The Heart Of The Railroad Problem - free ebook by Frank Parsons

Read as playlist

The Heart Of The Railroad Problem

Frank Parsons

43 chapters

8 hour read

Read as playlist

Selected Chapters

43 chapters

PREFACE

PREFACE

This work is one of the consequences of a conversation years ago with Dr. C. F. Taylor, of Philadelphia, editor and publisher of The Medical World and of Equity Series. The doctor said that Equity Series should have a book on the railroad question. The writer replied that there was room for a book dealing with the political, industrial, and social effects of different systems of railway ownership and control. A plan was adopted for a book, to be called “The Railways, the Trusts, and the People,”

2 minute read

Read Chapter

CHAPTER I. THE LAW AND THE FACT.

CHAPTER I. THE LAW AND THE FACT.

It is a principle of the common law that common carriers must be impartial. “They cannot legally give undue or unjust preferences, or make unequal or extravagant charges.... They are bound to provide reasonable and sufficient facilities. They must not refuse to carry any goods or passengers properly applying for transportation.... They have no right to grant monopolies or special privileges or unequal preferences, but are bound to treat all fairly and impartially.” [1] That is the rule of the co

2 minute read

Read Chapter

CHAPTER II. PASSES AND POLITICS.

CHAPTER II. PASSES AND POLITICS.

One of the most important forms of discrimination is the railroad pass. Many persons of wealth or influence, legislators, judges, sheriffs, assessors, representatives of the press, big shippers, and agents of large concerns, get free transportation, while those less favored must pay not only for their own transportation, but for that of the railway favorites also. A farmer and a lawyer occupied the same seat in a railroad car. When the conductor came the farmer presented his ticket, and the lawy

20 minute read

Read Chapter

The Deadhead Passenger Car.

The Deadhead Passenger Car.

Along with the less-than-carload lots of deadheads travelling on trip passes or annual passes, or transportation with a rebate attachment, there are carload lots going deadhead in private passenger cars. In a tour to the Pacific coast and back a score of private cars at different times were attached to the various trains I was on. A friend who went a year or so later counted nine private cars on his journey in California, four of them being attached to the same train at the same time, and in the

42 minute read

Read Chapter

Ticket Scalping.

Ticket Scalping.

For many years the railroads aided and abetted the ticket scalpers, paying commissions on the sale of tickets, [18] or making arrangements so that scalpers could get tickets from the railway offices for less than the regular prices. Railroad offices have been known to sell tickets systematically to scalpers at 33, 50, and 66 percent off, or ⅔, ½, and ⅓ of the regular rates. The scalper shared the discount with the passenger, and the railway prevented some other line from getting the traffic. In

4 minute read

Read Chapter

CHAPTER IV. FREIGHT DISCRIMINATION.

CHAPTER IV. FREIGHT DISCRIMINATION.

We come now to a kind of discrimination that enables a railway manager to determine which of the merchants, manufacturers, mine owners, etc., on his line shall prosper and which shall not; what cities and towns shall grow, what States shall thrive, what industries shall be developed. The purpose of discrimination may be (1) to keep business from going to a competing line; (2) to increase revenue by creating new business for which, if necessary, rates may be dropped very low, as anything above th

4 minute read

Read Chapter

The Granger Laws.

The Granger Laws.

In the early seventies (1872 and following years), Iowa, Nebraska, Minnesota, Kansas, and other States of the Middle West passed what are known as the “Granger laws,” fixing maximum rates and forbidding discriminations. Railroad commissions were also established in these States to control the roads, and it was hoped that these commissions, which grew out of the Granger agitation and were to represent the public interest and the people’s sovereignty in their relations with the railways, would be

1 minute read

Read Chapter

The Hepburn Investigation.

The Hepburn Investigation.

This most famous and enlightening investigation of the early period was that of the Hepburn Committee of New York in 1879. The committee found that many shippers were paying two or three times, and in some cases five times, the rates paid by their rivals. William H. Vanderbilt told the committee that, as a rule, all large shippers who asked for special rates got them. Among the men his road had helped to build up by special rates was A. T. Stewart, the great dry-goods merchant of New York. He ha

13 minute read

Read Chapter

CHAPTER VI. THE SENATE INVESTIGATION OF 1885 AND THE INTERSTATE COMMERCE ACT.

