EXPORTS OF DOMESTIC WHEAT AND FLOUR
The second step necessary for permanently developing railroad business was a lowering of the charges. This was first brought about during the seventies through unregulated competition between the trunk lines. The fiercest warfare occurred during the years immediately following the entrance of the Baltimore and Ohio and the Grand Trunk railroads into Chicago in 1874. This was some five years after the Pennsylvania and the New York Central had consolidated their through lines to the same point. These two original rivals had already slashed rates indiscriminately. Charges of $1.88 and 82 cents for first-and fourth-class freight from Chicago to New York in 1868, had already for a brief period in the following year dropped to a uniform rate of twenty-five cents for all business. As Hadley justly observes, such rates could not long prevail; and for the next few years nominal rates of one dollar, and one dollar and fifty cents for first class, and sixty and eighty cents for fourth class obtained. The outbreak of open warfare between the Baltimore & Ohio and the Pennsylvania over the charges made by the latter for the use of its lines between Philadelphia and New York, occurred in 1874. Grain rates of sixty cents per hundred pounds from Chicago to New York during 1873 fell to forty cents in 1874 and to thirty cents in 1875. Special or commodity rates were often as low as twelve cents. After a year's truce, only partially observed by the leading participants, discord again prevailed during 1876. The commercial rivalries of seaboard cities now became involved. Different or specially favorable rates had been accorded to Baltimore and Philadelphia as compared with New York since 1869.[12] Rates finally fell lower than ever before. This was especially true of grain. The published rate in March, 1876, was forty-five cents per hundred pounds from Chicago to New York. In May it fell to twenty cents—a rate almost as low as prevails today with all modern improvements in methods of conducting the business. Westbound rates dropped correspondingly. Quotations from New York to Chicago at twenty-five cents per hundred pounds first class, and sixteen cents fourth class were freely given. Actual rates were often much lower than this.
Rival cities again intervened and finally the whole matter was of necessity referred for arbitration to a commission. Even then both the Erie and the Baltimore & Ohio roads were well advanced on the road to bankruptcy. For us, however, the immediate result of importance was a permanent reduction of the general level of freight rates, not alone for the trunk line territory but for the entire country. The diagram on page [413] shows this plainly. From an average revenue per ton of freight moved one mile of 1.92 cents in 1868, intermittently upheld until 1872, the fall of over one-third to about 1.1 cents in 1882 was sudden and continuous. The end was not yet. The renewed outbreak of a rate war between the trunk lines in 1881 and again in 1884 led to further reductions. The decision in 1882 of the Thurman Commission on Differentials settled nothing.[13] All kinds of traffic were affected. Immigrants were carried from New York to Chicago for $1.00 a head. East-bound grain rates were as low as eight cents. At last, late in 1885, the warfare was terminated by an elaborate pooling agreement. These struggles brought about great reductions in the revenue of the carriers concerned; but declines in rates after this period were, in the main, more gradual, with short intervals of relief interspersed.
One immediate result of these lower freight rates was the impetus given to economy and systematic operation. This is the period when, as we have said, pooling as a device for restraint of competition first appeared in the "Evening" contracts on beef shipments in the West, in the notable Southern Railway & Steamship Association in 1874 and in the trunk line pool in 1877. Agreement between the anthracite coal roads began about 1872 and has continued with increasing effectiveness ever since.[14] This was also the heyday of the through freight lines which were now operating from every important western centre. In 1876 the first attempt at a systematic scheme of rate adjustment between competing localities was made in trunk line territory.[15] Order was indeed emerging out of chaos. In respect of operation, larger locomotives and cars and longer trains were rapidly coming into use. On the Lake Shore the average train load in 1870 was 137 tons. Nine years later it had risen to 213 tons. The widespread substitution of steel for iron rails was not yet to follow for some time. For in 1880 only three-tenths of the mileage of the country was laid with steel. This proportion rose to eight-tenths in 1890. It was doubtless this change during the eighties which made possible the heavy decrease in operating expenses which occurred during the five years subsequent to 1881. It appears, indeed, as if the need of economy was enforced by the decline of rates in progress; but, as usual, the supply of economies waited upon the demand and, in fact, tarried well behind it. To this circumstance may be attributed some of the financial hardships suffered by the roads during the ensuing interval between the reduction of rates during the seventies and the mechanical improvements of the succeeding decade. An incidental result of the rate wars of this period, it may also be noted, was the readjustment of the relative shares of the great seaports in foreign business. Philadelphia, especially, increased its quota of exports from about eleven per cent, in 1860 to over twenty per cent. in 1880. Much of this was gained, however, from the southern ports, as the relative status of Baltimore, New York, and Boston remained about the same.
A second important consequence of the severe decline in railroad rates during the seventies, was the permanent supersession of canals and riverways in favor of railroads as means of transportation. The Erie Canal outlasted all the other artificial water routes, most of which had succumbed to rail competition by the close of the Civil War. But even as late as 1868, practically all of the grain arriving at New York came by canal. The change, when it occurred, came suddenly.
FREIGHT RECEIPTS AT NEW YORK