A common form of wastefulness in transportation arises when freight from a point intermediate between two termini is hauled to either one by way of the other. Such cases are scattered throughout our railroad history. One of the delegates to the Illinois Constitutional Convention of 1870, cites, as an instance of local discrimination, the fact that lumber from Chicago to Springfield, Illinois, could be shipped more cheaply by way of St. Louis than by the direct route.[264] And now a generation later, it appears that grain from Cannon Falls, forty-nine miles south of St. Paul on the direct line to Chicago, destined for Louisville, Kentucky, can be hauled up to St. Paul on local rates and thence on a through billing to destination, back over the same rails, considerably cheaper than by sending it as it should properly go.[265] The Hepburn Committee reveals shipments from Rochester, New York, to St. Louis, Minneapolis or California, all rail, on a combination of local rates to New York and thence to destination.[266] Presumably the freight was hauled three hundred miles due east and then retraced the same distance; as New York freight for southern California is today hauled to San Francisco by the Southern Pacific and then perhaps three hundred miles back over the same rails. Even if the rate must be based on a combination of low through rates and higher local rates, it seems a waste of energy to continue the five or six hundred miles extra haul. Yet the practice is common in the entire western territory. From New York to Salt Lake City by way of San Francisco is another instance in point.[267] Of course a short haul to a terminal to enable through trains to be made up presents an entirely different problem of cost from the abnormal instances above mentioned.[268]
Carriage by water is so much cheaper and as compared with land transportation is subject to such different rate-governing principles, that it deserves separate consideration. Mere distance, as has already been said, being really only one element in the determination of cost, a circuitous water route may in reality be more economical than direct carriage overland. Yet beyond a certain point, regard being paid to the relative cost per mile of the two modes of transport, water-borne traffic may entail economic wastes not incomparable to those arising in land transportation. In international trade, entirely confined to vessel carriage, a few examples will suffice for illustration. Machinery for a stamp mill, it was found, could be shipped from Chicago to San Francisco by way of Shanghai, China, for fifteen cents per hundredweight less than by way of the economically proper route. Were the goods ever really sent by so indirect a route?[269] It would appear so when wheat may profitably be carried from San Francisco to Watertown, Massachusetts, after having been taken to Liverpool, stored there, reshipped to Boston, thereafter, even paying the charges of a local haul of nearly ten miles;[270] or when shipments from Liverpool to New York may be made via Montreal to Chicago, and thence back to destination.[271] I am credibly informed that shipments of the American Tobacco Company from Louisville, Kentucky, to Japan used commonly to go via Boston. Denver testimony is to the effect that machinery, made in Colorado, shipped to Sydney, Australia, can be transported via Chicago for one-half the rate for the direct shipment; and that on similar goods even Kansas City could ship by the carload considerably cheaper by the same roundabout route. Conversely straw matting from Yokohama to Denver direct must pay $2.87 per hundred pounds; while if shipped to the Missouri river, five hundred miles east of Denver, and then back, the rate is only $2.05.[272]
As a domestic problem, water carriage confined to our own territory has greater significance in the present inquiry. Purely coastwise traffic conditions are peculiar and in the United States, as a rule, concern either the South Atlantic seaports or transcontinental business. As to the first-named class, the volume and importance of the traffic is immense. Its character may be indicated by a quotation from a railroad man.
"Now a great deal has been said, chiefly on the outside, about the Canadian Pacific Railway seeking by its long, circuitous and broken route to share in a tonnage as against more direct and shorter lines all rail, and I propose to show to you gentlemen that not only have we a precedent on which to claim differentials, many of them, and that we also have numerous precedents to show that there are numerous broken, circuitous water and rail lines operating all over the country that are longer and more circuitous than ours, and still they do operate with more or less success.... In saying this I do not wish to be understood as criticising the right of any road to go anywhere, even with a broken and circuitous line, to seek for business, so long as they are satisfied that taking all the circumstances into account such business will afford them some small measure of profit. * * *
"The distance by the Chesapeake & Ohio Road, Boston to Newport News, is 544 miles by water; Newport News to Chicago, 1071 miles, total 1615 miles from Boston to Chicago, against 1020 miles by the shortest all-rail line from Boston, showing the line via Newport News, 58 per cent. longer. The distance by the Chesapeake and Ohio from New York to Newport News is 305 miles, to which add 1071 miles, Newport News to Chicago, total 1376 miles, against the shortest all-rail line of 912 miles, 50.87 per cent. longer. Again the distance between Boston and Duluth by all-rail is 1382 miles, against 2195 miles via Newport News and Chicago, 58.82 per cent. longer by the broken route.