CHAPTER VI. THE SENATE INVESTIGATION OF 1885 AND THE INTERSTATE COMMERCE ACT.

In 1885 the United States Senate appointed a committee to investigate railway discriminations, etc., and this committee made one of the ablest reports that has ever been issued in relation to railway abuses. It threw a flood of light upon the nature and prevalence of discrimination, and the reasons for it. On page 7 of this report the committee says that our efficient service and low rates (low average rates) “have been attained at the cost of the most unwarranted discriminations, and its effect

8 minute read

Read Chapter

CHAPTER VII. THE INTERSTATE COMMISSION.

CHAPTER VII. THE INTERSTATE COMMISSION.

A strong Commission was appointed, the Chairman being Thomas M. Cooley, one of the ablest jurists in the country, Chief Justice of the Michigan Supreme Court, author of “Constitutional Limitations” and other works of the highest authority. The Commission started with a review of the evils the Interstate Act was intended to abolish, and entered earnestly upon the great work of enforcing the law. The Commission’s statement of the arrangements used by the railways for discrimination is so admirably

12 minute read

Read Chapter

Direct Rebates.

Direct Rebates.

Direct rebates on interstate traffic appear to have been checked for a few months after the passage of the Commerce Act, but the railroads admitted that they still gave rebates on traffic within a State [54] just as they continued to give passes, making them good within one State, insisting in respect to both rebates and passes that they had a right to give them because the law did not reach State traffic. Nevertheless, as the Commission remarked, such rebates inevitably affect the rates upon in

4 minute read

Read Chapter

CHAPTER IX. SUBSTITUTES FOR REBATES.

CHAPTER IX. SUBSTITUTES FOR REBATES.

Numerous substitutes for the direct rebate were used. In some cases $10 a car was paid on shipments of flour from the Northwest under pretence of paying for the cost of loading the car above the minimum weight. [62] Railroads paid 50 cents for the loading of each private stock car, and ¾ of a cent for every mile the car was hauled, loaded or empty. Yardage was also paid to the car-line for keeping the cattle in its charge in its own yards, at the rate of 3½ cents per hundred lbs. for all cattle

10 minute read

Read Chapter

CHAPTER X. DENIAL OF FAIR FACILITIES.

CHAPTER X. DENIAL OF FAIR FACILITIES.

The refusal to furnish cars in fair proportion is a familiar form of discrimination all through this period, usually in combination with other forms of preference. In Kansas, on the line of the St. Louis and San Francisco Railway, were two coal companies whose plants were of about equal capacity, and several individual shippers. The railway and its officials became interested in one of the coal companies, and by rebate and other process it was given rates which averaged only forty percent of the

4 minute read

Read Chapter

CHAPTER XI. CLASSIFICATION AND COMMODITY RATES.

CHAPTER XI. CLASSIFICATION AND COMMODITY RATES.

Classification and commodity rates afford many examples of discrimination in the period we are studying. We find furs and fur scraps classed as double first-class, while hats and fancy products, for which these commodities constitute raw material, were first-class. [89] Celery was classed with peaches and grapes, instead of with cauliflower and asparagus, lettuce and peas. [90] The charge for beans and peas (70 cents) was almost double the charge on tomatoes (44 cents). [91] Flour for export was

2 minute read

Read Chapter

CHAPTER XII. OIL AND BEEF.

CHAPTER XII. OIL AND BEEF.

Oil in Standard hands continued to receive favorable attention from the railroads throughout the middle period. The Combine was preferred by an “unreasonable mileage” payment of ¾ of a cent a mile on its tank cars, loaded or empty, [95] while others who attempted to ship in tank cars had to pay mileage to the railroads for the return of their empties; by practically compelling independents to ship in barrels, and charging for the weight of the barrel; and by making an arbitrary allowance of 42 g

13 minute read

Read Chapter

CHAPTER XIII. IMPORTS AND EXPORTS.

