The great ore-docks of the West Shore Railroad at Buffalo

In 1887 the Interstate Commerce Commission was born, and ruinous rate-warring practically came to an end. The Commission required the railroads to file with it copies of all their rate-sheets, both freight and passenger, and ordered that in almost every case thirty days’ notice should be given of any change in the tariff. This meant that the old practice of tearing a rate-sheet apart in a single night, so as to jab vitally into the heart of a competitor, was at an end. And a dignified rate-war, with the opponents giving thirty days’ advance notice of their strategic intentions, is almost an impossibility.

Now come to the present. The freight-rate system of to-day is intricate, fearfully intricate, but it is a system. It begins by classifying all manner of freight into groups, for it must be apparent to any one that to the railroad the cost of handling different commodities must vary tremendously. Several factors make for such variation: the value of the shipment and the degree of risk for its safe transportation that the railroad must assume; its bulk, its weight, and the cost of handling at terminals, as well as the cost of any special equipment that may be necessary to carry it over the rails. No one would expect a railroad to haul a box-car filled with several hundred thousand dollars’ worth of silk for the same price that it hauled the same car filled with coke. So the railroad has grouped its freight into six general classes—varying from the most difficult and expensive to handle down to the easiest and the cheapest; and the rates for these six different classes also run in a rough proportion.

Some 8,000 articles, ranging from arsenic to step-ladders and from Christmas trees to locomotives, are grouped into these classes. Into them has gone about everything that the railroad will handle, save coal and a few other specialties which are rated as specific commodities and have special published rates. So a man shipping feather dusters from South Brooklyn to Ogdensburg, N. Y., would find that they came under Class 1, and that he would have to pay 44 cents a hundred pounds for the haul. If he was shipping steel beams between the same points he would find them under Class 4 and he would find the tariff at 23 cents a hundred. These six classes have been made standard throughout the country by all the railroads in coÖperation. The roads north of the Ohio River and east of the Mississippi use the so-called Official Classification; south of the Ohio and still east of the Mississippi, the Southern Classification; while all those west of the Mississippi use the Western Classification. So the shipper is no longer in much doubt in these matters, particularly in view of the fact that the three classifications are very much the same in all save minor details.

So much for the classification at this moment. It is quite simple when you come to place it beside the tariff sheets themselves, the printed form of an intricate structure, so great as to be almost shadowy in its workings. You ask a freight traffic-manager about rates. He is a skilled man, a man skilled in the economics of common carriers, and he tries his best to explain simply to you the basing charges for the transportation of commodities.

“Our rates,” he says, “are formed by many things. In a general way, by the competitive territory into which we go, and in specific cases by the volume of business that comes or goes from a single point. The direction of the movement, including whether cars must return empty or loaded, is another factor. Then, of course, there is the great factor to which both passenger and freight rates must comply—the necessity for the railroad earning more than it pays out. Acworth, the English economist, says that a railroad must pay for three things, the expense of maintaining the organization, that of maintaining the plant, and that of doing the work. Our revenues, from one source or another, must meet that triple expense.”

Ask this big freight-man about charging “what the traffic will bear” and he looks grieved. He turns about sharply and asks you:

“The earning-sheets of every railroad are public and they will show you that they are but making expenses, in a few cases paying about half the dividends that a healthy national bank or trust company or manufacturing enterprise might be expected to return to its investors. That makes it look as if we had begun to get some sort of scientific adjustment between expense and revenue, does it not?”

You dodge the point. You have no desire to quarrel or to delve into high railroad finance, and so you say you simply want to know about rates.

“It’s a little simpler than Sanscrit,” says the freight-man. “We begin to figure on common or basing points—”

You interrupt and inquire as to what a “common point” really is. Then the traffic expert gets down to primer talk and begins to explain the thing to your real understanding. It seems that some years ago, when the railroads first “pooled” they had to find an equitable method of making a rate-sheet. Everybody made suggestions, and a Pennsylvania freight-clerk, named James McGraham, made the right one. It was adopted and became the standard of to-day—which goes to show that good can sometimes come out of iniquity.

