The Railroads and the Farms
THREE men meet in a room in New York. They are not called kings, wear no crowns, and bear no sceptres. They merely represent trunk lines of railway from the Mississippi to New York. Other points settled, one says, “As to the grain rate ; shall we make it fifty from Chicago ? ”
“ Agreed ; crops are heavy, and we shall have enough to do.”
Business finished, the three enjoy sundry bottles of good wine. The daily papers presently announce that “the trunk lines have agreed upon a new schedule of rates for freight, which is, in effect, a trifling increase ; on grain, from forty-five to fifty cents from Chicago to New York, with rates to other points in the usual proportion.” The conversation was insignificant, the increase “trifling.” But to the farmers of the Northwest, it means that the will of three men has taken over thirty millions from the cash value of their products for that year, and five hundred millions from the actual value of their farms.
The conversation is imaginary; but the startling facts upon which it is based are terribly real, as Western farmers have learned. The few men who control the great railway lines have it in their power to strip Western agriculture of all its earnings, — not after the manner of ancient highwaymen, by high-handed defiance of society and law, the rush of swift steeds, the clash of steel, and the stern, “Stand and deliver ! ” The bandits of modern civilization, who enrich themselves by the plunder of others, come with chests full of charters ; judges are their friends, if not their tools ; and they wield no weapon more alarming than the little pencil with which they calculate differences of rate, apparently so insignificant that public opinion wonders why the farmer should complain about such trifles. Yet the farmers have complained, and, complaining in vain, have got angry. When large bodies of men get angry, the results are likely to be important, though they may not always prove beneficent. The farmers’ movement threatens a revolution in the business of transportation, if not in the laws which protect investments of capital. It seems strange, no doubt, to those who do not know that a change of one twentieth of a mill per one hundred pounds, in the charge for transportation per mile, may take hundreds of millions from the actual value of farms. It can neither be comprehended nor intelligently directed, without a full understanding of the conditions under which agriculture exists in the Northwestern States, and of the power which the railway has exerted and still wields for the development or destruction of that great industry.
About 150,000,000 bushels of wheat, 11,000,000 tons of hay, and 1,012,000,000 bushels of cereals are annually produced by eleven States, having in 1870 a population of 14,283,000. In this statement, as in the term “ Northwestern States,” when used in this article, Kentucky and Missouri are included with the former free States of the Mississippi Valley. Had these States consumed in proportion to their population, there would have remained a surplus of eighty-one million bushels of wheat and five hundred million bushels of cereals. Though the consumption per capita is greater of cereals other than wheat in this region than in the whole country, over two hundred million bushels of grain are received yearly at seven chief points of shipment from the West, while a large quantity besides goes directly to consumers at the East and South, without passing through either of these cities. Probably eight million tons of grain, besides hay and other products of the farm, go forth from this fertile region each year in search of distant markets.
Because the surplus is so enormous, distant markets control in a great degree the price of the whole crop. As the water behind a dam never rises far above the level of the overflowing sheet, so the prices of products largely exported do not rise much above the export price, less cost of transportation to the port of shipment. That this is true of wheat, of which we export about one sixth, is well known ; of other grain and of hay we export comparatively little, and yet the surplus at the West is so large, and the demand at the East for consumption or shipment so essential to a profitable sale of the crop, that the Eastern markets rule prices, not only of the quantity forwarded, but of the entire product. A very large proportion of the corn crop is consumed at the West. Yet the average of monthly quotations for the three years 1869, 1870, and 1871 at New York, Chicago, and Cincinnati, the difference per bushel and per cental, and the summer rate for freight per cental from Chicago and Cincinnati to New York all in cents compare as follows : —
Price. Difference Freight
Per bu. Per ct. Rates.
New York, 87 2-3
Cincinnati, 64 2-3 23 41 41
Chicago, 62 1-3 25 1-3 45 1-5 45
Thus even in corn, the average rate for three years at these three markets corresponds exactly with the summer rate of transportation between them.
In spite of wide fluctuations, “corners,” and local disturbances, the tendency of Western markets is to approximate closely during any term of years, to the rates at which the surplus of products of the farm can be shipped to and sold in Eastern markets.
Consequently, an increase of one cent per bushel in cost of transportation ordinarily costs the Western farmer one cent per bushel in the selling price of his crop. Neighborhood consumers, millers, produce merchants, cattle-feeders, do not ordinarily pay more than the price fixed by Eastern quotations less the rate of transportation, because they know that millions of bushels all around them must find a market at the East, or be wholly lost.
Cotton was ‘‘king,” only because it could bear transportation, its value being great in proportion to its bulk. Hay would wear the crown, if, instead of one cent, it was worth twenty cents a pound. Crops differ very widely in their dependence upon cost of transportation, and hence the question of transportation affects the Southern and Southwestern States much less than the States of the Northwest. Wool excepted, Northern crops vary in value from about ten cents per pound for wheat, to less than one cent for potatoes. But tobacco is worth eight, sugar ten, and cotton nineteen cents a pound. Transportation of cotton one hundred miles by wagon (at twenty cents per ton per mile) would cost only one nineteenth of its value. Carriage a like distance would cost about half the value of wheat, and more than the whole value of potatoes or hay. At three cents per ton per mile, byrailroad, the entire value of potatoes (at fifty-four cents) would pay for transportation 600 miles ; of hay (at twentytwo dollars a ton), 733 miles ; of wheat ($1.24 a bushel), 1.377 miles ; of tobacco (eight cents), 5.533 miles ; of sugar (ten cents), 6.666 miles ; and of cotton (nineteen cents), 12,666 miles. Even in the palmy days of Southern agriculture, the building of railroads was regarded with comparative indifference by the people of that section ; and, for the same reason, the contest between the farm and the rail is mainly confined to the Northwest.
Unable to raise Southern crops, the farmers of the Northwest must raise products peculiarly affected in value by the cost of transportation, or relapse into a patriarchal form of industry, and derive their only profit from flocks and herds. The value of animals for food is limited by the demand for consumption. All the animal food required by States which do not produce enough for their own use — in value about forty millions, or one tenth of the entire consumption— could be supplied by a single State. Texas now has one seventh of all the neat cattle in the country, and the difference in cost of transportation from Texas and from Northwestern States is more than compensated by the difference in cost of land. No large increase in the production of animals at the Northwest could be profitable, unless the people of this country should continue to eat very much more animal food. Wool bears transportation a long distance, but, again, the demand is limited ; the entire value of wool consumed, not of our own production, is less than that of the wheat alone exported. Meanwhile Texas, New Mexico, and California will soon supply wool in such quantity that the growing of sheep for wool alone must become even less profitable than it now is in the Northwestern States.