CHAPTER XIII. IMPORTS AND EXPORTS.

The low rates in favor of foreign goods and of domestic goods intended for export amount to a serious discrimination. Paul Morton told the United States Industrial Commission that goods were carried from Hamburg to Denver for less than the rates from Chicago to Denver. [113] Complaint was made many years ago that the Pennsylvania Railroad and other roads charged lower rates, even 50 percent lower, on goods shipped in from foreign countries than on domestic traffic of the same sort. Investigation

2 minute read

Read Chapter

CHAPTER XIV. LOCALITY DISCRIMINATIONS.

CHAPTER XIV. LOCALITY DISCRIMINATIONS.

Discriminations between localities, though less pronounced in this period than in the first, were nevertheless multitudinous and vital. In 1896 the railroads carried Minneapolis flour to New York for 10 cents a hundred, while charging New York State millers 18 cents a hundred to New York City. President Stickney of the Chicago and Great Western Railroad, in a discussion the same year with the representatives of other western roads before the I. C. C., said: “You charge the Kansas and Nebraska fa

9 minute read

Read Chapter

CHAPTER XV. LONG-HAUL DECISIONS OF THE SUPREME COURT.

CHAPTER XV. LONG-HAUL DECISIONS OF THE SUPREME COURT.

The long-haul clause did not realize the intent of its framers. It received a series of shocks from the United States Supreme Court, which produced, if not paralysis, at least a bad case of nervous prostration. [134] At first, believing that the law would be enforced in accordance with its purpose and intent to get rid of unjust and needless discrimination between localities, the Northern and Western roads revised their tariffs in good faith in reference to long and short haul rates, but, later,

9 minute read

Read Chapter

CHAPTER XVI. TEN YEARS OF FEDERAL REGULATION.

CHAPTER XVI. TEN YEARS OF FEDERAL REGULATION.

In “A Decade of Federal Railway Regulation,” after describing various forms of discrimination, H. T. Newcomb says: “The conditions described are fairly typical of those existing all over the United States. The Interstate Commerce Law has mitigated but slightly, if at all, the evil of unjust discrimination between individuals, has in but few and relatively insignificant instances moderated unjust discriminations between articles or classes of traffic, and has almost wholly failed to remedy the fa

7 minute read

Read Chapter

CHAPTER XVII. THE ELKINS ACT AND ITS EFFECTS.

CHAPTER XVII. THE ELKINS ACT AND ITS EFFECTS.

The “Elkins Act,” approved Feb. 19, 1903, amended the Interstate Act in some important particulars. It provides that any failure to publish rates and charges, or any departure from the published tariffs, or any offer or grant of any discrimination, rebate, concession, or device of any kind whereby transportation is obtained at a less rate than the tariffs published and filed with the Commission, shall be a misdemeanor of the corporation as well as of the officers or agents concerned. Every shipp

9 minute read

Read Chapter

CHAPTER XVIII. THE WISCONSIN REVELATIONS.

CHAPTER XVIII. THE WISCONSIN REVELATIONS.

In 1903, as stated in a previous chapter, Governor La Follette began an investigation of the railroads in Wisconsin, in relation to illegal deductions from the gross earnings returned by them as a basis for taxation. The investigation covered the period from 1897 to 1903, and it was found that $10,500,000 of illegal tax deductions had been made in that time, about $7,000,000 of which was in the form of unlawful rebates and discriminations. Every railroad of any importance in the State had paid r

4 minute read

Read Chapter

CHAPTER XIX. THE COLORADO FUEL REBATES AND OTHER CASES.

CHAPTER XIX. THE COLORADO FUEL REBATES AND OTHER CASES.

