The Texas "common point" system affords a valuable illustration of the influence of competitive forces in trade in bringing about an equalization of transportation charges over a wide area.[460] It also shows the danger of localization of interest through the exercise of piecemeal control by state commissions rather than the enforcement of broad-gauge regulation by the Federal government. The settlement of the great area of Texas naturally first took place by extension inland from the Gulf coast. All supplies came by sea from the north. Freight schedules were scaled from the seaboard according to distance, more or less, in competition with stage and wagon. Gradually, however, with the growth of St. Louis as a rival centre of distribution, railroads serving that city penetrated directly from the northeast. The St. Louis jobbers were at once brought into keen rivalry with merchants in North Atlantic states, served by coastwise steamship lines. This competition beginning at the points of contact of the two different sets of railroads, gradually extended all over the state. St. Louis lines, acting for local jobbers whose goods came from New York, might not charge more at any point in the aggregate than the total rate from the same initial city which applied by way of the Gulf steamers. Nor could the railroads in from the Gulf ask more for both steamer and rail carriage than the entire double charge from New York around by way of St. Louis. The natural stronghold of the Gulf lines was in the centre and the south; northern Texas was more naturally tributary to St. Louis; but gradually a compromise was effected whereby equality of rates was accorded either from New York or St. Louis to all stations throughout the state. Thus arose the so-called Texas Common Point Territory, to all parts of which Kansas City, Chicago, and finally all other distant cities were admitted on even terms.
Another feature of the Texas rate adjustment is suggestive.
A vast territory, uniform in products and needs, might either be served by a few great distributing centres or by a larger number of smaller ones, each forming the natural focus of trade within a given district. Believing the latter arrangement to be better suited to local conditions, the Texas Railway Commission has arbitrarily prescribed such intrastate tariffs as to foster the development of a number of such jobbing points or mercantile centres. Local rates, more or less proportioned according to distance, are graded up to a maximum, all based principally upon the needs of the principal city, Houston, as served by its seaport, Galveston. The significant feature of these Texas local rates, however, is the fact that beyond a fixed maximum,—say 245 miles on classified tonnage, or 160 miles on cotton,—no further increase of rate occurs with extension of the haul. That is to say, beyond a certain radius fixed by the maximum rate, distributing centres are placed upon an entire parity with one another. Fort Worth, for example, within a distance of about two hundred miles, naturally has an advantage over all other competing centres, more distantly located; but outside of this zone, naturally tributary to it as a provincial trade centre, all others such as Dallas, Waco, or San Antonio enjoy equal opportunity. In only one respect is the distance principle violated: namely, in the preferential rates from the north to Houston and Galveston as compared with the higher charges to intermediate Texas points. These primary centres are encouraged by standing in a class by themselves.
This theoretically admirable Texas system is, however, unstable in several regards. It is artificial in that it is primarily adjusted to the needs of the state, without reference to the rights of other places lying beyond its borders.[461] The railroads naturally desire to contract the common point territory; the forces of trade rivalry seek to enlarge it. The growth of middle western cities and manufactures, supplying Texas from their own domestic plants rather than merely redistributing goods manufactured in the East, also tends to modify the scheme. Whether the common point system, therefore, can long withstand the force of these disintegrating influences remains to be seen. The conditions are not compact and homogeneous as they are in New England, which enjoys a similar flat rate system. And it may well be that ambitious cities along the northwestern border of the state, like Fort Worth, may finally succeed in forcing concessions in rates from the Middle West on the ground of their relative nearness as compared with competitors further south. On the other hand, distributing centres farthest away from the main sources of supply, like San Antonio, would naturally resist any infraction of the rule of parity. And then, again, it is becoming apparent that the decentralization of distribution through a number of second-rate jobbing towns rather than from one preëminent centre, is hindering the growth of a metropolis, able to compete on even terms in high grade products with the older centres of the East. Few dealers in Texas cities are able to purchase dry goods or boots and shoes in carload lots, that is to say, on the lowest terms as concerns freight rates; and the combination of shipments of different goods to make up a miscellaneous carload rate, thus overcoming this disadvantage, is open to serious objection.[462] All told, therefore, the experience of Texas is well worth attentive consideration, as a study in the intimate relationship between trade and transportation. The sharpness of contrast between such a common point scheme and the basing point system of the other southern states, brings the relative advantages and defects of each into strong relief.
Transcontinental freight rates have been brought into prominence of late in direct connection with the wonderful growth of population and trade on the Pacific slope.[463] Our territorial possessions in the Pacific and the development of Oriental trade, together with the general interest in the Panama Canal since 1900, have all conspired to direct attention to this complicated problem. The first point to notice is the relatively high level of rates, averaging very much more per mile than anywhere else in the United States. The following table of rates in 1905 is significant:
| Miles | Class | ||
|---|---|---|---|
| From | 1 | 5 | |
| 912 | Chicago to New York | $0.75 | $0.30 |
| 912 | Chicago to New Orleans | 1.10 | 0.47 |
| 2328 | Chicago to San Francisco | 3.00 | 1.65 |
These distance tariffs, however, as already explained in our chapter on Classification, need to be supplemented by additional details in order to bring into relief the relative amount of the charge. So far as these figures go, it will be observed that for a distance about two and one-half times as great as from Chicago to New York or the Gulf of Mexico, the rates to San Francisco are very much higher in proportion.
The unrest among shippers in far western territory is not due to the relatively high tariffs in force. It arises primarily from the nullification of the distance principle in rates. And, in the second place, it hinges upon the relation between carload ratings and the development of local jobbing business. The primary factor in the making of rates to the coast has always been the existence of water competition, either by way of Cape Horn or the Isthmus of Panama.[464] The facilities for cheap transportation over these routes have compelled the all-rail lines to make low through rates which would enable them to secure a portion of the business. Inasmuch, also, as most of the competition of the steamships over these very long routes involves shipments in large quantity, competition with the railroads has mainly been felt in making rates by the carload. The result has been the existence for many years of a special transcontinental tariff, more or less uniformly adopted by all the roads, which consists in the main of commodity rates for carload shipments, the scale of these rates being sufficiently low to meet steamship competition as above described.