Railroads: Rates and Regulations

by William Zebina Ripley

In this case the Interstate Commerce Commission ordered an equalization between all five points. It is to be hoped that this special case may be a point of departure for a general reform in the immediate future of the entire iniquitous scheme of local favoritism which has too long been allowed to exist.

The entire artificiality and even at times iniquity of the basing point system is admitted in the following brief for the railways in the Alabama Midland case before the Supreme Court of the United States. "There may be," it is conceded, "a few mere 'railroad junctions' in the South, which, owing to the ignorance or corruption of certain railroad officials, have been arbitrarily 'called' competitive points and which 'receive' certain arbitrary 'concessions' in rates to which they are not justly entitled. There may be also a few strictly local stations in the South, which are not even 'railroad junctions,' where arbitrary and unfair 'concessions' in rates have been made by certain corrupt railroad officials, to enhance the value of property owned at such stations by said officials, or by their relatives or friends ... [but they are] the offspring of ignorance or corruption and should not be recognized by the courts." This artificiality is also proven by the difference of practice which exists on the various southern roads.[457] The worst offender and most defiant opponent of the government from the inception of Federal regulation, has been the Louisville & Nashville Railroad. The Southern Railway introduced the long and short haul principle in the main on its through line to Atlanta long ago. On the Atlantic Coast Line few violations of the distance principle exist, and the condition is improving. No basing points whatever exist in South Carolina; and the state railroad commissions in general are working for betterment. Neither the Chesapeake & Ohio nor the Norfolk & Western, operating alike in sparsely settled regions, find it necessary to violate the distance principle. One of the curses of the scheme, however, is that irregularity of one carrier may compel its neighbors to adopt a policy which they recognize as unjust. Only by compulsion applied to all alike can a just solution be had.

A determined effort was made in 1880 by the carriers themselves to apply the trunk line rate system, based upon the distance principle, to the southern states.[458] A thoroughgoing scientific readjustment was proposed. The situation is significantly described in the following extract from this report:

"Your committee entered upon the performance of their duty entertaining the sentiment that experience and observation have rendered generally potent among those in charge of the revenue interest of transportation lines, namely, the necessity for more intelligent and defensible methods of making competitive freight rates than the following of figures, descending to us from tariffs named on arbitrary bases or conditions now obsolete, or by the assumption of differences between centres of trade now changed or junction points now no longer such, or other methods for which there are no reasons capable of satisfactory explanation."

Representatives of most of the important lines subscribed to this plan; but it fell through at the last because of the opposition of others, selfishly viewing their own particular interests rather than the general welfare of all. It is clear that while minor improvements may be introduced, no widespread reform can be effected without the interposition of Federal authority. It is to be hoped that this exercise of authority under the larger powers now conferred by Congress since 1906 may not long be withheld.

A third and essentially different problem respecting southern rates concerns the discrimination against western cities in favor of those along the Atlantic seaboard. This has been for years before the Interstate Commerce Commission in the Cincinnati and Chicago Freight Bureau cases.[459] The amount of this discrimination appears in the fact that at the time of the original complaint, the rate from Cincinnati to Atlanta was ninety-four per cent. of the rate from New York to the same point; although the distance from Cincinnati was scarcely more than half of that from New York. It appears as if this difference were largely the result of keen water competition by coastwise steamers,—a competition which affects rates for a considerable distance inland all along the coast as far as New Orleans. Where such water competition is absent, there seems to be a general arrangement as between East and West which is standardized by distance. Atlanta gives the keynote; and all rates from outside southern territory change with its fluctuations. The disability against western cities may be expressed, therefore, in another way, by the fact that New York, although so much farther north than Baltimore,—supposed theoretically to be kept on a par with Louisville as to rates,—reaches Atlanta on lower charges than are made to Cincinnati.

Fortunately an attempt at improvement of the southern rate system will be greatly aided by the wonderful industrial revival which has been under way during the last decade. The growth of population, and especially the development of manufactures, may render it possible for the carriers to endure the hardship which any traffic readjustment always entails. The growth of manufactures, measuring in a way the degree to which the South is learning to supply its own needs, appears in the fact that in 1907 it converted one-fifth of its cotton production into cloth, and reduced from its own ores one-half of its consumption of pig iron in its own local factories. Furniture shipments to the South were once large. At the present time High Point, North Carolina, is second only to Grand Rapids in this line of manufacture. Every new mill and mercantile establishment which springs up, is bound to help to a degree in the transition from a mediaeval scheme of rate making to a more defensible system.