in this respect. This was not merely due to the direct saving in repairs, which, though appreciable, was moderate in amount. It was due still more to improvements in transportation which followed. It was found that steel rails would bear heavier rolling-stock. Instead of building ten-ton cars to carry ten tons of cargo, companies built twelve-ton cars to carry twenty tons of cargo, or fourteen-ton cars to carry thirty tons; and they made the locomotives heavy enough to handle correspondingly larger trains. A given amount of fuel was made to haul more weight; and of the weight thus hauled, the freight formed a constantly increasing proportion as compared with the rolling-stock itself. The system of rates was adopted to meet the new requirements. Charges were made incredibly low in order to fill cars that would otherwise go empty, or to use the road as nearly as possible to its full capacity. In the twenty years following the introduction of steel rails the traffic of the New York Central increased from less than 400,000,000 ton-miles to decidedly over 2,000,000,000; while the average rates fell from 3.09 cents per ton per mile in 1866 to 0.76 cent in 1886. This is but a single instance of a process which has gone on all over the country. The average freight charge on all railroads of the country to-day is a little over one cent per ton a mile: less than half what would have been deemed possible on any railroad a few years ago.

The progress of railroad consolidation contributed greatly to this economy. It saved multiplication of offices; it saved re-handling of freight; it enabled long-distance business to be done systematically. So great were its advantages that co-operation between connecting lines was carried far beyond the limits of actual consolidation. Through traffic was handled without transshipment, sometimes by regularly incorporated express companies or freight companies on the same plan, but more commonly by what are known as fast-freight lines.[30] These are little more than combinations for keeping account of through business; they are by no means ideal in their working, but they have the advantage of few expenses and no income, so that the temptation to steal, which is the bane of such organizations, is here reduced to a minimum.

But all these things, while they increased the efficiency of the service, also increased the power of the railroad authorities and rendered the shipper more helpless. The very cheapness of rates only made a recourse to other means of transportation more difficult. If A was charged 30 cents while his competitor B was paying only 20 cents for the same service, he was worse off than when they were both paying a dollar; and the fact that no other means of conveyance could be found to do the work for less than a dollar simply put A all the more completely at the mercy of the railroad freight-agent. In other words, the fact that rates were so low made any inequality in rates all the more dangerous. The lower the rate and the wider the monopoly, the less was the chance of relief.

Such inequalities existed on a large scale: and they were all the more difficult to deal with because there was a certain reason for some of them arising from the nature of railroad business. The expenses of a railroad are of two kinds. Some, like train and station service, locomotive fuel, or repairs of rolling-stock, are pretty directly chargeable to the different parts of the traffic. It costs a certain amount in wages and in materials to run a particular train; if that train is taken off, that part of the expense is saved. But there is another class of items, known as fixed charges, that do not vary with the amount of business done. Interest on bonds must be paid, whether the volume of traffic be large or small. The services of track-watchmen must be paid for, whether there be a hundred trains daily or only a dozen. In short, most of the expenses for interest and maintenance of way are chargeable to the business as a whole, but not to particular pieces of work done. The practical inference from this is obvious. In order that the railroad as a whole may be profitable, the fixed charges must be paid somehow. The railroad manager will try to get them as he can from different parts of his traffic. But if, for any reason, a particular piece of business cannot or will not pay its share of the fixed charges, it is better to secure it at any price above the bare expense of loading and hauling, without regard to the fixed charges. For if the business is lost, these charges will run on just the same, without any added means of meeting them.

The consequence is that there is no natural standard of rates; or, rather, that there are two standards, so far apart that the difference between the two is quite sufficient to build up one establishment or one locality and ruin another, in case of an arbitrary exercise of power on the part of the freight-agent. In the use of such a power it was inevitable that there should be a great many mistakes, and some things which were worse than mistakes. Colbert once cynically defined taxation as "the art of so plucking the goose as to secure the largest amount of feathers with the least amount of squealing." Some of our freight-agents have taken Colbert's tax theories as a standard, and have applied them only too literally. It is this short-sighted policy which has made the system of charging "what the traffic will bear" a synonyme for extortion. Interpreted rightly, this phrase represents a sound principle of railroad policy—putting the burden of the fixed charges on the shipments that can afford to pay them. But practically—in the popular mind at least—it has come to mean almost exactly the opposite.

The points which got the benefit of the lowest rates were the large trade centres, which had the benefit of competing lines of railroad, and often of water competition also. The threat to ship goods by a rival route was the surest way of making a freight-agent give low rates. The result was that the growth of such places was specially stimulated. In addition to their natural advantages they had an artificial one due to the policy of competing lines of railroad. It may well be the case, as is argued by railroad men, that sound railroad economy demands that goods in large masses should be carried much more cheaply than those which are furnished in smaller quantities. But it is certain the practice went far beyond the limits of any such justification. There was a time when cattle were carried from Chicago to New York at a dollar a car-load; and many other instances, scarcely less marked, could be cited from the history of trunk-line competition. The fact was, that in an active railroad war freight-agents would generally accede to a demand for reduced rates at a competing point, whether well founded or not, and would almost always turn a deaf ear to similar demands from local shippers, however strongly supported by considerations of far-sighted business policy.

But this was not the worst. Inequalities between different places might after some hardship correct themselves; differences of treatment between individuals could not be thus adjusted. And the system of making rates by special bargain almost always led to differences between individuals, where favors were too often given to those who needed or deserved them least. The fluctuation of rates was first taken advantage of by the unscrupulous speculator. Often, if he controlled large sources of shipment, he might receive the benefit of a secret agreement by which he could obtain lower rates than his rivals under all circumstances. A more effective means for destroying straightforwardness in business dealings than the old system of special rates was never devised. Sometimes, where one competitor was overwhelmingly strong, the pretence of secrecy was thrown aside, and the railroad companies so far forgot their public duties as almost openly to assist one concern in crushing its rivals. The state of things in this respect twelve or fifteen years ago was so bad that it is painful to dwell upon; but the reformation to-day is not so complete that we can wash our hands of past sins.

Less was said or felt of similar evils in passenger traffic, because the passenger business of the country generally is of much less importance than its freight business, either to the railroad investors or to the producers themselves. But there was the same fluctuation in passenger rates; and there was an outrageous form of discrimination in the development of the free-pass system; a practice which would have fully deserved the name of systematic bribery, had it not become so universal that most men hardly recognized any personal obligation connected with the acceptance of a pass. Officials and other citizens of influence had come to regard it as a right; it was not so much bribery on the part of the companies as blackmail levied against them.