The Northwest not only must produce cereals, but must produce a surplus. The hope that growth of manufactures may create a sufficient “ home market ” in the farming States is cherished by many, in complete disregard of necessary conditions of manutacture, or the ratio of production to consumption of agricultural products. The average consumption of wheat is four and seventy-six hundredths bushels per capita ; and of all cereals, including the quantity fed to animals, thirty-six bushels per capita. If it were possible to gather up all the hands employed in all the cotton mills of the United States and deposit them in a single county in Iowa, either one of fourteen counties in that State now produces more wheat than all those hands could consume. All the hands employed in all the factories and shops of the United States, if added to the present population of Illinois, would consume less than half the surplus of cereals now produced by that State. A mill of 273 hands on every farm of 100 acres of wheat would only suffice to consume the wheat which that farm would produce. Until hands in manufacturing establishments eat very much more than they are able to do at present, and manufacturers establish themselves without regard to natural facilities and resources, the great agricultural States will continue to produce a surplus of cereals. The costly exchange of products between farms and factories widely separated supports a class which consumes nearly hulf as much as do the hands employed in manufactures. In the year 1871, about thirty-nine per cent of the wheat grown in this country was consumed by farmers and those dependent upon them ; about eighteen per cent by persons employed in manufactures and those dependent upon them ; about eighteen per cent by those engaged in personal and professional services and others dependent upon them ; about eight per cent by persons engaged in trade and transportation and their dependents ; and the rest, about seventeen per cent, was exported. The surplus of cereals in the Northwestern States, therefore, is not the result of accident or mistaken whim, but the inevitable consequence of fixed laws. Increasing density of population and cost of land steadily drive the larger operations of agriculture to regions more remote from the great centres of population, manufactures, and commerce, and to fresher and cheaper lands. New York produces less wheat and less corn than it did twenty years ago. The cost of moving the ever increasing surplus of agricultural States, over a steadily increasing distance, to points where it is needed to supply an ever-increasing deficit in production, is a condition of the growth and prosperity of agriculture in this country which it cannot escape.
An increase of five cents per one hundred pounds in the cost of transportation from Western Stales to New York or other Eastern markets is equivalent to three cents a bushel on wheat, two cents and eight tenths on rye and corn, one cent and six tenths a bushel on oats, and (allowing for convenicnce forty-nine pounds to the bushel of barley and buckwheat, laws of different States varying widely) two cents and four tenths to the bushel of barley or buckwheat. At these rates, supposing the change in rates to affect the whole crop of all the Northwestern States alike, the loss in value to the farmer upon the crop of 1871, as given in the latest agricultural report, may be thus stated : —
Quantity produced. Loss in Value.
Wheat 149,600,000 bushels $4,488,000
Corn 690,900,000 “ 19,345,000
Hay 10,915,000 tons 10,915,000
Oats 153,789,000 bushels 2,460,000
Rye 6,625,000 “ 185,000
Barley 10,019,000 " 245,000
Buck wheat 1,694,000 “ 41,000
This loss of over $37,000,000 in the selling price of the products of 44,375,100 acres cultivated is about eighty-four cents an acre. It is a loss, not of valuation, but of the yearly income or profit upon which valuation is based. The actual value of land for farming purposes is that sum upon which the net profit of the yearly crop will yield a fair interest. At seven per cent interest, whatever reduces the net profit seventy cents per acre reduces the actual value of the land $ 10 per acre. Hence the loss of $ 37,679.000, in the yearly income from certain lands, is equivalent to a loss of $538,271,000 in their actual value. Such is the result of a “trifling” change of five cents per cental in rates of freight!
It is true, the farmers of the eleven States are not affected in the same degree by a general change in rates. For the effect upon the value of land depends upon the number of bushels produced to the acre. The average yield of different crops to the acre in different States, for the four years 1868-1871 inclusive, and the effect of a change of one cent per one hundred pounds upon the average value of land employed in growing each crop in each State, are stated in the following tables : —
AVERAGE YIELD OF DIFFERENT CROPS.
(Hay in tons and hundredths ; other crops in bushels and tenths.)
Effect upon value of land per acre of a change of one cent per one hundred pounds in value of crop: —
From these tables, the effect of any change of rates of transportation or of price, upon lands employed in growing either crop in either State, may be readily calculated ; also, the profit on every one hundred pounds of each crop necessary to yield seven per cent interest on any value of land per acre ; also, the effect of any change in rates of freight per ton per mile, the distance to the controlling market being known. Thus, from a farm nine hundred miles from New York a change in freight rates of one nine-hundredth of one cent per one hundred pounds, or one forty-fifth of one cent per ton, per mile, will affect the value of wheat land in Illinois one dollar an acre. It is easy to see, also, that there are limits within which only these effects follow, fixed, on the one hand, by the lowest cost of raising any crop compared with its value at a consuming market, and on the other hand by the cost of land. But within those limits, as far as the price of crops is controlled by distant markets, all the profits and even the very existence of agriculture depend upon the rate charged for transporting its products. It is not strange that the owners of land and producers of grain regard with constant apprehension a power which may at any moment affect the value of a thousand million bushels of cereals, and of forty-four million acres of cultivated land. Even if a change of five cents per cental does not affect the whole crop so much as three cents per bushel in price, it may take away all the profit, — all the reward of a year’s labor. And the same power may also raise rates even more at pleasure. The farmers have been taught that the cost of transportation depends upon the will of a few men, and varies with their agreements or quarrels. The quondam pedler of Vermont fell out with Vanderbilt, and their quarrel was worth, during the year 1870, one fifth of a cent per ton per mile to the farmers ; $9,000,000 on the crop of wheat alone, if it had all been shipped at the reduced rate. In July, 1872, somebody raised the rates from the West five cents per cental. His act cost the farmers millions of dollars. Is it strange that our greatest industry grows restive under fluctuations which it can neither foresee nor comprehend ? Elsewhere the world moves. The beneficent progress of civilization in other lands is toward cheaper transportation and better wages for the producer. Russia pushes railroads through her vast territory, in order that her subjects may obtain at the Baltic and Black Seas better pay for their industry. We cannot maintain sufficient private markets of our own, nor force upward prices in those great markets of the world upon which ours depend. If, while the world makes transportation cheaper, we make it more costly, the loss will be our own.
This the farmer believes we are doing. He declares that others, who stand between him and the consumer, amass great wealth, while pinching economy barely saves him subsistence and does not keep him from debt. His beliefs, as to the cause of existing evils and the best remedy, whether correct or not, will soon take the shape of laws. He has the votes. Before that power, legislators drop like leaves shaken by the autumn wind. Governors, politicians of all grades, crush each other in their hurry to seize the new standard. Lawyers who do not forget the Dartmouth College case already find themselves ineligible to the judiciary. Has not this same generation set its heel upon the Dred Scott decision ? Reverence for judicial precedents is a dam which floods have carried away. Restraints devised by founders of our government no longer bar the people from their will. We have trusted all power to the majority. If its opinion is in error, we have but one remedy, — that freedom of discussion which remains the only safeguard of our institutions.
There are always cowards enough to shout with the majority, right or wrong. But the times now demand men who can tell a majority wherein it is wrong, and by what measures its just aims may be reached. Progress toward cheaper transportation has in fact been arrested. The evil can be removed only by removing the cause. But mistaken remedies will not only fail, they will inflict upon agriculture itself the gravest disasters. By diminishing the cost of transportation, the railroad has made agriculture possible in a large part of the Northwestern States. The extension of railroads has given to the farmers a great part of their wealth, and the natural alliance, a blessing to both, cannot be broken without great disaster to both.
Far away from all the great markets of the world, separated from the consuming States of the Atlantic coast by a thousand miles of distance, with rivers not yet bridged and mountains not yet tunnelled, the vast, rich prairies which now form the chief wealth of the Western States, if left to depend upon natural channels alone, must have remained in great part untouched by plough, and occupied only, like the pampas of South America, by enormous herds of cattle. Cultivation of land would indeed have been possible along the Mississippi and its tributaries— our great “inland sea” — and near the shores of the lakes. But transportation from these inland regions, by a route long, circuitous, and open only during a part of the year, would have remained very costly but for the sharp competition which railroads created. Meanwhile the cost of hauling by wagons, about one cent per one hundred pounds per mile, would have limited the cultivation of the soil to narrow strips of land along the lakes and navigable streams. It is instructive to note, in the census returns of 1840, how the population of Western States had clustered about such channels. A small quantity of grain, shipped from New Orleans to Atlantic ports, was borne down the river in flatboats ; but the entire receipts at that point in 1840 were 63,015 barrels and sacks of wheat, 482,523 barrels of flour, 278,358 sacks of corn, 152,965 barrels of corn in the ear, and 42,885 barrels and sacks of oats. In 1838 wheat sold in the interior counties of Ohio for thirty-seven cents per bushel, and corn for ten cents, and just seventy-eight bushels of wheat were shipped from Chicago. The entire movement of grain eastward from the Northwestern States, by lake and canal in 1840, embraced 595,142 barrels of flour, 1,004.561 bushels of wheat, and 71,327 bushels of corn. The cost of transportation from Buffalo to New York was $ 10 per ton ; before the opening of the canal it had been $ 100. In the interior of Ohio the chief business was the fattening of droves of hogs and herds of cattle, often driven thither from farms still more distant, there to be wintered and recuperated, prior to the long journey over the mountains to the Atlantic States.