"The Southern Pacific Co., or System rather, in connection with the Morgan line steamers, carries business, via New York, New Orleans and Fort Worth, to Utah points at a differential rate. The distance from New York to Denver via water to New Orleans thence rail to Fort Worth is 3155 miles, against 1940 miles by the direct all-rail line, showing it to be longer via New Orleans 62.61 per cent."[273]
Allowing a constructive mileage of one-third for the last named water haul,[274] many of these even up fairly well with the all-rail carriage; although a route from New York to Kansas City by way of Savannah, Georgia, would appear to be an extreme case, owing to the relatively long haul by rail.[275] The increasing importance of Galveston and the necessity of a back haul to compensate for export business make it possible for that city to engage in business between New York and Kansas City, although the roundabout route is two and one-half times as long as the direct one.[276] As compared with these examples, it is no wonder that the competition for New York-Nashville or New England-Chattanooga business by way of Savannah, Mobile, or Brunswick, Georgia, is so bitter. The roundabout traffic thus reaches around by the southern ports and nearly up again to the Ohio river.[277]
The second great class of broken rail and water shipments consists of transcontinental business. Goods from New York to San Francisco commonly go by way of New Orleans or Galveston,[278] as well as by Canadian ports and routes.[279] In the opposite direction, goods are carried about 1000 miles by water to Seattle or Vancouver before commencing the journey east. But more important, as illustrating this point, is the traffic from the Central West which reaches the Pacific coast by way of Atlantic seaports. As far west as the Missouri, the actual competition of the trunk lines on California business has since 1894[280] brought about the condition of the "blanket" or "postage stamp" rate. The same competitive conditions which open up Denver or Kansas City to New York shippers by way of New Orleans or Galveston, enable the Southern Pacific Railroad or Cape Horn routes to solicit California shipments in western territory to be hauled back to New York, and thence by water all or part of the way to destination. How important this potential competition is—that is to say, what proportion of the traffic is interchanged by this route—cannot readily be determined.
Transportation over undue distances—the carriage of coals to Newcastle in exchange for cotton piece goods hauled to Lancashire—as a product of keen commercial competition may involve both a waste of energy and an enhancement of prices in a manner seldom appreciated. The transportation of goods great distances at low rates, while economically justifiable in opening up new channels of business, becomes wasteful the moment such carriage, instead of creating new business, merely brings about an exchange between widely separated markets, or an invasion of fields naturally tributary to other centres. The wider the market, the greater is the chance of the most efficient production at the lowest cost. The analogy at this point to the problem of protective tariff legislation is obvious. For a country to dispose of its surplus products abroad by cutting prices may not involve economic loss; but for two countries to be simultaneously engaged in "dumping" their products into each other's markets is quite a different matter. In transportation such cases arise whenever a community, producing a surplus of a given commodity, supplies itself, nevertheless, with that same commodity from a distant market. It may not be a just grievance that Iowa, a great cattle raising state, should be forced to procure her dressed meats in Chicago or Omaha;[281] for in this case some degree of manufacture has ensued in these highly specialized centres. But the practice is less defensible where the identical product is redistributed after long carriage to and from a distant point. Arkansas is a great fruit raising region; yet so cheap is transportation that dried fruits, perhaps of its own growing, are distributed by wholesale grocers in Chicago throughout its territory. The privilege of selling rice in the rice-growing states from Chicago is, however, denied by the Southern Railway Association.[282] An illuminating example of similar character occurs in the Southern cotton manufacture, as described by a Chicago jobber: