"Right in North Carolina there is one mill shipping 60 carloads of goods to Chicago in a season, and a great many of these same goods are brought right back to this very section.... I might add that when many of these heavy cotton goods made in this southeastern section are shipped both to New York and Chicago and then sold and reshipped South, they pay 15 cents to 20 cents per hundred less each way to New York and back than via Chicago. This doubles up the handicap against which Chicago is obliged to contend and renders the unfairness still more burdensome."[283]
The overweening desire of the large centres to enter every market is well exemplified by recent testimony of the Chicago jobbers.[284]
"A few years later, when the railroads established the relative rates of freight between New York and Philadelphia and the Southeast, and St. Louis, Cincinnati and Chicago and the Southeast, giving the former the sales of merchandise and the latter the furnishing of food products, the hardware consumed in this country was manufactured in England. At that time we, in Chicago, felt that we were going beyond the confines of our legitimate territory when we diffidently asked the merchants in western Indiana to buy their goods in our market. Today, a very considerable percentage of the hardware used in the United States is manufactured in the Middle West, and we are profitably selling general hardware through a corps of travelling salesmen in New York, Pennsylvania and West Virginia, and special lines in New England.
"What we claim is that we should not have our territory stopped at the Ohio river by any act of yours. It is not stopped, gentlemen, by any other river in America. It is not stopped by the greatest river, the Mississippi. It is not stopped by the far greater river, the Missouri. It is not stopped by the Arkansas; it is not stopped by the Rio Grande. It is not stopped even by the Columbia; and, even in the grocery business, it is not stopped by the Hudson. There are Chicago houses that are selling goods in New York city, groceries that they manufacture themselves. Mr. Sprague's own house sells goods in New York city, and Chicago is selling groceries in New England. As I say, even the Hudson river doesn't stop them."
All this record implies progressiveness, energy, and ambition on the part of both business men and traffic officers. Nothing is more remarkable in American commerce than its freedom from restraints. Elasticity and quick adaptation to the exigencies of business are peculiarities of American railroad operation. This is due to the progressiveness of our railway managers in seeking constantly to develop new territory and build up business. The strongest contrast between Europe and the United States lies in this fact. European railroads take business as they find it. Our railroads make it. Far be it from me to minimize the service rendered in American progress. And yet there are reasonable limits to all good things. We ought to reckon the price which must be paid for this freedom of trade.
One further aspect of economic waste may be mentioned, especially as bearing upon Federal regulation so far as it affects carload ratings and commercial rivalry between remote middlemen in the large cities and provincial jobbing interests. The actual cost of handling small shipments being about one-half that of carriage by carloads, the cheapest way in which to supply, let us say, the Pacific slope or Texas territory, is to encourage the local jobber who ships by carload over the long haul. For, obviously, distribution by less-than-carload lots from New York, or even Chicago direct, direct to the cross-road store, is bound to be a wasteful process by comparison.[285] But in addition there are also, of course, the social factors to be considered, which are of even greater weight.
The causes of economic waste in transportation are various. Not less than six may be distinguished. These are: (1) congestion of the direct route; (2) rate cutting by the weak circuitous line; (3) pro-rating practices in division of joint through rates; (4) desire for back-loading of empty cars; (5) strategic considerations concerning interchange of traffic with connections; and (6) attempts to secure or hold shippers in contested markets. These merit consideration separately in some detail.
Congestion of traffic upon the direct line is a rare condition in our American experience. Few of our railways are over-crowded with business. Their equipment may be overtaxed, but their rails are seldom worked to the utmost. Yet the phenomenal development of trunk line business since 1897 sometimes makes delivery so slow and uncertain that shippers prefer to patronize railways less advantageously located, even at the same rates. The congestion on the main stem of the Pennsylvania railway between Pittsburg and Philadelphia is a case in point.
Special rates or rebates often divert traffic. The weak lines, in that particular business, are persistently in the field and can secure tonnage only by means of concessions from what may be called the standard or normal rate. The differential rate is an outgrowth of this condition. The present controversy over the right of the initial line in transcontinental business to route the freight at will involves such practices. The carriers insist that they can stop the evil only by the exercise of choice in their connections. An interesting recent example is found in the Elkins Committee testimony. It appears that lumber from points in Mississippi destined for Cleveland instead of going by the proper Ohio river gateways was diverted to East St. Louis. The operation was concealed by billing it to obscure points,—Jewett, Ill., near East St. Louis, and Rochester, Ohio,—and there issuing a new bill of lading to destination: