The nature of the traffic handled by a carrier is the most important consideration to be kept in mind in interpreting revenue per ton mile data. This is most clearly shown by comparison in the table between the group of coal and ore roads and the New England systems. The revenue per unit of service on a road whose traffic is largely of low grade most necessarily be low. Probably the lowest average ever reported in the United States was for the Chesapeake & Ohio in 1899—the low point in the general movement of freight rates—when its ton-mile revenue touched O.362 cents. Whenever the business of a carrier consists largely of coal, grain, lumber or other low-grade commodities on which the freight charges must necessarily be exceedingly low in order that the freight shall move at all, the revenue per ton mile must consequently stand at a low figure. Bald comparison of any such revenue with a corresponding figure for high-grade roads is obviously misleading and fallacious. It does not mean that the latter necessarily charges more for the same service; but its higher revenue per ton of freight moved one mile may be, and very likely is, merely due to the fact that much of its tonnage is capable of bearing higher charges. From this circumstance it also follows that comparisons from year to year either for single roads or for the entire railway net, must be made in the light of variations in the proportion of high and low grade tonnage. The trend seems to have been steadily downward in this regard year by year. A steady increase, relatively, in the volume of low-grade traffic has long been under way.[490]

The development of the last twenty years in the United States has certainly been in favor of a great increase in low-grade traffic. This is shown by the following table, giving the per cent. of tonnage in various classes upon the trunk lines from New York to and beyond Chicago.

Per Cent. of Tonnage in Each Class of Freight on Trunk Lines, Westbound[491]

From this it appears that "sixty per cent. of the tonnage is now (1893) carried in fourth, fifth and sixth classes.... Prior to 1886 no considerable number of articles were permanently assigned to the fifth and sixth classes; they embraced usually a few commodities which had been assigned a special rate." Further consideration of this table shows that first-class freight, forming thirty per cent. of the tonnage in 1878, declined to less than twenty per cent. in 1892; while at the same time sixth-class freight ran up from nothing to 43.4 per cent. in 1892. Fourth-class freight declined during the same period from 57.9 to 10.4 per cent. These figures simply mean that a great deal of traffic is now carried upon American railways for long distances which a generation ago it was believed could not be profitably moved at all. The utility of the railway service, once supposedly confined entirely to freight of the higher classes, has been gradually extended until today there is no commodity too cheap to be handled with the improved facilities. This vast increase in the amount of low-grade traffic is undoubtedly responsible to some degree for the apparent decline of freight rates so often instanced. Fortunately upon this point we have the specific testimony of traffic managers of long experience. On the other hand, in justice to the railways it must be admitted that the proportion of local business at high rates, which would tend to increase the average revenue per ton mile, has steadily increased with the growth of the country; and, moreover, as has already been shown, in times of exceptional prosperity the movement of high-grade freight has increased in more than its due proportion.[492] Nor are these facts adduced in criticism of American railway policy. They are simply intended to draw attention to the fact that, while changes of freight rates have undoubtedly been considerable, they have not been as great as is oftentimes plausibly stated. As for comparisons with foreign countries, they are practically invalidated by the difference in local conditions, as, for instance, in England where local delivery is involved. In the United States such service is charged in addition, either as drayage or express.

The increased diversification in the freight tonnage of American railways, always in the direction of a larger proportion of traffic from general business rather than from the movement of staple commodities, is also of great fiscal significance. It means not only more business, but better and more permanent traffic. The difference, moreover, between the charge which high-grade freight, such as merchandise, will bear by comparison with the highest rate upon grain or coal, is much greater than any difference in the cost of service. The profit, therefore, attendant upon the movement of traffic other than low-grade commodities is strikingly great; although, of course, profitableness is a question of relativity between operating cost and revenue. Heavy train loads of coal at 4 mills per ton mile may be better business than merchandise in light carloads at a rate five times as high. At all events the tendency toward higher grade tonnage has been notable, especially since 1900. Many western roads and even the trunk lines, formerly dependent in a great measure upon the movement of crops, are now affected only indirectly in this regard, by reason of their influence upon general business. The growing diversification of traffic because of its financial importance merits more concrete illustration.