In this arrangement, the rate for each of the six different classes and all the special commodities, between New York and Chicago was made 100 per cent. Other towns, both further and less distant from New York than Chicago were given proportionate percentages, St. Louis being fixed at 117, Pittsburg 60, Cleveland 71, Detroit 78, Indianapolis 93, Peoria 110, and Grand Rapids at 100—the same as Chicago. At the eastern end of this particular bit of territory—the Official Classification—a reduction of two or three cents a hundred was made from the New York rates in favor of Baltimore and Philadelphia, a corresponding addition of two or three cents to meet the increased haul to Boston. No matter how you ship freight, these rates now hold standard, as long as the railroads remain faithful to their traffic associations. You may ship from Indianapolis to New York by way of Cleveland and Albany, by Marion and Salamanca, by Columbus and Pittsburgh, or by Cincinnati and Parkersburg, and although there is quite a wide variance in mileage between these routes, the rate is the same on all the different roads that go to form them.

This standard, simple as things go in freight-rates, was not adopted in a moment. Bitter contentions on the part of cities and of shippers had to be settled before it ruled. After it ruled, it was easy for each road to build its own tariff upon it. Together these form a vast structure, one that is constantly changing, as one road or another changes its tariff under the pressure of shippers or of civic bodies, or possibly a desire to establish more equitable schedules; and the work these changes make can be imagined when it is stated that a single one of them in the Official Classification territory causes more than eight thousand changes in the rate-sheets of the railroads.

The choosing of Chicago as the “one hundred per cent” city in the northeastern territory of the United States repeated the compliment to her prowess as a traffic city, that the great yards which hedge her in for miles have paid her for many years. She is one of the very greatest basing points, where multiple rates or percentages are built from the single. Most of the very important commercial cities share this distinction, which is further shared sometimes by comparatively unimportant points that happen to be the terminals of rather important railroads. Thus we find Cincinnati and Henderson, Louisville and Evansville, St. Louis and Davenport, Chicago and Peoria, Omaha and Sioux City, Kansas City and Leavenworth, all possessing this railroad distinction.

So much for the standard rates. Just as certain railroad lines running from New York to Chicago are permitted to charge two dollars less for tickets than other “standard lines,” because of slower running time, so does the same factor make a “differential” in freight rates. Big roads boast that they can haul the first-class freight—the “preference freights”—from one city to the other in sixty hours. Others take a longer time, and are permitted by their larger competitors to make their prices a shade lower because of slower running time in freight service. Such a “differential” is the Grand Trunk, handling New York-Chicago freight by a roundabout route, from New York by water to New London, Conn., and thence over the Central Vermont up into Canada and the Grand Trunk’s main line. Obviously such a longer route adds to the running-time and would be at a keen disadvantage in securing travel, without a lower rate as bait for the shipper. We have used New York-Chicago differentials simply as illustrative cases. The differentials are apt to be found in any corner of the country where there are long hauls and a number of railroads fighting to secure them.

But the Grand Trunk as a factor in Chicago traffic to and from Boston brought one of the earliest and most interesting decisions from the Interstate Commerce Commission. St. Albans, Vt., complained to that board that its local freight rate by Boston & Maine and Central Vermont from Boston was higher than the through rate from Boston to Chicago. On the face of it, it seemed as if justice must have rested with St. Albans, but the railroad was able to prove its case and win a decision. It showed that it could not live on shipments between Boston and St. Albans and other local non-competitive points, or on the business interchanged between these points. To earn its bread and butter it must fight for the rich Chicago traffic; and to be in a position to fight for that traffic, despite some disadvantage of location, it must make very low rates.

It proved that these low rates were possible for business that went through in solid trains, like Boston-Chicago traffic, and that each of these trains earned its proportion of the railroad’s profit. For when you come to handle freight at St. Albans, more particularly the case in still smaller towns, you bring on a new traffic expense, and because of this expense we get what is known as “back haul.”

On the “back haul” small towns suffer and must probably continue to suffer until a still more equitable system of railroad rates can be devised. Sometimes it may come about in such a case at the St. Albans one just cited; in other times because of water competition, as in the famous Spokane case, to which we shall again refer; and sometimes it is merely an arbitrary charge laid by the railroad. In such cases the railroad reasons that it would cost, in time and train delay ten dollars for every dollar’s worth of freight switched off and delivered at certain small towns; and so it figures upon hauling to the nearest large division point with large yards, and sending it back from there on a way-train. When such a small town is nearer the division yard at the far end of the route the back haul charge develops, and the small town must grin and bear it. If the small towns and the small cities, with their vigorous organizations, begin to complain too bitterly of the present system, the traffic experts will turn to them and say:

“Devise a better system. Perhaps you would like the Australian system, where the charges diminish per mile, for each additional mile covered by a consignment?”