At that time there were only 117 miles of railroad west of the mountains, 59 in Michigan, 30 in Ohio, and 28 in Kentucky. During the next decade 1,237 miles were built, but still in 1850 not a single line had opened unbroken communication to the seaboard. The detached roads, subsequently consolidated as the New York Central, were interrupted by breaks which compelled passengers to change cars five or six times en route, and bound by such conditions regarding payment of canal tolls as amounted to a virtual prohibition of the transportation of through freight. J. Edgar Thompson, then chief engineer, now president of the Pennsylvania Central, had located its line over the mountains in 1849, but connection with the Portage road was not made at Johnstown until August 25, 1851. The Erie was not opened from Piermont to Lake Erie until April 22, 1851. The Grand Trunk was not opened until 1853 ; and the Baltimore and Ohio did not reach Wheeling until that year; while the Atlantic and Great Western of Georgia first made connection between the waters of the Tennessee and the Atlantic during the year 1850. Thus, twentythree years ago, no railroad from the sea had reached the lakes or crossed the mountains. The magnificent accomplishment of that day was the “great national road,” from Washington via Wheeling, Columbus, and Vandalia to St. Louis, along which the tide of emigrants rolled toward Western homes, blessing the government for thus reducing their journey to one of several weeks. Even by the fast fourhorse coaches, the mail took longer to reach Wheeling than it now takes to reach San Francisco by the “ national road” of later days. All the railroads then built in the West were merely subsidiary to the lines of water communication.
But 1,354 miles of such railroads west of the Alleghanies had already increased the shipments of grain by lake and canal, so that in 1850 the receipts of all grain, flour included, at Buffalo and Oswego combined, were 18,166,503 bushels ; had raised the price of corn from thirty-two to thirtyseven cents at Cincinnati ; and had contributed largely to the advance in value of farms, which contained in
1850, in the eleven Northwestern States, 79,636,210 acres, valued at $907,144,395, or $ 11.39 Per acre.
The year 1850 is the dividing line between the old era and the new. Its statistics mark the growth to which the Northwest had attained with water channels as the outlets tor its products, and 1,354 miles of railroad tributary thereto. In April, 1851, the Erie road was completed to the lake ; in the same year the Pennsylvania was connected with the Portage road, the consolidation and revolution in management of the New York Central began to take effect, and the long war of competition between railroads and canals began. So great was the revolution in the management of roads that the average charge for freight over all the New York roads, which was four cents and one twentieth per ton per mile in 1851, was reduced to two cents and one fifth per ton per mile in 1860. The effect of the competition is clearly shown in the record of rates charged on the Erie Canal, which, in the year 1847, prior to the completion of the railroads, in 1851, the year of their completion, and in 1858, for flour and wheat, were as follows : —
1847. 1851. 1858.
Flour, per barrel 77 49 34
Wheat, per bushel 17 1/2 14 3/4 10 1/2
Notwithstanding this reduction of rates, the canals lost a material part of the grain traffic, and, in spite of many improvements, have continued losing to this day, so that the quantity of Western products moved to tide-water by canal was actually greater in 1861 than it is now.
Thus the railroads, at first subsidiary to water lines, after 1850 entered into direct competition with them, and not only forced down rates, but secured a large proportion of the through traffic. The reduction in cost of transportation of Western products, amounting to twelve cents per hundred weight, effected by competition during the decade 18501860, as appears from tables already given, was equivalent to an increase in value for all the Northwestern States of $ 13 per acre for 79,600,000 acres in farms in 1850, or not less than $ 1,034,800,000 ; and moreover some value had been given to 47,200,000 acres of land not embraced in farms in 1850 ; if we suppose $5 per acre, we have an increased value of $ 1,300,000,000, due entirely to the railroad system. The actual increase in value of farms, from $907,144,395 to $ 2,421,413,973, was over $ 1,500,000,000. During this decade, 11,589 miles of road were built in the Northwestern States; if the cost was $40,000 per mile, or $ 463,000,000 (and it was less prior to 1860), it was repaid more than threefold during the same decade by the increase in value of farms. Had the saving in cost of transportation from Buffalo to Albany been only five cents per hundred weight, it would have paid the entire cost of building and equipping all the railroads west of the Alleghanies.
But the successful competition of railroads with canals would not have been possible had not the great trunk roads been enabled, by the building of 11,589 miles of road at the West, to reach a multitude of farms. And the correspondence between the increase in value of land in the several States and the development of the railway system in each is so remarkable as to deserve especial attention.
The efficiency of facilities for transportation can be measured, not by the number of miles of road to the whole area of a State,— for a large part of the State may be unsettled, — but by the ratio of miles of road to acres of land in farms. In Northern States east of the Alleghanies, railroads built prior to 1850 already afforded an outlet to many farms ; but the revolution in their management, previously noticed, and marked by a reduction in rates on New York roads of from four to two cents per mile, — one half the entire cost of transportation, — indicates an increase of efficiency and value equivalent to the addition of one half the number of miles operated in 1850. Thus New York had 1,361 miles of road at that time ; counting the increased efficiency of these in 1860 as equivalent to the building of 680 miles, and adding 1,321 miles built between 1850 and 1860, we have 2,001 miles, or nine and five tenths miles to 100,000 acres, as the increase of railroad facilities in that State. But the average value of land increased $9.30 per acre. Estimating the increase of railroad facilities in Pennsylvania, New Jersey, and Vermont in the same manner, and entering in the first column the proportion of that increase to the area of farm land, we place in the second column the increase in average value of all land in farms from 1850 to 1860, and in the third column the cost of all roads and equipments in each State in 1860 to each acre of farm-land : —
RAILROADS AND FARMS, 1850 TO 1860.
Road, Value Farms, Cost of Miles to increase Roads Acres. per Acre. per Acre.
Vermont, 6.1 $6.68 $3.25
New York, 9.5 9.30 4.17
New Jersey, 15.3 16.74 7.25
Pennsylvania, 11.7 11.58 4.80
Ohio, 14.4 13.18 5.78
Indiana, 13.2 11.10 4.96
Illinois, 13.3 11.56 5.20
Michigan, 11.0 11.04 3.06
Wisconsin, 11.4 7.02 4.47
Iowa, 6.5 5.82 3.40
Minnesota, - 4.53 -
Kentucky, 2.7 6.07 .95
Missouri, 4.1 4.95 1.63
Comparison of the second and third columns shows that in each State the farmers would have gained very largely — in most of the States double their outlay — had they paid the entire cost of building all the railroads in operation in these States in 1860.