The Lake Shore & Michigan Southern, during the calendar year 1900, increased its freight traffic by 1,760,000 tons. Of this only 194,000 tons were specified as products of agriculture and animals, while products of the forests actually declined by 84,000 tons. In other words, nearly all of this phenomenal increase in business in 1900 was due to the movement of manufactures, minerals and merchandise. A comparison made for the last three decades makes this point still more clear. Since 1880 there has been very little increase in agricultural tonnage upon this trunk line, with an actual decrease in the movement of grain. This, perhaps, may be in part explained by the great development of grain traffic upon the lakes, which, of course, absorbs much business formerly carried by this road. In other words, farm products and provisions transported by the Lake Shore rose from 3,465,000 tons in 1880 to only 3,843,000 tons in 1900. The movement of petroleum and lumber actually decreased, owing to the construction of pipe lines and the clearing of the forests. On the other hand, manufactures and merchandise increased threefold in volume, rising from 3,754,000 tons in 1880 to 14,932,000 tons in 1900. Whereas agricultural products in 1880 formed over forty per cent. of the traffic upon the Lake Shore, they constituted in 1900 less than twenty per cent. Much the same tendency is manifested by other routes. Thus for the fiscal year 1901, the Chesapeake & Ohio reported substantial decreases in the actual tonnage of flour, grain, sand, stone, iron, etc.; but a largely augmented movement of general merchandise of the higher classes. Many of the soft-coal roads, such as the Cleveland, Lorain & Wheeling, which used to carry nearly two-thirds of their tonnage in the form of coal, now carry less than forty per cent. A feature of importance in the great prosperity of the anthracite coal roads has been a steady increase in the volume of their general traffic as distinct from coal tonnage. All over the country, in short, the steady growth of population and the decline in the proportion of grain for export is reducing, relatively, the importance of low-grade tonnage, supplanting it by a movement of supplies and merchandise in the contrary direction.

The classification of tonnage for the United States, as a whole and by main divisions, is shown by the following excerpt from Statistics of Railroads for 1909:

Freight Traffic Movement

Conclusions from these figures are well worth noting. The importance, measured by traffic rather than revenue, of low-grade freight classed as products of mines, is notable. This forms more than half the aggregate tonnage for the United States, and has appreciably increased within the last ten years. In 1910 it constituted almost two-thirds of the business in trunk line territory and almost one-half in the West. Products of agriculture, on the other hand, even in western territory, amount to less than one-fifth of the total tonnage. These facts indicate clearly the diverse conditions under which railways operate in different parts of the country. The next table,[493] besides incidentally throwing more light upon the relative tonnage of staple commodities, will suffice to establish our main point—namely, that the nature of the traffic vitally affects all ton mile revenue statistics. It entirely, in fact, overshadows mere changes in the general level of freight rates. Any argument concerning the movement of such charges, which fails to correct fully for this factor, may be dismissed at once as valueless.

Summary of Selected Commodities for the Year Ending June 30, 1910[494]

A second consideration in the interpretation of ton mile data, of equal importance with the nature of the traffic, is the length of the haul and the proportion of local as distinct from through business. This necessarily follows from the nature of a distance tariff. Only on condition that the rate augmented in direct proportion to the increase of distance, would the revenue per ton mile remain constant. The diagram at page 108 is instructive in this connection. The charges—denoted by the height of the curve at any given point—tend to grow much less rapidly than distance. In other words, the rate curve approaches a parabolic form, until after a certain point it becomes practically a flat rate, independent of distance. This fact of necessity causes ton-mile revenue to decrease steadily with the length of the haul. For ton-mile revenue is but the ratio of the abscissa to the ordinate of the curve at any given point; the former being the rate charged, the latter the distance.

In practice, therefore, the longer the haul in general, the lower is the revenue per ton mile.[495] This is clearly shown by comparison of the two items for given roads, otherwise similarly circumstanced, in the table already discussed on page415.

Closely akin to the length of haul in affecting ton-mile revenue, is the proportion of local traffic. This also is in practice vital. Obviously it costs much more to handle local business, the terminal expenses being far greater in proportion. And at the same time a larger proportion of the freight moves in small lots locally. This difference between revenue per ton mile for local business and through traffic is very great. On the Louisville & Nashville, for example, in 1886, it was 1.48 cents for the former, as against .99 cents for through business.[496] The Illinois Central in 1900 reported an average revenue per ton mile on through freight of 0.48 cents, while for local freight the corresponding figure was 1.17 cents, the average of both being 0.56 cents. It is apparent, therefore, that any accurate determination of the level of charges in general must take account of such facts as these.

Any carrier like the Southern Pacific, the Chesapeake & Ohio or the Erie, with relatively little local traffic and a business dependent largely upon the long haul, will conduct transportation for a materially lower figure than roads in a densely settled territory. This consideration was recently illustrated in Massachusetts experience.[497] The Fitchburg Railroad, devoted to long distance, low-grade business by the Hoosac tunnel route, was consolidated with the Boston & Maine in 1900. Its revenue per ton mile was formerly .818 cents based upon such traffic. When it was merged with the Boston & Maine,—considerably blessed as it is with local traffic,—the latter's ton-mile revenue fell from 1.44 cents in 1900 to 1.158 cents in the following year. There had been no change whatever in freight rates.

A word may be interposed in this connection as to the peculiar movement of local as distinguished from through rates through a series of years. Local charges have decreased relatively little, probably because of the absence of competition in such cases. They have, moreover, decreased very unevenly in different parts of the country. Apparently one of the first and most beneficent results of the enactment of the Act to Regulate Commerce in 1887, was a reduction of local rates in various parts of the country, in order to bring the rate adjustment into conformity with the long and short haul clause. This was peculiarly the case in the northeastern or trunk line territory. It does not seem to have occurred in the southern states, where the long and short haul principle has never been accepted in its entirety. The most comprehensive report upon the subject concludes that local rates have in various parts of the country, during the last quarter century, been reduced from ten to fifty per cent.[498] Returns from various railway commissions interrogated by the Industrial Commission in 1900 upon the subject showed highly variable results. From Mississippi it appeared that "local freight rates in this state have been materially lowered in the last four years, especially in the lettered classes"; while in the adjoining state of Alabama "local rates on freight have decreased very little in the last five or six years, and have not decreased in proportion to the decrease made in interstate rates." In New England, comparison of actual freight rates did not indicate any very considerable reduction, the absence of competition in this section being, perhaps, in part responsible for this result. A comparison of published freight rates in southern territory, without making allowance for departures from such tariffs, apparently showed a very much smaller reduction than in other parts of the country. It is also apparently true that the reduction of cotton rates in this section, while considerable, had been much less rapid than that of the rates upon grain from Chicago to the seaboard in either direction. A few instances of an actual rise of local charges since 1900 may be cited.[499] But the fact that competition has been substantially eliminated in consequence of widespread consolidation since 1900, has rendered the movement of local and through freight rates more nearly alike all over the country than they were prior to that time.

The third consideration which must always be kept in mind in the interpretation of revenue per ton mile is the volume of the traffic handled. Any comparison of freight rates which is not made in the light of increase in the business transacted, is bound to be misleading. A reduction of cost of operation per unit, attending a growth in volume, has already been fully described in connection with the theory of rates. And it is but natural that a reduction in the rate should follow any lessening of cost. Moreover, a large volume of business usually implies a relatively greater amount of low-grade tonnage. In order to bring out this relationship the second column in the table on page 415 has been added. This permits a correlation between freight density—that is to say, ton miles per mile of line and revenue per unit of service. It will be noted that, in general, the revenue unit falls as the volume of traffic, measured by freight density, rises. This is strikingly shown by comparison of the groups of western and transcontinental roads with those concerned mainly with the carriage of coal and ore. The soft coal Hocking Valley road with its enormous density and very low revenue per ton mile, affords an excellent example. It is indubitable that the trunk lines and the coal roads are able to transact business for relatively low rates, not only because their tonnage is of low grade, long haul or both; but also because of its immense concentration per mile of line, permitting all of the economies incident to large-scale operation. In this connection, however, it should be noted as a general principle, that oftentimes it is not the mere increase in the traffic of a particular sort which is significant; but rather the growth in the total volume of business of all kinds.[500]

