The experience of Germany, so often adduced in favor of water carriage, when examined in the light of the foregoing economic principles, is peculiarly illuminating. Much traffic, to be sure, moves apparently with greater cheapness than by rail upon both canals and rivers. Considering the tariffs which are based upon movement expenses alone, excluding, that is to say, any adequate return upon the total investment, such methods of transportation seem very economical and highly effective. But when total costs, rather than merely partial ones, are considered, the picture is completely reversed. The Dortmund-Ems canal, for instance, certainly the most important in Germany, represents an investment per mile fifty per cent. greater than the average for German railways.[824] For the single year 1905, the contributions from the states and cities interested, amounted to a subsidy of about $900,000. This financial burden, if distributed over the total tonnage, would make the entire cost of operation nearly one-fourth greater than the average by rail.
Rivers, as we have seen, possess certain advantages over canals, mainly in proportion to the lessened first cost of their improvement. The Rhine is often cited as an example of what the Mississippi should be as a great channel of commerce; but again that fatal objection of the first cost and, in the case of the Mississippi, of maintenance must always be kept in mind. The Rhine like the Hudson river or the St. Lawrence is, indeed, naturally adapted for carriage by water. Its firm banks, gentle gradient and constancy of level, are all elements in its favor. But it is certainly futile to anticipate similar results on the Mississippi or its tributaries,—huge and inconstant leviathans as they are, traversing a great alluvial plain devoid of solid foundations of any sort. The fact that today with a nine foot channel, Pittsburg makes no use of the Ohio river for its shipments of iron and steel, but sends them to the Pacific coast by way of New York, certainly does not augur well for the success of even an enlarged riverway in future, except possibly as to coal. Of course, if the government is to write off all the original investment, shifting the incidence to the general taxpayers of the country, that is a different matter. But unless the state thus chooses to subsidize the enterprise entirely, the total cost of transportation by rail will continue to be in future as it has been in the past, substantially lower than by the older and now antiquated methods of transportation. If the end in view be the attainment of the lowest possible rates, why not subsidize the railroads directly by this same amount? or even buy them up and operate them for cost? The expense to the taxpayers would be no more; and this plan would unquestionably give far better results. Even the electrically-towed canal boat is not to be compared for efficiency in reaching all parts of the country without transhipment, with giant locomotives, low grades, heavy rails and large train loads.
The ownership or control of water carriers by railroads constitutes a troublesome feature of present day conditions. Peculiar prominence, legislatively speaking, was given to it because of the attempt in 1912 to combine legislation dealing with this possible evil with the matter of Panama Canal tolls and regulations. Such control of water lines in competition with railways is matter of public record.[825] Much of the coastwise traffic is thus tied up. The Long Island sound service of the New Haven system, the Old Dominion Company, jointly owned by eastern railroads, and the Morgan Line and Pacific Mail Company, both parts of the Southern Pacific system, are notable instances. The same thing is true upon the Great Lakes, where a practical monopoly of eastbound transportation has been long held by the trunk lines. By refusal to grant through routes and joint rates to the Lake lines at Buffalo, these railroads have practically throttled the independent water service.[826] Even on the lesser rivers this phenomenon of neutralization of water competition occurs. Oftentimes where the bulk of the tonnage, as in transcontinental business, moves by rail, the water lines simply follow the railroads as to rates with a modest differential dependent upon circumstances. But the fact of practical elimination of competition by boat line is well recognized.
The concrete shape in which this matter arose in Congress was in the form of amendments to the Panama Canal law of 1912. In the House a bill providing for free passage of all American coastwise vessels was passed by a vote of 206 to 61, this measure at the same time prohibiting all railroads from owning stock in or otherwise controlling directly or indirectly, any competing steamship lines. The overwhelming non-partisan majority is significant of public sentiment on the question. The Senate took a less radical stand in limiting the prohibition of railroad ownership to vessels making use of the Panama Canal. After prolonged discussion in the conference committee, the more drastic measure was, fortunately, eliminated.