In the Colorado Fuel and Iron Case, investigated by the Commission in 1904 and 1905, it was shown that the Santa Fe has persistently violated the Interstate Act, the Elkins Act, and the injunctions issued by the United States Circuit Court. The Santa Fe tariff filed with the Interstate Commission May 24, 1903, and in effect till November 27, 1904, made the rate on coal from the Trinidad district, Colorado, to Deming, N. M., $4.05 a ton; but Mr. Biddle, General Traffic Manager of the Santa Fe, te

23 minute read

Read Chapter

CHAPTER XX. FREE CARTAGE, STATE TRAFFIC, DEMURRAGE, THE EXPENSE BILL SYSTEM, GOODS NOT BILLED, MILLING-IN-TRANSIT.

CHAPTER XX. FREE CARTAGE, STATE TRAFFIC, DEMURRAGE, THE EXPENSE BILL SYSTEM, GOODS NOT BILLED, MILLING-IN-TRANSIT.

In a recent St. Louis case it appears that the railroads were paying 5 cents a hundred to transfer companies for carting goods across the river from East St. Louis to the depots in St. Louis. They paid the same amount to the Grant Chemical Company for hauling their own goods across the river and also to the make-believe transfer company of the Simmons Hardware Company, the traffic manager of which organized the company’s own teams into a little transfer company on purpose to get 5 cents per hund

6 minute read

Read Chapter

CHAPTER XXI. MIDNIGHT TARIFFS AND ELEVATOR FEES.

CHAPTER XXI. MIDNIGHT TARIFFS AND ELEVATOR FEES.

“Midnight tariffs” or “flying tariffs,” changed while you wait, [212] are used to give rebates and preferences all wool and a yard wide, strictly gilt-edged and in accord with the statutes made and provided for the publication and observance of schedule rates. When a big shipper gets ready to send a large amount of freight the railroads will suddenly make lower rates, publish them just in time to fulfil the law, and the moment the shipment is made the lower rates are withdrawn. For example a mil

3 minute read

Read Chapter

CHAPTER XXII. COMMODITY DISCRIMINATIONS.

CHAPTER XXII. COMMODITY DISCRIMINATIONS.

Unfair discriminations in respect to special commodities are very common. The New Haven and Hartford charges $80 a car on peaches from New York to Boston, 228 miles, while the same peaches come from Georgia points to New York, 1150 miles, for $162 a car. The Commission says the $80 rate is arbitrary and unjust and that $50 a car would be a reasonable charge. [217] The Atlantic Coast Line Railroad made its rate on peaches depend on the valuation put on the fruit, in order that by increase of rate

5 minute read

Read Chapter

CHAPTER XXIII. DISCRIMINATION BY CLASSIFICATION.

CHAPTER XXIII. DISCRIMINATION BY CLASSIFICATION.

The intricacies of classification afford boundless opportunity for favoritism. Classification is always more or less arbitrary by necessity, and is frequently more arbitrary than necessary. One industry or wholesale trade is often charged two or three times as much as another for the same service. The New York Railroad Commission found the railroads charging twice as much on dry goods as on coffee or sugar and protested against the rule as utterly indefensible, but the railroads refused to compl

4 minute read

Read Chapter

CHAPTER XXIV. VARIOUS OTHER METHODS.

CHAPTER XXIV. VARIOUS OTHER METHODS.

Railroads are in the habit of giving special rates on stuff sent over their lines for other roads. “It is done,” says one of the leading traffic managers of the country, “on everything that is handled,—supplies, coal, and material.” [239] This enables any one who stands in with the management of a railroad to have coal, etc., billed at low rates to the railroad for him. The routing of freight is the source of a double discrimination. Connecting lines in some cases pay shippers to route the goods

8 minute read

Read Chapter

CHAPTER XXV. TERMINAL RAILROADS.

CHAPTER XXV. TERMINAL RAILROADS.

Another method of preference without departing from published rates is the division of rates with private terminal companies or mere switching roads, or roads existing only on paper. A man of large experience in railroad matters said to me not two years ago that “Since injunction suits were instituted by the Interstate Commerce Commission in 1900, published tariffs have been more generally followed. But big concerns build a mile or more of railroad of their own, or incorporate their switch track

10 minute read

Read Chapter

CHAPTER XXVI. PRIVATE-CAR ABUSES.

CHAPTER XXVI. PRIVATE-CAR ABUSES.