The foregoing criticism of the use of revenue per ton mile as a means of showing the course of freight rates in general has been mainly destructive. This figure, nevertheless, will in many cases be found highly serviceable in the examination of particular rates. It may properly be used to determine whether a given commodity is contributing its due proportion to the general budget of the carrier. Revenue per ton mile can, of course, be computed for each particular service; inasmuch as both the income and the volume of that service are matters of independent record. The table on page 421 brings out this point. Or take a division of the Illinois Central for 1900. Its revenue per ton mile was 0.136 cents on wheat, 0.79 cents on flour, 4.267 cents on sugar-cane, 0.309 cents on soft coal, 1.148 cents on stone and sand, 2.238 cents on furniture, 3.165 cents on merchandise. On this basis one may properly inquire as to whether under all the circumstances wheat, coal or merchandise are doing their part, in the light of the particular expenses attached to their carriage, in maintaining the general burden of indivisible costs. When copper yields a revenue per ton mile of only 0.285 cents, the rate being only 1.6 per cent. of its market value, while on wheat for the same haul the corresponding unit of return is 0.4 cents per ton mile—equal to one-fifth of its worth—there is evidently a maladjustment favoring one commodity over another.[501] In a number of recent cases questions of this sort have been rather satisfactorily answered by resort to this unit of measurement.[502]

The curve of revenue per ton mile, as shown by diagram at the head of this chapter, certainly gives no indication of the considerable increase of freight rates which has ensued since 1900. This follows from the fact that in at least two of the three respects, above mentioned, the trend of events, independent of any change in the level of freight rates, has operated to greatly dilute the revenue per ton mile. The growth of low-grade traffic and the immense augmentation in tonnage have both conspired to render this unit entirely useless for purposes of comparison year by year. The average length of haul alone seems to have remained much the same during the decade. Although the curve does not show it, there has been a notable upward movement all along the line, responsible, as we shall see, for much of the new Federal legislation. How may we, then, estimate the amount of these increases? Under such circumstances, it is necessary to turn to the movement of actual rates.[503] The course of these down to 1900 is best shown upon the same diagram above mentioned by means of the dotted curve, entitled Actual Rate Index, the scale for which is given at the right. This rate index is simply the average of the actual published rates for a number of specific commodities between certain given points. It differs in principle from the ton mileage revenue curve, in that it concerns merely the published rates, taking no account of rebates or departures from those rates in actual practice. A comparison of its course with that of the ton mileage curve shows a more abrupt decline from about 1878 to 1886, since which year the course of both lines is about parallel. Its irregularity is also significant as illustrating the violent fluctuations to which the published rates were subjected jected prior to 1887. Judged by this curve, the situation has been more settled since the enactment of the Act to Regulate Commerce in 1887.

Were data at hand for a continuation of this line to 1910 it would undoubtedly afford a fairly reliable measure, in general, of the substantial increase of rates which has taken place during the decade. The main objection to it would be that it did not weight the average according to the volume of the business carried for each of the thirty-seven concrete rates chosen.[504]

Tracing the rise of actual rates since 1900 is rendered peculiarly difficult, also, by reason of the fact that few of the changes took the form of an outright advance in charges. The end in view was more often accomplished surreptitiously. The substantial increases in 1900[505] which inaugurated the upward movement were mainly accomplished by changes of classification. Modification of the carload ratings brought about the same result. A notable instance appeared in the complaint of the dairy men in Wisconsin in 1909. An annual shipment of 38,000,000 lbs. of cheese to Chicago before 1899 moved at twenty cents per one hundred pounds, irrespective of the size of the consignment. Ten years later the rate had become twenty-eight cents for less-than-carload lots, and twenty-two and one-half cents for wholesale shipments. The relative disability of the small shipper under the new circumstances is as significant as the rise of rate for all.[506] The increase of charges might be brought about in another way without actually advancing rates by a withdrawal of commodity ratings, thereby subjecting the shipper to the higher scale of classified commodities. And, finally, a practical elimination of the rebate and the cessation of general rate wars has usually resulted in a very substantial increase in the revenue of the carriers as well as in the scale of charges imposed upon most shippers. Evidence upon this point is officially given in connection with the rate increases of 1903.[507] It thus appears that to follow step by step the movement of actual rates is an extremely complicated matter. Every factor entering into the determination of the charge must be considered; the distance tariff, the classification, minimum carload rules and a host of other specifications which enter into the final result. For our purposes it must suffice that the fact of a substantial rise of charges since the turning point in 1900 is beyond question.[508] On the other hand, it is indubitable that such increases as have occurred, arousing vehement protest among shippers, have been more widely advertised than changes in the opposite direction. Substantial reductions, especially on low-grade staples, have sometimes occurred. One is almost at a loss to strike a fair balance between the two, in the absence of dependable data.