Comparison of the first and second columns shows a very remarkable correspondence between the increase of railroad facilities in each State and the increase in the average value of farmland in that State. For every additional mile of railroad to 100,000 acres of farm-land, we have an increase in average value of such land varying not widely from one dollar per acre. In Wisconsin a variation may be in part explained by the fact that 258 miles of railroad, built after the year 1859 began, had not produced their full effect upon the value of land by June, 1860, when the census was taken ; for, excluding these, the ratio of miles to acres is eight and one tenth, and the increase in value $ 7.02. A correspondence so remarkable, maintained so closely in every agricultural Stale of the North, in spite of some local variations, deserves the consideration of the farmers who now see in that very railroad system a merciless foe. It shows that, whatever railroads may have cost, and however little many may have been worth to unhappy builders and stockholders, they were worth to the farmers of the West about $ 100.000 per mile. That the same correspondence does not appear at the South, and vanishes even in Kentucky, where the character of crops begins to change, only proves that it is the result of a general law, based upon the proportion of cost of transportation to the value of Northern crops.
In examining the effect of railroadbuilding upon the value of farms since 1860, we must first get rid of the imaginary valuations caused by depreciation of currency, by reducing them to gold values at the average rate for the year preceding the last census. Then comparing the increase in gold values since 1850 with the increase in railroad facilities since 1850, computed with the same allowance as before for roads built in Eastern States prior to 1850, we have the following results : —
RAILROADS AND FARMS, 1850 TO 1870.
Road, Miles Value Farms, to Acres, increase per Acre.
Vermont, 10.4 $7.88
New York, 14.6 14.29
New Jersey, 34.1 21.37
Pennsylvania, 22.4 16.49
Ohio, 16.3 16.72
Michigan, 16.3 18.17
Indiana, 17.5 55.78
Illinois, 18.6 18.85
Wisconsin, 13.0 9.77
Iowa, 17.2 12.99
Missouri, 9.6 7.01
Kentucky, 5.0 3.44
Minnesota, 16.5 5.78
Kansas, 26.5 5.16
Nebraska, 28.4 4.87
In New York, Ohio, and Illinois the increase corresponds very closely with the ratio previously noted. In Indiana, also, the proportion of increase in value of lands to increase in railroad facilities is nearly the same in 1870 as in 1860. But in Vermont, New Jersey, and Pennsylvania at the East, and in all the other Western States, the increase in value of land fails to correspond with the increase of railroads. In Michigan alone it exceeds, in all other States falls below, the ratio of one dollar to the mile. The contrast is still more striking when the increase in gold value of land from 1860 to 1870 is compared with the increase of miles to acres during the same period.
RAILROADS AND FARMS, 1860 TO 1870.
Roads, Miles Value Farms, to Acres. Increase per Acre.
Vermont, 9.4 $1.20
New York, 8.1 4.99
New Jersey, 22.6 4.66
Pennsylvania, 14.1 4.91
Ohio, 1.9 3.54
Michigan, 5.3 7.13
Indiana, 4.3 4.68
Illinois, 5.3 7.29
Wisconsin, 1.6 2.75
Iowa, 10.7 7.17
Missouri, 9.6 2.06
Kentucky, 5.0 2.63
Minnesota, 16.5 1.25
Kansas, 26.3 5.16
Nebraska, 28.4 4.87
Here it is evident that, since i860, in the States from Ohio to Wisconsin inclusive, the efficiency of roads built prior to 1860 has been much increased, the value of land having advanced more rapidly than the roads newly built would warrant. On the other hand, in the States east of the Alleghanies and west of the Mississippi, the roads newly built alone should have been accompanied by a greater advance in values than has been experienced. For these phenomena but one explanation appears, —a general increase in the cost of transportation for short distances, and to points where the railroads are not restrained by competition with lakes and canals, without increase in through rates, or in charges from points where such competition has effect. This explanation fits the ascertained facts. The products of seaboard States are shipped short distances, and a general advance in local rates would check the advance in prices of farm-lands. The products of far Western States, also, are moved first to Chicago, Milwaukee, St. Louis, or some other point of shipment, by lines not competing with the lake and canal; and a general increase in charges, especially for local freight, would materially affect values there. But the Central States enjoy the advantage of through rates to the seaboard constantly restrained from advance by competition with the water route. Even if the local rates have been increased in these States, so that to noncompeting points the usefulness of roads formerly built has diminished, the addition of new roads has multiplied the number of competing points, and brought thousands of farms nearer to the market.
Not only do facts sustain this explanation, by showing that the through rates from the West are, on the whole, lower than in 1860, while local freights, and rates for short distances and to and from non-competing points have been generally increased, but they also point very clearly to the causes which have prevented any increase of through rates, and at the same time compelled roads dependent upon local business and traffic for short distances to increase their rates.
The ordinary summer rates for freight to New York, from Chicago, Cincinnati, Indianapolis, and other Western cities, are the same now that they were before the war, and the rates have been precisely the same during the past summer as during the summer of 1860. But the Western through business is mainly done by the New York Central and Hudson River, Lake Shore and Michigan Southern, Erie, Pennsylvania Central, and Pittsburg, Fort Wayne, and Chicago. The average of receipts of these roads for freight per ton per mile, in 1860, was about 2.01 cents, and in 1871 the average was only 1.48 cents per ton per mile. Falling a little in 1861, this average of receipts of these five great roads rose to 2.05 in 1862, to 2.16 in 1863, to 2.58 in 1864, to 2.83 in 1865 ; and then declined to 2.74 in 1865, to 2.36 in 1867, to 2.11 in 1868, to 1.89 in 1869, to 1.53 in 1870, and to 1.48 in 1871. Upon these roads, which depend largely upon the through carriage of Western products, and in that business have to meet constant and sharp competition either from the lake and canal route, or from the Grand Trunk on the north, or the Baltimore and Ohio on the south, there has been a reduction of more than one fourth the entire cost of transportation in 1860, and more than one half of one cent per ton per mile. It is worthy of note that the Grand Trunk, paying less for iron than roads in this country, has been able to carry grain from Chicago to Boston, 1,174 miles, for 50 cents, or .85 of one cent per ton per mile,— a rate lower than any of the roads in this country have yet found profitable.
But while through rates and charges for long distances have been thus reduced, being forced steadily downward by competition between railroads and water lines, or between the roads themselves, the roads of shorter line, and those more largely dependent upon local traffic, have increased their charges. The Railroad Commissioners of Massachusetts point out the fact that the roads of that State had increased their average charges to and from connecting points from 2.61 cents per ton per mile in 1860 to 2.90 cents per ton per mile in 1870, and to other points from 5.29 cents in 1860 to 5.62 cents in 1870. The New York and New Haven increased its average rate from 4.14 in 1862 to 5.56 in 1871. The New York and Harlem increased its average rate from 3.74 in 1862 to 6.06 in 1871. Many other illustrations might be given ; but the fact that local rates and charges upon short roads or to non-competing points have generally increased since 1860 is not disputed, and has led to very great complaint at the West. There even the longer and more prosperous roads have so largely increased local rates that the general average is higher than it was ten years ago. Thus the average charge per ton per mile on the Chicago and Rock Island, Chicago, Burlington, and Quincy, and Illinois Central was only 2.51 cents in 1863 (when
the average of the five trunk roads was 2.16), and probably not higher than 2.35 in 1860 (when the average of the trunk roads was 2.01), but in 1871 their average charge was 2.45. In November, 1860, the rates charged in published freight-tariffs for transportation between twenty Western cities averaged only one cent and a half per ton per mile ; charges for similar distances in 1873 average fully two cents.
It is safe to count upon human greed as a pretty constant force. Managers of railways probably have not become generally so Christianized since 1860 that they make haste to “sell all that they have and give to the poor.” But neither is it probable that much greater aversion to the making of money prevailed among them ten years ago than now exists. If there has been an increase in charges for service performed, it is at least reasonable to inquire whether the service itself has become more expensive.