From several points of view absolute prohibition of financial relationship between railway and water carriers seems unwise. A practical objection is that it may seriously handicap American roads in competition with Canadian carriers. The Grand Trunk, for example, reaching tidewater on Long Island sound might lawfully operate a boat line extending its service into New York; whereas the New Haven Railroad would be forced to dispose of its water lines to the same point, because they were in competition with its railroad service. And it is indisputable that similar injustice to American railroads might elsewhere be brought about. Moreover, the undoubted evil of water competition thus neutralized by railroads, might be remedied in other ways. One of these, embodied in recommendations of the Port Directors of Boston in 1912, opposing the more drastic legislation above mentioned, is the prevention of monopoly through public ownership or control of docks and wharfs. For railway ownership or lease of these, as at Philadelphia, San Francisco, Boston and elsewhere, is one of the easiest methods of preventing water competition. The water lines find it physically impossible to secure suitable terminals. And then, finally, there is always the possibility under the now amplified Interstate Commerce law, of enforcing both reasonable rates and facilities for through shipments, part rail and part water, as exemplified in the Flour City case above mentioned. It is not improbable that further amplification of the law, as recommended by the National Waterways Commission in 1912, may be necessary. Probably, in the light of bitter Southern Pacific experience, it was wise to restrict Panama Canal traffic to water lines not under railroad control. But any attempt to go farther and absolutely to divorce rail and water lines without provision, even, for the approval of the Interstate Commerce Commission in exceptional cases, might be productive of great harm both to the railroads and the public.
What will be the probable effect of the opening of the Panama Canal upon the railroads of the United States? One must consider the nature and volume of transcontinental traffic. The most important fact is that nearly nine-tenths of all transcontinental business at the present time moves by rail.[827] The tonnage by vessel west bound either around Cape Horn or by the Isthmian routes has, to be sure, doubled within five years to 1911. But by far the larger proportion of the business moves by railroad direct. Secondly, it is important to note that a large part of transcontinental traffic consists of an exchange of commodities between the Middle West and the Pacific coast. Over one-half of the rail shipments west bound to Pacific terminals comes from west of Chicago. Less than one-quarter of the through traffic of one of the principal transcontinental roads originated at Atlantic coast points. And, inasmuch as water competition is still mainly confined to eastern seaboard territory, the diversion of this middle western business from the rail routes will not be disastrous in amount. In the opposite direction probably an even higher proportion of business is carried by rail, the principal reason being that much of the bulky freight of the Pacific slope,—lumber for example,—is consumed throughout the treeless Mississippi valley. None of this traffic naturally ever moves by water. It is apparent, therefore, that the effect of opening the Panama Canal, although great, will be for the most part localized as to results.
Specifically stated, four distinct changes seem likely to be brought about in the transcontinental situation. The first will probably be a considerable stimulation to the merchants and cities along the Atlantic seaboard throughout a zone extending inland, perhaps, as far as Cleveland and Pittsburg. A substantial drop in steamship rates will be followed, of course, by a corresponding reduction in through rates to the Pacific coast. But, on the other hand, it must be borne in mind that at best this tonnage is even today relatively unimportant to the transcontinental railroads. More than two-thirds of their through traffic, as we have just seen, now comes from the Middle West. These railways will probably prefer to lose a portion of this Atlantic seaboard business rather than to reduce their rates upon perhaps four-fifths of the other traffic, as they would otherwise have to do under the present system of postage stamp rates, from the Atlantic seaboard to the west of the Missouri river.[828] The eastern trunk lines, moreover, may probably be relied upon to extend the low seaboard rates somewhat farther inland than at present, rather than to divide low or even lower through all-rail rates from the Atlantic to the Pacific.
Next to the Atlantic seaboard territory, the so-called Intermountain or Rocky mountain region, may be expected to benefit substantially from the opening of the canal. It will surely get lower direct rates than at present on all its supplies from the East. Atlantic seaboard cities will doubtless also seek to regain some of the business throughout this region, which has been lost to them because of the growth of manufactures in the Middle West. The transcontinental railroads will seek to protect their clients in St. Louis and Chicago as against the merchants in New York and Boston, who gain an entrance to Denver and Spokane through the backdoor, so to say. Not only will lower rates prevail, therefore, but there will also probably be a larger proportion of supplies for these mountain states drawn directly from the eastern seaboard.
The foregoing prognostication, at first glance, seems to indicate that the Middle West is likely to profit less by the opening of this great waterway than other parts of the country. But it should be borne in mind that their hold upon west coast trade is now most firmly established. A part, but certainly only a part, of Pacific terminal business may be lost, but this will be more than offset by the growth of intercourse with the intermountain states. Surely the transcontinental railroads west from St. Paul, Chicago, and St. Louis may be relied upon to protect the direct exchange of goods of their constituents with the intermountain communities. Transcontinental railway rates will, of course, be lowered somewhat. The railways will, however, probably prefer to surrender the lesser portion of their present traffic in order to maintain profitable charges upon the major share of their tonnage. The profit of these railways will doubtless for the moment be lessened; but there can be little question that an enhancement of their prosperity will follow in the long run. The opening of this great new avenue of commerce by sea is bound to stimulate immensely the growth and prosperity of the entire country. And it is beyond question that in any such large development in future, they will all share to a large degree.