The movement of passenger fares has been quite different from that of freight rates.[509] No marked decline during the last quarter of the nineteenth century took place. Growth in the volume of traffic was not accomplished by a reduction of charges. This is in consonance with the experience of foreign countries. Passenger business, while steadily growing, has increased less rapidly than freight tonnage. Generally, in other words, as measured by volume, freight business has become relatively more important with the progress of time. Fiscally the same thing is true. Only in New England does the revenue from this service approximate one-half of the total net earnings. The nature of railway competition explains why passenger fares have not decreased as rapidly as freight rates. Persons must necessarily be more or less directly transported from one point to another; while experience shows that competition in freight traffic may be exceedingly circuitous in route, goods even going hundreds of miles out of the direct line for transportation by water. This narrowing of the sphere of competition in the case of passengers has consequently operated to lessen the rate of decline. Another point to be considered in this connection is that no such increasing economies in the handling of passengers are possible as in the case of freight. Instead of decreasing the proportion of dead weight, which for passengers amounts to upward of ninety per cent., by any of the economies recently applied to freight traffic, it appears rather that the proportion of dead weight of equipment per passenger is increasing, owing to the necessity of providing more sumptuous accommodations. Bearing in mind all these facts, it appears not unreasonable that the progressive decline of passenger fares has continually lagged behind the decrease of freight rates. But the natural lethargy in the movement of passenger fares was rudely interrupted in 1908 in connection with the wave of legislation accompanying the Roosevelt campaign which culminated in the Mann-Elkins law. A widespread demand for lower passenger fares found expression in the passage by twenty-two states within five years of maximum fare laws. Eleven legislatures fixed the charge at two cents per mile, the others establishing it at less than three cents. Many appeals to the courts in connection with these statutes took place on the ground of confiscation, and sharp conflicts of authority between Federal and state governments arose.[510] Whether passenger rates would ever have declined without such exercise of authority is open to question, but the disturbance of established conditions at this time was extreme.

One further question with relation to the movement of rates merits consideration. In how far has the rise since 1900 been commensurate with the general upward movement of prices of other commodities than transportation—the particular commodity produced by railways? The evidence tends to show that prices in general have moved upward during the last ten years by approximately one-fourth, and it may be even one-third.[511] Have railway charges in general surpassed this rate or not?

Some activity of railway experts has been devoted of late to the elucidation of this question.[512] But, after all, is this inquiry of basic importance as bearing upon the general reasonableness of railway rates? Here, as so often elsewhere in the discussion of these questions, the need is for the analysis of such problems with reference to particular services and not in connection with matters in general.[513] It is conceivable that railway rates might and properly ought to increase under certain circumstances much more than in proportion to the general change in freight rates; or that, on the other hand, they might fairly be compelled to lag behind. This introduces the larger question of reasonable rates in general which must remain for discussion in our second volume.

The general level of rates affects the ultimate consumer more than the shipper. Steadiness of rates, on the other hand, is vital to a healthy state of trade. It is important to examine the evidence from this point of view. The history of railroad rates shows a steady improvement in the direction of more general observance of published tariffs. Periods of abject demoralization incidental to the most furious rate wars, have alternated with periods of peace, characterized by more or less faithful observance of agreed rates. Viewed in a large way the intervals of disturbance have become less frequent and less intense with the passage of time. Present conditions are more satisfactory than any which have prevailed since 1850.