What is a railway? It is an iron track, nailed to the earth with iron spikes, crossing streams on bridges wholly or in part of iron, over which iron engines draw cars whose wheels, axles, brake-rods, and braces are of iron. Now, the average cost of railway bars was $48 per ton in 1860; but the average for the seven years 1863-1869 inclusive was $89.71, while the average in 1872 was $85.12 1/2 per ton. Iron laid in railroads, from 1863 to 1869 inclusive, cost 86 per cent more than in 1860. One hundred tons of rail to the mile cost $4,800 in 1860, and $8,971 during the seven years preceding 1870, and this increase of over four thousand dollars a mile in the cost of building roads is in effect a permanent tax of $280 a mile yearly upon all traffic passing over the road. Roads built in 1870 paid $ 7,225 per mile for rails, and $ 7,037.50 per mile in 1871, and $8,512.50 in 1872. At one hundred tons to the mile,— and if roads with single track and few sidings use less, roads with double track and frequent sidings use much more,— the cost of the iron rails alone in roads built since 1862, at the average prices given for each year in tables published by the American Iron and Steel Association, has been as follows : —
Miles built. Iron per Ton. Cost of Iron.
1863 1,050 $76.37 1/2 $8,071,875
1864 738 126.00 9,298,800
1865 1,377 98.62 1/2 12,594,412
1866 1,832 86.75 15,892,600
1867 2,227 83.12 1/2 18,510,924
1868 3,033 78.87 1/2 23,922,787
1869 4,999 77.25 38,617,275
1870 6,145 72.25 44,397,625
1871 7,453 70.37 1/2 52,450,487
1872 6,427 85.12 1/2 54,709,837
At rate of 1860, $48 $168,763,200
Increase in cost $108,703,422
We have here an expenditure, caused by the increased cost of rails alone, of $108,700,000; to return seven per cent on the investment, a perpetual tax of $7,600,000 must be paid by the traffic done over these roads. Widely varying estimates have been made of the quantity of iron consumed in railroads beside the rails. One writer, usually accurate, holds that for every pound used in rails three pounds are used in chains, spikes, bridges, buildings, locomotives, and cars, and improvements incident to the construction of the road. As we used 533,571 tons of American rail in 1870, and made only two million tons of iron for all purposes, this can hardly be correct. Eight wheels and four axles for an ordinary car weigh three tons ; other iron may reach a ton more ; and the average supply is about six cars to the mile of road, or twenty-four tons of iron. Of locomotives the average weight is thirty tons, and the supply one to three miles, or ten tons to the mile. Spikes, chains, and fish-plates are about one sixth the cost of the rail to the mile. But while in weight the iron in other railroad uses cannot exceed the quantity in rails, in cost it probably does, and the price of such iron has been increased in like proportion. Thus, though the quantity of all iron used in railroads is probably less than 200 tons to the mile, its cost doubtless exceeds $ 17,000 per mile at the prices of 1872, as compared with $9,600 at the prices of 1860. In other words, the entire cost of iron used in roads built since 1863 has probably been $ 550,000,000, and at least $ 216,000,000 more than it would have been at the prices of 1860 ; so that the perpetual tax required to pay interest on the increased cost of roads is over fifteen millions yearly.
But rails wear out, and much faster than they did ten years ago. The average life of the rail is not more than three years on roads with heavy business, about five years on roads of moderate traffic, and about twelve or fifteen years on roads of small business. On the Michigan Central, records show an average duration of about four years for iron rails ; on the Erie, in 1868, two thousand tons a month were used in replacement. It is safe to say, therefore, that all the roads in the country, built prior to 1863, have relaid the whole track with rails costing $79 per ton instead of $48, and the additional cost, $99,572,000, is a further investment upon which the roads must hereafter pay interest. Finally, the yearly supply of rails for replacement on the Erie, 24,000 tons for 773 miles, was 31 tons to the mile, which would have cost at the price of 1860 only $ 1.488 per mile, and at the price of 1872 about $2,639 per mile ; the increase, $1,151 per mile, is another tax which transportation over roads of the larger class must pay every year, because of the cost of rails used in relaying track. On roads of the middle class, where rails last five years, and twenty tons to the mile are needed each year, this annual tax is $ 742.50 per mile ; on roads of small business, where the rail lasts twelve years, and about eight tons yearly are needed, this tax is $ 297 per mile. The average on all roads can hardly be lower than $ 600 per mile, or forty millions a year for 67.000 miles of road. If transportation costs too much, the farmers must charge an excess of forty millions a year to the increased cost of rails used in relaying track alone. The annual wear of iron other than rails is mainly in car-wheels, of which 473,108 were made in 1870 ; and locomotives, of which 1,137 were made. Perhaps the yearly cost of replacement of all iron other than rails may be $ 350 per mile, and the increase in cost since 1860 about $ 150 per mile. The entire tax for replacement of iron made more costly by high duties must therefore be about $750 per mile, or over millions yearly. This tax those must pay who travel or ship freight over the railroads ; and the farmers could better afford to pay out of their own pockets the wages paid by every iron establishment in the country than to bear their share of this burden. For fifty millions is about one sixth of the entire operating expense of all the railroads. A reduction of one sixth in the cost of transporting products of the farm, or ten cents per hundred weight, would be worth more than seventy millions a year in the cash value of farm products, and one thousand millions in the actual value of farms.
The high price of iron has here been attributed mainly to the tariff. Until within the present year, there was no room for dispute about it ; during any year since 1860 we could have imported iron, but for the tariff, at a cost far below the price actually paid either to importers or American makers. During twelve years, not iron only, but thousands of other articles have thus been constantly rendered more costly by means of duties, and the effect has been to artificially raise the cost of living, of labor, of materials, of production, and the whole scale of prices and values. Hence the effect of the tariff has been not only to raise the price at which a product maybe temporarily sold, but in many cases to raise even more the cost at which its production in this country is possible. Inspection of census reports shows that in many important branches of manufacture the cost of materials and of labor has increased far more than the value of products, and yet the wages of labor have not increased as much as the cost of living. These effects of the tariff continue, so that, even though the price of iron abroad has risen temporarily higher than its price here, and a small quantity is exported, nevertheless it is in consequence of the tariff that we are no longer able to produce iron as cheaply as we did formerly. Under its operation, high instead of low rates for materials have been established, and high instead of low valuations of mines ; higher wages for labor have been rendered necessary by the greater cost of living ; transportation of fuel and other material has been rendered more costly ; furnaces, mills, and machinery costing far more than the same would have cost in 1860, have been put in operation. The return to lower rates and a natural cost of production can come only in connection with a general abandonment of artificial valuations and prices. It is likely to come only under the pressure of necessity, — a necessity pushing that and other branches of industry at the same time to a lower cost of production. Free competition with the industries of other nations would bring it, but that competition the present tariff prevents, and was designed to prevent. Thus the only test of the effect of the tariff is the cost of iron, not as compared with the temporary cost of foreign iron, if free of duty, but as compared with the cost of our own iron before that artificial system of prices and valuations had been established which the tariff still maintains. We ought to produce iron to-day at a cost less than that of 1860. We do not, because every step in the process, from the purchase of the mineral property to the shipment of the finished product, has been rendered more costly. That effect remains, although English iron has risen in price, and it will remain until our whole tariff system is reduced to a revenue basis. Accordingly, other elements in the cost of railway building and service have been increased through the same influence. The cost of fuel has largely increased, and the wages of all labor employed have necessarily advanced, since the cost of living is at least sixty per cent greater than it was in 1860. The average of wages paid yearly to employees in railroad repair-shops in 1860 was $370 each, and in 1870 it was $626 each,— an increase of about seventy per cent. The average value of all coal raised in 1860 at the mines was $ 1.34 per ton for bituminous and $ 1.46 per ton for anthracite ; in 1870, for bituminous $ 2.03 per ton, and for anthracite $ 2.45 per ton ; but the cost to consumers was still more increased by the higher cost of transportation. It seems certainly within bounds to say, in view of these facts, that the whole cost of building and operating railroads must have increased at least fifty per cent since 1860 ; that one third of the entire cost of building, and one third of the entire cost of operating railroads at this time is due to the increased cost of material since 1860, the increased cost of living, and consequent increase in wages of hands employed. Of a cost exceeding $55,000 a mile, for 35,000 miles built since 1863, or $ 1.925.000.000, fully $ 18,000 per mile, or $630,000,000, is due to the increase since 1860 caused by higher taxes and duties and higher prices. Operating expenses in the year 1872 were $307,486,682 upon 57,323 miles, or $ 5,364 per mile ; at the same rate for 67,000 miles now in operation, the yearly expenses are $ 360,000,000, and the increase in yearly cost, due to high tariffs and high prices, not less than $ 120,000,000. This high tariff is a very expensive luxury. Duties on all kinds of iron and steel yield to government about twenty millions yearly, but compel the people to pay, in increased cost of iron used in transportation alone, about fifty millions yearly. The entire revenue of government from tariff is about two hundred millions, but we have to pay one hundred and twenty millions yearly in increased cost of operating railroads, and about fortyfour millions more as interest on the increased cost of roads built since 1863.