That may look good to the Secretary of the Chamber of Commerce, who has come down to headquarters with wrath in his eyes; it looks absolutely equitable to every one; and he nods yes. The traffic-manager gleams with joy. His quarry has stepped into the trap. He turns upon him.

“Where would your dandy little town of 35,000 contented folks be under the Australian system?” he demands. “The Australian system would concentrate all business at water traffic points, along the seaboard and the great lakes and rivers; it would concentrate all manufacturing at the points from which comes the raw material. Where would the seven wholesalers of your town that we are all so proud of be located under the Australian plan? If the railroads were to adopt it, it would save millions of dollars in bookkeeping alone, but there would not be an interior distributing point in the entire country.”

The Secretary of the C. of C. is flustered. He was a young newspaper reporter before he reached his present high estate. He flounders. The traffic man is a man of ready wit and even readier figures. Still the young Secretary feels that he must show a few grains of wisdom, and so he gently makes inquiry about the Spokane case.

That Spokane case, also a famous decision of the Interstate Commerce Commission, shows another factor in railroad rate-making, the serious influence of water competition. Indirectly it also includes the principle of the back haul. Spokane, which is much nearer Chicago than Seattle, was, like St. Albans, paying a higher rate for the “short haul” than Seattle was paying for a much longer haul. But Seattle is a prosperous port, and if the railroad did not make a very low rate to it, all the slow freight would go to it by water, where much lower transportation expense invariably makes much lower rates, and the railroad, to save its own skin, as it were, must make a low through rate there, charging a back haul or higher rate to Spokane from the large eastern points. If it charged Spokane a proportionate rate of the one to Seattle, which would then be lower, all the other inland towns would demand the same privilege, and the railroad would then be hauling property at a loss—a business which can have but one inevitable result.

“You see how complicated it all is,” the traffic manager tells the young Secretary, “and how we must use judgment all the while. We’ve got to figure individual cost for certain distances and localities and directions of traffic, figure in the varying cost of handling different sorts of freight, and then put in a percentage of the general cost of the business, just as the restaurant-keeper makes each patron pay proportionately for the cost of bread and butter, heat, light, service and rent, no matter how large or how small his check may be on any one occasion.

“We must use judgment, and we must make rates to keep the goods moving all the while. Suppose that both nails and crowbars are made in Pittsburgh and only nails are made at Williamsport. Suppose then that the rate from Pittsburgh to New York for both crowbars and nails is fifty cents a hundred, but that the rate from Williamsport to New York was but 38 cents. What chance would the nail manufacturer in Pittsburgh have against his competitor in Williamsport, when both men are making annually nails in tens of thousands of tons? It is to help the Pittsburgh man that we make a special 38-cent rate on nails from his town to New York; and when we keep filing these commodity rates at Washington, your shippers ask why we can’t have a standard rate-sheet, or the Australian system. The next time some one of them finds that he cannot sell plough shares in Texas because a man down in Fort Wayne has him beaten on standard rates, you watch him hurry here and ask for a special one.

“It is out of this clamor and contention of almost myriad interests, the ambitions of just such thriving little cities as your own, out of the skilled arguments of brainy men that the rate-sheet is born and kept living in a state of perpetual healthy change.”We are tired of rates and the factors that go to make them, and inquire what is the A, B, C of a freight transaction between the railroad and a shipper. The traffic-man makes it quite clear to us.

“When one of our agents receives a consignment of freight,” he says, “he immediately issues a bill of lading to the shipper, or consignor, as a receipt and as a contract for the shipment. From his duplicate of this bill of lading he makes out a way-bill, or manifest, which will accompany the car until the freight reaches its destination. This way-bill describes the shipment and the car into which it has been loaded, specifies the shipping point and the destination, the consignor and the consignee, the rate and whether or not the charges have been paid in advance or are to be collected at destination. A copy of this way-bill is given to the freight-conductor, who gives the station agent a receipt for the consignment. At that place of destination a freight-bill, containing a description of the shipment similar to that of the way-bill, and showing in addition the total charge collected or to be paid, is rendered to the consignee, and his receipt is taken for the shipment when it is delivered.”

“It seems quite simple,” you breathe softly.

“It is not,” is his reply, “for it has its complications. I’ll show you one of them.”

We step through swinging doors of green baize and for a moment from a traffic into an operating department, but an operating department that for the telling in a work of this sort is best allied with the story of the freight traffic. The traffic-manager points to a man sitting at a square and littered desk, his thoughts with sturdy intent upon the mass of correspondence which he is quickly sifting.