Some of the worst discriminations now prevailing are connected with the private-car system. The private car originated in the need for special equipment for particular purposes. It was clear that the transportation of live-stock, fruit, vegetables, and other perishable products might be facilitated by the use of special cars. When the inventors of improved stock cars and refrigerator cars went to the railroad managers, they were informed that the railroads had no money with which to make experim

41 minute read

Read Chapter

CHAPTER XXVII. THE LONG-HAUL ANOMALY.

CHAPTER XXVII. THE LONG-HAUL ANOMALY.

The long and short haul clause is still broken by the railroads as well as by the Supreme Court, especially in the West and in the South, where the basing-point system causes such grievous discriminations. For example, with a rate of 48 cents from New York to Atlanta and a local rate of 38 cents from Atlanta to Suwanee, the rate from New York to Suwanee is 86 cents, although Suwanee is 31 miles nearer New York than Atlanta. This system is not confined to places that have water competition. A con

9 minute read

Read Chapter

CHAPTER XXVIII. OTHER PLACE DISCRIMINATIONS.

CHAPTER XXVIII. OTHER PLACE DISCRIMINATIONS.

There are multitudes of other place discriminations besides those related to the long and short haul question. The Business Men’s League of St. Louis and the St. Louis Merchants Exchange complain of serious discrimination against their city as compared with Chicago, Kansas City, Omaha, etc., in rates on corn, wheat, oats, groceries, hardware, and cotton. [319] Des Moines gets supplies from Chicago at 60 cents, while Fort Dodge, the same distance from Chicago, pays 72 cents. [320] Shoe manufactur

5 minute read

Read Chapter

CHAPTER XXIX. NULLIFYING THE PROTECTIVE TARIFF.

CHAPTER XXIX. NULLIFYING THE PROTECTIVE TARIFF.

The railroads continue to nullify the protective tariff upon imports, and erect a counter protective tariff of their own in favor of foreign goods and against domestic manufactures, aiming to supply home markets, while on the other hand they facilitate the export of our productions by rates much lower than the charges on the same goods for the same haul when intended for domestic consumption. The effort seems to enable our producers to capture foreign markets, and to give our markets, especially

8 minute read

Read Chapter

CHAPTER XXX. SUMMARY OF METHODS AND RESULTS.

CHAPTER XXX. SUMMARY OF METHODS AND RESULTS.

We have dug down through the geologic epochs of discrimination, and have examined the living varieties. The predominant forms have changed, but none of the species we find among the fossils of the earlier strata have become extinct, though some of them, ticket scalping and the direct rebate for instance, are much less in evidence than formerly. Passes [344] and other personal discriminations [345] still prevail, and the assortment of favoritisms in freight traffic is larger than ever. Here is a

13 minute read

Read Chapter

CHAPTER XXXI. DIFFICULTIES OF ABOLISHING DISCRIMINATION.

CHAPTER XXXI. DIFFICULTIES OF ABOLISHING DISCRIMINATION.

It is difficult to enforce the law against discrimination, because of the strong interests that call for it, the secrecy of many of its forms, the reluctance of shippers to make complaints for fear of persecution, and the resistance offered by railway officers to efforts to get at the facts, leaving the country during an investigation, refusing to answer truthfully on the witness stand, burning books and papers that might reveal the facts to courts or other investigating bodies or enable the off

27 minute read

Read Chapter

Pooling.

Pooling.

Many railroad men have advocated the legalization of pooling and combination as a remedy for discrimination. A number of railway presidents and managers have told me they believed this would stop discrimination, and that nothing else would. Others have assured me that pooling could not stop discrimination, and even those most emphatic at the start in the opinion that pooling is the needful remedy have admitted on further questioning that pooling would only stop one class of discrimination. Take

6 minute read

Read Chapter

Wrestling with the Long-Haul Abuse.

Wrestling with the Long-Haul Abuse.