If the actual cost of transportation has increased fully one half since 1860, it is evident that those roads must be most affected whose business is comparatively small, because the larger the business done the less the cost per ton. The increased expense of 24,000 tons of iron yearly for maintenance of track on a road like the Erie, at the prices of 1873, would be about $888,000, but falls upon a traffic amounting to 897,446,728 tons moved one mile, and is therefore less than one tenth of one cent per ton per mile. But the increase in cost of only eight tons of iron per mile on a smaller road, like the Hartford, Providence and Fishkill, though amounting to only $ 36,408 yearly, falls upon a traffic of only 6,096,808 tons moved one mile, and is therefore about six tenths of one cent per ton per mile. From this illustration it will clearly appear that the roads which do a large through business are affected very much less by any increase in the cost of transportation than the roads which do a smaller business and move freight a shorter average distance. It follows, also, that as the business of a road increases, either in number of tons moved or in average distance to which it is moved, the consequent reduction in cost of transportation per ton per mile more effectually neutralizes the increase in cost of transportation resulting from higher prices of materials. It is for this reason that the great trunk lines, whose traffic has vastly increased during the period since 1860, have been enabled, not only to maintain low rates, but even to reduce them, in spite of the great increase in cost of operating. Meanwhile the smaller roads, whose traffic has not increased as largely either in number of tons or average length of carriage, are forced by the increased cost of operating to charge higher rates. Thus the cause to which we have pointed — a great increase in the cost of operating roads, and especially in the cost of iron — precisely fits the ascertained change of rates, and the consequent effect upon values of farms. It is of such a nature that, in spite of it, the great trunk lines, pushed by sharp competition with the water route and with each other, have been able to reduce their charges, while it has borne so heavily upon roads doing a smaller business, hauling shorter distances, or more dependent upon local traffic, that, if their charges have not been raised one half, it is only because even to them a moderate increase of business has brought some degree of relief.
Somewhat strangely, the farmers of the West have attempted to remedy this peculiar state of things by requiring that railroads shall not charge a less rate for large business or long distances than for small business or short distances. This is as if a surgeon, being called to prescribe for an injured limb, should content himself with telling the patient that he must not limp, or bear more weight on one leg than on the other. Undoubtedly, the railroads do limp. Government has crushed one leg with a tariff which makes light traffic and local business unnaturally expensive. But it will neither help them nor the public to require them to limp as much with the sound leg as with the injured one.
It is not strange, nor is it discreditable to the farmers or the people of Western States, if the measures first tried for the remedy of existing evils prove to be mistakes. The regulation of railroads by public authority, in a country as large as this, is not an easy matter. The nature of railroad traffic, and the conditions under which it must be conducted, have been so little studied and are so little understood that, when we begin to apply law to it. we are somewhat in the case of Voltaire’s doctors, who “put drugs of which they knew little into bodies of which they knew nothing.” But if all difficulties as to the framing and constitutionality of a law could be avoided, and the principle for which the farmers contend could be applied in the best possible manner to all the roads, what would be the effect ?
That principle was very clearly stated in the recent decision of the Supreme Court of Illinois, in the Chicago and Alton case, in these words : “If a farmer is charged fifteen cents a bushel for shipping his corn to Chicago, is it just that the farmer who lives twenty miles nearer Chicago should be charged a higher sum ? Certainly not, unless the railway company can show a peculiar state of affairs to justify the discrimination, and this must be something more than the mere fact that there are competing lines at one point and not at the other.” The theory here is that distance alone should govern the charge for transportation. But the fact is that the quantity of business done has a very material effect upon the cost of transportation. If a low rate from a competing point will secure a large increase of traffic, the actual cost per ton of doing that increased business is reduced, and the lower rate may yield a profit, though, on the smaller business of another point closely adjacent, the same rate would result in loss. A law which compels a company to equalize the rates from these points virtually forces the people who make the larger shipments to pay part of the actual cost for others who make the smaller. Hundreds of roads have been built in part by the aid of people who desired the advantage which competing lines would naturally give them ; after they have paid for this advantage, must they also be taxed to pay part of the cost of transportation for other people who have given nothing ? Will not the application of this principle put an end to efforts of people to secure competing lines for themselves, and thus check the building of roads, and all the consequent increase in value of property ? Certainly, this is not what the farmers want. They want cheaper transportation and more facilities, not less. They certainly do not want to put an end to all competition. Yet one road or the other must be the shorter between any two points ; if the longer road cannot lower its rate to the competing point without corresponding reduction to many others where less business is done, and where the reduction would cause loss, it will generally be unable to compete at all. The larger business is generally done at the competing points; is it not more for the good of the whole people that the lowest possible rate should be charged for the larger business, than that the larger business should be charged higher rates to pay some part of the cost of the smaller ? Indeed, all the product of farms shipped to a distant market is moved from some competing point the greater part of the distance ; to force competing points generally to pay a higher rate in order to get lower rates for the non-competing would be, in effect, to raise the charge for transporting the whole quantity the longer distance, in order to lower the charge for transporting a part of the quantity the shorter distance. That railroads may and often do outrageously abuse the monopoly which they hold at noncompeting points is. doubtless true. But it does not follow that the public would be benefited by preventing all discrimination in favor of points at which the larger business is done. Nor would the whole people be benefited by an abolition of the present system, so far as that system involves lower rates for large business and long distances than for small business and short distances.