“He is the best car-service man in the country,” says our guide; and you recall when you were in the auditor’s office, that an accounting was being kept between the lines for the use of one another’s cars that went on through runs off upon strange or “foreign” lines. The traffic-man continues: “Ours is not a big road, as some roads go. Yet we receive about 40,000 cars a month and, of course, deliver something like the same number in the same thirty days. Yet there is not an hour of any day of the month that this man cannot tell where any one of these cars is, just how long it has been upon our tracks, just how much free time the consignee has for unloading it, or just how much he will have to pay the railroad for his delay in emptying it, so it can get back into service once again.”

That waiting charge, the traffic-man explains, is known in the parlance of his business as “demurrage”; and it is another keen example of the constant use to which a railroad puts its equipment, of the tremendous economy that is beginning to be practised in the modern science of railroading. You are introduced to the car-service man, bend low over his desk as he explains a bit of his work to you. Here, for example, is a car filled with automobiles bound from Detroit to a dealer in Worcester, Mass. This car, in a train of some 60 others, leaves Detroit east-bound over the Michigan Central Railroad. At Buffalo it is switched to the tracks of the New York Central & Hudson River Railroad. On the evening of the second day it arrives at Rensselaer, across the Hudson River from Albany, and is given over to the Boston & Albany Railroad. To make a concrete instance, let us see how the B. & A. handles the thing through its car-service department.

That department swings into quick action automatically, as soon as the car strikes B. & A. rails at Rensselaer. The freight agent there makes a note of the car and its contents from the way-bill which accompanies it; makes special note, perhaps, of the fact that it is a car designed particularly for the transportation of automobiles. Now let us presume that this big box-car is owned by the Michigan Central. The Boston & Albany will pay that owner railroad 35 cents a day rental—“per diem,” in the phraseology of the railroads—for the time it is upon B. & A. rails. There are at that very time perhaps hundreds of B. & A. cars on the Michigan Central, and at the end of 30 days these accounts and many, many others are sent to the auditor’s department, where they are balanced between the roads with the general freight and passenger accounts.

This movement of freight cars makes a valuable barometer of the general condition of business. The daily papers have a custom of making national compilations of car-service reports part of their most interesting market news. In dull seasons the cars come home from long service on other roads. But in very busy seasons all roads have little compunction about borrowing “foreign” cars for use in their local service. With shippers begging cars from every quarter and threatening all manner of dire things, 35 cents daily is a small rental to pay for the use of a roomy car. Besides, the other fellows are all doing the same thing, and no one road can hope to get all its cars back even with the use of a vigilant corps of young men who search “foreign” yards. But in the dull seasons they come trundling home, like lost cattle finding the big barn once again. In the business depression of 1907, a Western car-service man received cars that had been absent from the home road for seven years.

We turn from the car-service men back into a department that is strictly traffic. Coal service is one of the principal sources of income for this particular railroad. It stretches some of its branches into bituminous fields, and others through the anthracite fields that Nature, in some freakish mood, implanted in just a few counties of Northeastern Pennsylvania. That entire country is comparable to a cut of beef, the coal veins resembling streaks of fat that run hither and thither. As in beef, the lean predominates. The fat streaks are the valuable coal veins, the lean the earth, slate and rock in which the coal was planted during some great convulsion of Nature in the process of the creation of the world. How it got into this particular spot science cannot tell. What it is, further than the fact that it is mostly carbon, science only guesses. It guesses that it was originally bituminous coal and that by some process of intense squeezing in an upheaval of Nature, the oil and tar and gas of the bituminous coal was squeezed out and the much more valuable anthracite deposits created.

Mining consists in getting the streaks of fat anthracite out of the bulk of lean earth and rock. The veins run well down into the mountains, and, as do the little streaks of fat, lose themselves in the rock, or lean, to continue the simile. Some of the veins are but a few feet in thickness, while some run to as high as twenty and thirty feet, and, as a rule, the farther down into the earth they go the better the coal; and the farther down you go the more difficult and expensive is the mining.

Now, here is a traffic that demands and receives special attention. In other days the mining of anthracite coal was, itself, merely a department of operating for the half-dozen systems that stretched their rails into that valuable Pennsylvania corner. That work has now been removed into the control of separate mining companies; but the handling of coal is a great function of not only these roads, but of the systems that reach their tendrils into the valuable bituminous fields here and there about the country.

The great bridge of the New York
Central at Watkins Glen