Rate wars are almost as old as railroading and are coincident with the appearance of competition. Among the earliest of note were the struggles between the Erie and the New York Central as soon as the former road was constructed to Dunkirk, Ohio, on the Great Lakes. But the most notorious rate wars were those which prevailed between the trunk lines in respect of the carriage of grain to the seaboard. These wars began with the entrance of the trunk lines into Chicago in 1869.[514] The Baltimore and Ohio from the outset was the disturbing factor. Having no entry into New York except over the lines of the Pennsylvania Railroad, the refusal of the latter in 1874 to give proper facilities led to immediate retaliation by rate cutting on the Baltimore and Ohio. The details of these wars and their economic significance have become classics in our American industrial history. Suffice it to say that for intensity and persistence these contests which lasted for ten years after 1884, have been unequalled in our history since that time. A brief period of calm ensued after 1876. But soon the struggle broke out again in 1881, intensified by the construction of new parallel trunk lines like the West Shore and the Nickel Plate. These latter rate disturbances lasted for about three years.

The passage of the Act to Regulate Commerce in 1887 greatly improved the rate situation for a time;[515] but harmonious relations were rudely shaken by a bitter rate war in 1888 between the Grand Trunk Railway and the American Lines with reference to the rates upon dressed beef. Trouble over this traffic had occurred as far back as 1879, when the rate from Chicago to New York had been cut from one dollar to forty-five cents. In 1888, however, the rate on dressed beef for weeks was as low as six cents per hundred pounds. The Grand Trunk which had carried almost half of this business in 1887, had its proportion reduced to twenty-eight per cent. in the following year. At this time also extensive rate wars prevailed in the far western territory. The failure of the Atchison Road brought to light accumulated rebates for the four years prior to 1894 to the amount of $3,700,000. The prosperity of the early nineties led to a considerable improvement in rate observances. The only exception was the persistence of trouble from the Canadian carriers. The Soo line across the Straits of Mackinac, opening a short route from St. Paul and Minneapolis to the seaboard, was acquired by the Canadian Pacific Railroad in 1890. Combined lake-and-rail grain rates were sadly disturbed and the controversy over so-called ex-Lake grain between the lines from Buffalo to New York, which afterward cropped out in 1900, took its beginning. These Canadian Pacific rate wars were severe while they lasted. In 1892, for instance, the rate on boots and shoes from Boston to St. Paul dropped from one dollar and fifteen cents per hundredweight to forty-five cents.

The panic and subsequent depression of 1893 caused serious and widespread rate wars all over the country. Grain rates from Chicago to New York were openly reduced from twenty-five to fifteen cents. Two peculiarities of this rate war deserve mention. In the first place, every concession was publicly made,—that is to say, the cut rates were filed with the Interstate Commerce Commission; and, consequently, owing to the percentage-basis system to intermediate points, the rate war on Chicago-New York business automatically induced a rate war to every intermediate point in Central Traffic Association territory. Transcontinental rates were also badly upset at the same time. This was due not only to the prevalent hard times, but to complications arising from the independence of the Panama Railway. This line had been controlled since 1871 by the Union Pacific Railroad. The arrangement under which the Pacific Mail Steamship Company was also controlled came to an end in 1893, when the field was again opened to competition. The merchants of San Francisco established an independent line of steamships and for two years the most bitter and reckless rate war prevailed. During this conflict freight was carried from New York to San Francisco as low as thirty cents per hundredweight.[516] Matters were finally settled in 1898; but in the meantime the Union Pacific Railroad had gone into bankruptcy.

Entire demoralization in freight rates throughout the southern states occurred in 1894. Every carrier in this section was involved. Rates were cut for two months by as much as two-thirds. The first-class rate from New York to Atlanta dropped from $1.14 to forty cents per hundred pounds. The years 1894-1895 for the country as a whole were exceedingly unfortunate. Better conditions then supervened except for a rate war on grain at Missouri river points, so important that it was made the subject of special investigation.[517] The Chicago Great Western Railroad through the agency of a corporation known as the Iowa Development Company actually purchased on its own account large amounts of grain in order to secure its carriage. Grain was carried from Kansas City to Chicago under the system of rebating known as "protecting the through rate" for as low as two cents, when the open published rate was seventeen cents per hundredweight. Conditions then bettered somewhat largely through the activities of the Joint Traffic and Trans-Missouri Freight Associations. The prospect of legalization of pooling by Congress was bright. Rates seem to have been observed with more than usual faithfulness throughout the country, the only exception being another brief conflict in the southern states. But the Trans-Missouri decision by the United States Supreme Court in 1897, declaring these traffic associations illegal, once more precipitated most unsatisfactory conditions. And these were accentuated by the budding prosperity of the following year.