The farmers of the West do not seem to have realized that the adoption of a pro rata rule, requiring all charges for transportation to be proportioned to distance in each State, would establish a fatal monopoly against themselves, and in favor of those who happen to own farms nearer the seaports or the water channels. Yet, if this principle, that distance alone should govern charges for transportation, is just and beneficial when applied to one State, must it not be equally so when applied to all States alike? If the farmer who lives at a competing point in Illinois ought to pay a higher rate than actual cost for his traffic, in order that another farmer who lives at a non-competing station twenty miles nearer may get a lower rate than the actual cost of his traffic, must not the farmer of Illinois also pay a higher rate to New York, in order that the farmer of Ohio may pay a lower? This would be the effect of a general application of the pro rata principle. In order to lower local rates and yet obtain a living income, many roads in each State must raise their through rates. The present average charge for transportation of all kinds of freight, over roads of all lengths, is about three cents and six tenths per ton per mile, as will presently be shown, and the average charge for grain all distances and over all roads about two cents and four tenths. If the roads should strictly equalize their rates for all distances, according to the average now charged for all, freight from Chicago to New York would cost $ 21.60 per ton, or 64 cents per bushel of wheat. Even if such rates did not depopulate that thriving city, they would at least put an end to wheatgrowing in Illinois, except for home consumption. The average rate for all distances cannot be reduced lower than a cent and a half per ton per mile. The charge for moving wheat from the wheat-fields of Illinois and Wisconsin now averages about 60 cents per 100 pounds— 15 cents at way rates 100 miles to Chicago, and 45 cents at through rates 900 miles thence to New York. At an equalized rate of one and one half cents per ton per mile for all distances, the farmer would indeed pay only 7 1/2 cents per 100 pounds to Chicago, but he would pay 67 1/2 cents thence to New York, and 75 cents in all, and the loss of 15 cents would cost him $ 15 per acre in the value of wheatland, and $ 39 per acre in the value of corn-land. True, the lake route would remain, but, the railroad competition being ended by which canal tolls were forced down 12 cents per cental, would not a pressure of business greater than the capacity of the canal drive rates up again ? There is no escape ; corn is shipped at all from Illinois only because there has been a discrimination in favor of Chicago, the chief competing point at the West. To put an end to that discrimination, charging the exact average cost of transportation for all distances, would cost Illinois in the value of farms about $ 120,000,000, and Wisconsin about $ 56,000,000. Way rates 100 miles to Indianapolis average 15 cents, and through rates thence 43 cents per cental. All discrimination abolished, shipment to Indianapolis would cost only seven and one half cents, but for 838 miles thence 63 cents, or 70 1/2 cents in all ; a loss of 12 1/2 cents per cental, $ 12.50 per acre in the value of wheat-land and $31 per acre in the value of corn-land, and for the State about sixty millions. Wheat now pays, from the great wheat-fields of Iowa and Minnesota, an average of 15 cents wayfreight to a point of shipment such as Burlington, and thence 60 cents per cental to New York. Abolish all discrimination, and the charge would be 7 1/2 cents to Burlington ; thence to New York, 1,122 miles, 84 cents ; total charge, 91 1/2 cents. If the farmers now find it hard to raise wheat at a profit, and burn corn for fuel, would they be aided by an addition of 16 1/2 cents per 100 pounds to their burdens ? That vast field, the richest wheat-growing region in the country, might as well be sown with salt but for a system of discriminations in favor of competing points and through traffic. Abolish that system, and the monopoly which distance originally gave to farmers in Eastern States and near navigable waters, which the railroads have in part destroyed, would be restored. Except near the water, not a bushel of grain could be profitably grown, unless for home consumption, on any farm west of Cincinnati.
Extravagant as are the rates often charged for short distances or to noncompeting points, it must not be forgotten that the actual cost of transportation in such cases is somewhat higher than for long distances or points yielding larger traffic ; and if the more costly business does not pay for its own cost in moderately increased rates, the difference must be paid by somebody else. While suppressing the extortion now practised, it is important not to create another, by compelling those who make large shipments to pay part of the cost for those who make small shipments. To the railroad, a long shipment is a large business. Short traffic, no matter how large, can be made profitable only by high rates. At a profit of one fourth of a cent per ton per mile, a car moved two hundred miles a day would earn $ 5 ; the use of the same car for at least a day would be expended in moving a load ten miles, but it would yield 25 cents. Freight receipts average 72 per cent of the whole; they must therefore pay 72 per cent of the interest on $50,000, the average cost of the road per mile, at seven per cent, $2,520 yearly per mile ; five freight cars to the mile, the average number, must therefore earn $ 504 each, or $ 1.38 a day. Evidently, increase of long shipments means profit, even at low rates. But without higher rates for short distances, increase of such shipments means heavier loss to the road. Even in Chicago, the usual charge for loading a car at the elevators is two dollars, or 20 cents per ton ; the average cost of loading and unloading can hardly be less than 33 cents. For a trip of a thousand miles, this is only one thirtieth of the cost ; for a trip of ten miles it is nearly eighty per cent of the cost, use of car not included. Inspection of returns of 88 railroads at the East, 28 at the West, and 11 at the South, whose statements for 1871 are complete, shows that those which moved freight an average distance of ten miles or less, charged an average rate of nine and one tenth cents per ton per mile, and yet yielded only $1,112 net earnings per mile, less than two per cent on average cost. Those moving freight an average distance of ten to twenty miles charged six and eight tenths cents, and yielded only $ 970 per mile net earnings. All these are Eastern roads ; full returns are given for only one Western or Southern road having a ton-mileage less than 39 miles. Those moving freight above forty miles each, from the three sections, compare thus with each other and the Eastern short roads : —
Distance. Charge. Earnings.
27 Eastern, 75 miles. 3.13 cts. $3,152
28 Western, 116 “ 2.68 “ 2,162
11 Southern, 79 “ 5.67 “ 1,886
61 Eastern, 27 “ 5.95 “ 1,815
Evidently the Eastern roads, in proportion to distance of carriage, pay better at a lower charge than the Western or Southern having a larger business, and yet the 61 Eastern roads carrying freight each an average distance less than 40 miles, and all an average of twenty miles and seven tenths, charge 5.95 cents per ton per mile, and yield barely three per cent on their average cost. Taking the Eastern roads separately, and putting in groups those whose ton-mileage is below ten miles, from ten to twenty, and so on, the average ton-mileage, rate of charge, and net earnings per mile of each group are as follows : —
Mileage. Charge. Earnings.