In respect to the long and short haul abuse, Commissioner Fifer, Brooks Adams, and others argue that the practical remedy is to make the long-haul clause of the Commerce Act binding except where the railroads come in and get an order releasing them to a specified extent from the operation of the clause. [394] The idea is to put the burden of showing the need of an exception on the railroad. At present the burden really rests on the complainant. The railroads disregard the law with impunity. It i

50 minute read

Read Chapter

A Drastic Cure for Rebating.

A Drastic Cure for Rebating.

For the cure of discrimination, the Transportation Committee of the New York Board of Trade suggests that Congress enact a law authorizing the Interstate Commission, in case of any rebate or other device for securing low rates, to declare that the net rate so made by the railway or car owners shall be the regular tariff rate, published as such, and open to all shippers; said new rate to take effect immediately, subject to appeal within 60 days upon questions of law. [395] The Committee says the

6 minute read

Read Chapter

Objections of Railroad Men.

Objections of Railroad Men.

Railroad men object to further regulation till the effectiveness of the present laws has been thoroughly tested. In answer to the question what he would do to stop discrimination, President Tuttle of the Boston and Maine Railroad said to me this morning: “Enforce existing laws. The Interstate Commission can investigate the railroads. It need not wait for complaints. It can act on its own initiative. It can have experts examine the railroad books. It can publish the facts, and publicity is a powe

4 minute read

Read Chapter

Alleged Errors of the Commission.

Alleged Errors of the Commission.

Another railroad president turns the lime-light of mathematical analysis on the errors of the Commission. David Willcox, President of the Delaware and Hudson, says: “About 93 percent of the decisions of the Commission which have been passed upon by the courts have been held to be erroneous. In case, therefore, the Commission had the future rate-fixing power, so far as its decisions were in force until the courts passed upon them, injustice would be accomplished in 93 percent of the cases. For th

37 minute read

Read Chapter

CHAPTER XXXIV. CAN REGULATION SECURE THE NEEDFUL DOMINANCE OF PUBLIC INTEREST?

CHAPTER XXXIV. CAN REGULATION SECURE THE NEEDFUL DOMINANCE OF PUBLIC INTEREST?

It is questioned whether any form of regulation can overcome discriminations. One of the ablest members of the Interstate Commerce Commission said to me: “No, regulation can never stop discrimination.” And the man who is regarded by many as the leading railroad expert in the country replied to my question in substantially the same way. “Regulation properly so-called cannot eliminate discrimination, though it may greatly diminish it.” What he meant was that a control strong enough to eliminate di

8 minute read

Read Chapter

CHAPTER XXXV. HINTS FROM OTHER COUNTRIES.

CHAPTER XXXV. HINTS FROM OTHER COUNTRIES.

Germany tried private railways for 25 years, and Austria tried them over a quarter of a century, and they have tried the two methods side by side ever since the public system was organized. In New Zealand, also, and Australia the two systems have been tried side by side. And in every one of these countries where they have thoroughly tried both systems the conclusion by an overwhelming consensus of opinion is that public railways serve the public interests best, and also make lower rates and serv

27 minute read

Read Chapter

A.—THE COAL-CARRYING DECISION, U. S. SUPREME COURT.

A.—THE COAL-CARRYING DECISION, U. S. SUPREME COURT.

Since this book was put in type the United States Supreme Court has sustained the Interstate Commerce Commission in an important suit brought by the Commission against the Chesapeake and Ohio Railroad, and the New York, New Haven and Hartford Railroad under the Elkins Act. The Chesapeake and Ohio agreed to deliver at New Haven 60,000 tons of coal at an aggregate cost which, after deducting the market price of the coal at the mines and the cost of transportation from Newport News to Connecticut,

3 minute read

Read Chapter

B.—REGULATION OF RATES.

B.—REGULATION OF RATES.

In the Boston Transcript for February 24, 1906, President Hadley, of Yale University, criticises the Hepburn Bill because it makes “the decision of the Commission itself final on all questions of fact,” and he predicts that if such a bill is enacted into law it will be a failure, although he does not believe it practicable to obtain a better measure now. President Hadley bases his prediction of failure on his interpretation of the experience of England. He says that the English Railway Act, 1873

8 minute read

Read Chapter