With the return of activity in business and agriculture in 1898 a frenzy for participation in the rapidly expanding traffic once more brought about extreme disorganization. The Interstate Commerce Commission reported that "a large part of the business at the present time is transacted upon illegal rates ... in certain quarters the observance of the published rate is the exception." The commissioner of the St. Louis Traffic Bureau testified before the United States Industrial Commission that "there were fewer rates maintained in 1898 than at any other time within my knowledge of the railroad business, and I have been in the railroad business for twenty-eight years." At this point the Interstate Commerce Commission intervened by the proffer of its good offices. Conferences with the heads of the principal railroads were held. A decided change in the attitude of the Commission toward the carriers became evident. It wisely sought to arouse the railroads themselves to the enormity of the existing evils, being absolutely unable itself under the law either to prevent or correct the existing abuses. The result fully justified all expectations. The following year witnessed an almost complete restoration of published rates, although business continued to expand in volume. Naturally there was ample for all the railroads to handle. This condition lasted for some time. But during 1900 rate cutting again developed upon a large scale in westbound business. The great increase of eastbound shipments and the demand for return lading at any price was undoubtedly the cause. This condition lasted for some months.

Rate cutting between the trunk lines again broke out in the spring of 1901, grain being hauled as low as eleven cents per hundred pounds from Chicago to New York. Competition between the Lake line railroads seems to have been the cause. The problem of adjusting ex-Lake grain rates dates from this period. The community-of-interest plan of trunk line control was ineffective to prevent disturbance. In the same year a passenger rate war from the Missouri river to California was also threatened. The United States Industrial Commission sent out a number of inquiries concerning conditions in the summer of 1901. This indicated a firm and stable rate condition in the East but some disturbance on lines between Chicago and the Ohio river points. Trouble soon broke out, however. The Atchison road suspecting its competitors of bad faith, cut its rates first-class from Chicago to the Missouri river from eighty cents to fifty cents per hundredweight. Agreements were repeatedly made and almost immediately violated, some of the strongest lines being the worst offenders. During the fall of that year export rates on flour and grain were badly slashed. The traffic manager of the New York Central lines testified that grain rates for export were not maintained for a number of months.

Apparently the general situation in 1900 was more satisfactory than at any previous time in the history of railroading in the United States. With few exceptions the published rates were observed. This commendable situation seems to have been due to several causes. Primarily an adequate appreciation by the railroads themselves of the losses of revenue to which they had voluntarily subjected themselves prevailed. An enormous volume of traffic incident to general prosperity, also, almost overtaxed the facilities of the carriers. And, in the third place, the spread of consolidation and the community-of-interest idea undoubtedly contributed to the same end. The determined attitude taken by important roads, notably the Southern Railway, contributed to the maintenance of rates. Even in the Far West and Northwest, rate conditions seemed to be in better shape than at almost any previous time. But it was too good to last; trouble soon broke out again. Grain rates from Kansas to Chicago during the summer dropped from nineteen cents to seven cents. Rates on packing-house products became utterly demoralized. So bad did conditions become that in March of 1902 the Interstate Commerce Commission intervened, seeking injunctions in the Federal courts against any departure from the published tariffs. This immediately bettered conditions; and in February of 1903 the passage of the Elkins law, as we shall see, contributed still further to this end. The enactment of this statute, passed at the solicitation of the carriers themselves and imposing much severer penalties upon departure from published rates, brought about conditions during the spring of 1903 unsurpassed for stability. The only exception was a minor disturbance concerning the carriage of ex-Lake grain from Buffalo to New York. Tariffs seem to have been faithfully maintained throughout the country with one exception, that is to say, concerning traffic to and from Missouri river points.