12 roads below 10 6 1/4 9.10 $1,112
17 " 1020 13 6.80 970
13 " 2030 25 4.70 2,078
19 " 3040 33 3.90 2,209
11 " 4060 49 3.50 3,200
10 " 6080 66 1/2 3.35 1,825
2 " 80100 86 2.25 2,241
4 " over 100 159 7.596
The regularity of decrease in rate charged corresponds with a general law governing all railway service, namely, cost of loading and unloading and fixed expenses being the same whether the trip is long or short, cost of transportation per ton per mile regularly decreases as distance increases, being cost of haulage plus fixed cost, divided by the number of miles. Thus, if cost of loading and unloading be 33 cents, and other items of fixed cost 27 cents, per ton, the actual cost of haulage (maintenance of track, repairs, etc., included) being eighty-three hundredths of one cent per ton per mile, the cost for different distances will be 83+60 cents divided by distance, thus : —
10 miles .83 6.00 6.83
20 " .83 3.00 3.83
30 " .83 2.00 2.83
40 " .83 1.50 2.33
50 " .83 1.20 2.03
60 " .83 1.00 1.83
80 " .83 .75 1.58
100 " .83 .60 1.43
150 " .83 .40 1.23
200 " .83 .30 1.13
300 " .83 .20 1.03
400 " .83 .15 .98
500 " .83 .12 .95
1000 " .83 .06 .89
Comparison with the figures above given shows that this estimate of cost corresponds fairly with the average charges for different distances, supposing that about 66 per cent of those charges represents actual cost, and 33 per cent interest and profits on capital. The charges on Western roads, however, follow a higher rate, excepting the main trunk lines, on which competition with the water route has pushed the average of charges very low. For comparison, six of these roads may be classed together as “competing routes,” — the Lake Shore, Fort Wayne, Cleveland C. C. and Indianapolis, Atlantic and Great Western, Indianapolis and Saint Louis, and Great Western of Canada. In another class, called Eastern trunk roads, may be placed the four Eastern roads having a ton-mileage over 100, — the New York Central, Erie, Pennsylvania, and Boston and Albany. In another class the remaining Western roads having a tonmileage over 100 may be placed : namely, the Chicago and Rock Island, Northwestern, Burlington and Quincy, Illinois Central, Ohio and Mississippi, Hannibal and St. Joseph, Burlington and Missouri River, Kansas Pacific, Milwaukee and St. Paul, and Western Union. In a fourth group are all Southern roads, having a ton mileage of 100 or over, — the Atlantic, Mississippi and Ohio, the Orange and Manassas, Mobile and Ohio, and Louisville and Nashville. Other roads in each section do a large business, but did not publish full statistics for 1871. These groups compare with each other, and with other roads, thus : —
6 Competing routes, 163 1.39 $ 2,658
4 Eastern Trunk, 159 1.69 7,596
10 Western “ 147 2.54 2,782
4 Southern “ 120 3.90 1,666
12 Western (below 100), 78 3.70 1,043
56 Eastern (20 - 100), 41 3.82 2,431
29 Eastern below 20, 10 7.80 1,029
The twenty-four trunk roads do the lion’s share of the business. They extend about 13,000 miles, and upon them the whole traffic of the country largely depends. Of these, the Southern roads, with low ton-mileage and high rates, yield about four per cent on their average cost. The six competing routes of the West, though charging a lower rate than any other group, do an enormous business, and yield about five per cent of cost. But the ten Western roads, which gather the grain and move it to the lakes or points of shipment, though doing a large business, and yielding over five per cent of cost for the whole group, charge an average rate of two and a half cents, with an average ton-mileage of 147 miles. Judged by comparison with the six “competing routes,” the charges on these ten grain-gatherers could be very much reduced. Finally, the four Eastern trunk roads charge one cent and seven tenths, with an average tonmileage of 159 miles, and yield over ten per cent on their cost, — the Erie alone falling below, while the others exceed that average. The New York Central route to Chicago yielded in 1871 over twelve per cent, the Pennsylvania route 17 per cent, the Chicago, Burlington, and Quincy, 15 per cent, the Chicago and Alton 16 per cent, the Chicago and Rock Island, 10 per cent, and the Illinois Central and Northwestern, 8 per cent. On the other hand, the great majority of railroads yield less than ordinary interest on the investment, and very many, though charging high rates which only turn business away from them to roads able to underbid them, still barely pay running expenses and interest on bonds. With them, high charges result less from greed than from need. The few roads strong enough to reduce rates, in spite of an increase of one half in the cost of transportation, have gathered up so much of the business that the weaker, upon which the increased cost falls far more heavily, barely live, though charging higher rates. Examination of charges and receipts thus confirms the conclusion hitherto suggested : that only a few roads of large traffic are able to bear, without increase of charges, the extraordinary burdens which the tariff imposes. In this, as in many other respects, the protective system follows the Scriptural rule, “To him that hath shall be given, and from him that hath not shall be taken even that which he hath.” In effect, upon railroads, as upon individuals, it “makes the rich richer and the poor poorer.”
This review shows that, while high charges on short roads and for short distances, especially since the cost of transportation has been so much increased, are within certain limits unavoidable, unless benevolent human beings can be found who will build and run railroads at pecuniary loss, and for pay be satisfied with the smiles of an approving conscience, nevertheless there are very grave abuses which require a remedy. It shows, particularly, that the charges on the chief graingathering roads of the West, for short distances, and from non-competing points, must be far beyond any reasonable estimate of cost and fair profit. For on these roads the average charge for all distances, two and one half cents, is eighty-two per cent higher than the average on the great competing roads Eastward, nor is the difference in tonmileage or business done enough to excuse an excess so great. Moreover, the rates on through freight on these same roads have been moderately low ; if this part of the traffic is done at one cent and a half, while the average for all traffic is two cents and a half, it follows that the charges to non-competing points must be three and one half or more. Plainly, the monopoly which a false system of taxation gives to a few roads is here abused by some, wherever communities are found dependent upon a single route.
But it is equally clear that the remedy is to be sought, not in less competition, but in more of it. Competition alone has prompted and enabled the great grain-bearing roads to the Eastward to wrest a large share of business from the water route, and to reduce rates, in spite of great increase in cost of operating. To that competition alone we owe it that a tariff which has made iron cost $ 85 per ton, has not also made wheat-growing west of Cincinnati and corn-growing west of the Alleghanies wholly unprofitable. Competition alone has prompted the building of thousands of miles of railway at the West, multiplying competing points, and striking the shackles of monopoly from hundreds of thousands of farmers. Not less, but more of it, is needed. No “ cast-iron ” law, which denies freedom of competition in low rates, can serve the farmer or the public. A graduated maximum, so adjusted (somewhat upon the principle of the table of cost elsewhere given) that no road could charge far above the actual cost for a given distance with reasonable profit added, might serve to put an end to serious abuses of power by some roads. But the farmer, of all men, should guard well against any restriction which would prevent the reduction of rates, wherever competition prompts it, by requiring as a condition a corresponding reduction to many other points at which no profitable enlargement of business would follow. Still less can it be the interest of the farmer to frighten capital, proverbially timid, to drive it from Western investments, and thus to prevent that increase of railroad facilities upon which, as facts have shown, the value of Western farms so largely depends.
But no possible change in rates of freight which can be reached by State legislation, by pressure of public opinion, or even by a miraculous Christianization of railway managers, can do as much good as the removal of unjust and unnecessary burdens now imposed by the tariff. After all, freedom is the short road to many blessings. The ten great grain-gathering roads now make net earnings of about eighteen millions yearly. No one will propose that either of them should be deprived of all earnings by any regulation. Yet if all of them should be compelled so to reduce charges as to make no profits whatever, the sum taken from the actual cost of transportation would be less than the necessary increase of expense of operating these roads alone. That tariff removed, not these roads only, but a multitude of others, now crippled by the excessive cost of operating, would compete for the Western traffic. The cost of building additional roads would be reduced ; the same capital which now builds two miles to 100,000 acres, would suffice to build three miles, and give the Western farms during the next decade one half greater increase in value. No other remedy applies to the weaker as well as to the stronger roads ; the many which now charge high rates because they cannot help it, if relieved of one half of the present cost of operating, would have every inducement as well as opportunity to reduce rates, and struggle for a share of the traffic now denied them. It is not extravagant to say that a reduction of iron to the prices of 1860—at which the furnaces increased and the mills made large profits — would add one thousand millions to the value of Western farms, by consequent reduction in the cost of transportation alone.
This remedy, the only complete and effectual one, is also the very one which the farmers only can attain. On this question, political parties will never be formed until the West learns that it can elect a President without the aid of Pennsylvania. But, among the farmers, there is but little diversity of opinion on this question, and if it were generally understood there would be none. They shrink from grappling with it only because they are afraid of “ politics.” In due time they will learn that the less they have to do with politics, the more it hurts them. The grave responsibilities of self-government cannot be shirked by any class of citizens. Those who blindly follow any party, and thus suffer others to do their thinking, and practically their voting for them, will, in the end, find themselves robbed. It is in the nature of things, that, if a people intrusted with the power of self-government do not take care to govern themselves, somebody else will govern — and plunder them.
W. M. Grosvenor.