Since the passage of the Elkins Amendments in 1903, the phenomenal development of export trade through the Gulf Ports, principally New Orleans and Galveston,[518] has been mainly responsible for recurring and often ferocious rate wars, particularly during the years 1903-1906. These rate wars were usually precipitated in the first instance by struggles between the Gulf railroads and the trunk lines for the carriage of export corn. In 1904, for example, after a long period during which little surplus corn was available for export from Iowa, Kansas and Nebraska, much of it being locally consumed for stock feeding, a large surplus was left over. Rates were promptly cut during 1905 by both sets of lines. Thus the rate on export corn from Omaha to New Orleans was reduced from eighteen to eleven cents per hundred pounds. This cut was promptly met by a reduction of rates from Missouri river points to Chicago from twenty-four to thirteen cents. The rate from Omaha to New York dropped to the extraordinarily low figure of thirteen cents per hundred pounds. The Burlington and Missouri Pacific Railroads were particularly active in this contest; together securing over eighty per cent. of the corn traffic, although five other important roads were operating in this territory. All through the winter and spring of 1905 the struggle went on unabated. The Gulf ports during this period increased their exports of corn two and one-half times over. The struggle was not alone confined to the carriage of grain; although export flour being manufactured so far north, seems to have been immune from disturbance. The trouble extended over into the field of packing-house products for export. It was long thought that this could not be shipped over the roundabout southern route, but its practicability was demonstrated at this time. The demand of the Gulf roads for a ten per cent. differential rate in their favor as an offset for the greater time requisite for transit, not being accorded, rates were again cut by one-third, sometimes being as low as twenty cents per hundred pounds.

The rate wars of 1905 in the carriage of export traffic immediately spread into the field of imports. Competition for transcontinental and far western business has always been keen by the Gulf routes. The notable Import Rate case already discussed, offers a good illustration of this fact. The great volume of tonnage moving outward through Galveston and New Orleans necessitated a correspondingly heavy northern and northwestern movement of empty cars. Hence the railroads leading from the Gulf ports, actively bid both against one another and in connection with the steamship lines against the trunk lines. Competition was particularly keen for the carriage of the large volume of sugar to the Middle West, particularly Missouri river points like St. Louis and Omaha. Carriers from every point of the compass were interested in this traffic. The trunk lines brought refined sugar from the seaboard cities where the West Indian product is concentrated. The Gulf lines brought the Louisiana product, partly as a back-load against exported grain. And the transcontinental lines brought the Hawaiian sugar, also as a back-load against a predominance of westbound tonnage. All hands thus directly took part.[519] For three years this sugar war persisted despite all attempts at harmony. Rates were constantly cut by fifty per cent., always of course to the profit of the large sugar refiners. Coffee, also constituting an important part of our import trade, and of course particularly adapted to entry through the Gulf ports, was carried at ruinous rates. Thus on green coffee during 1905, the rate from New Orleans to St. Paul was cut from forty to fifteen cents per hundred pounds, while coincidently the rate on sugar dropped from thirty-two to ten cents. The struggle for import business extended finally to all imports of merchandise from Europe. The Illinois Central, for example, actively bid for the imported plate glass business about this time. At a meeting of parties concerned in 1905, the fact developed that every one of the important lines had entered into contracts for the carriage of this traffic at rates approximately one-half those normally prevalent. The trunk lines of course had to meet this competition or lose the business. The Pennsylvania Railroad cut the rate on crockery from forty to eighteen cents; on imported seeds the rate dropped from fifty to twenty cents and on toys from seventy-five to twenty-five cents per hundred pounds. These rate wars it will be observed differed neither in extent nor degree from those of a generation earlier. One cannot avoid the conclusion that the utter demoralization of rates was ended only by the intervention of the Federal government; first by the sturdy and determined application of the Elkins Law under President Roosevelt's personal direction, and later by extension of the principle of supervision and regulation by the Hepburn Act of 1906.

The principal breach since the sugar wars was a rather persistent and locally interesting disturbance of westbound import rates, precipitated in the spring of 1909 by the Boston & Maine Railroad. Its object was to overcome the disability against the port of Boston in the matter of imports, due to the differentials allowed at Philadelphia and Baltimore.[520] This led to a general trunk line upset lasting about four months, in the course of which rates from Boston to Chicago were reduced from sixty-nine to fifty-eight cents. This obviously left little profit in the business. Yet it was a mild concession as compared with the struggles of earlier years. Two years later, in June, 1911, trouble threatened to break out again. This time it was the Delaware & Hudson and Erie roads which filed reduced rates to the interior. But the solidarity of feeling between the trunk lines was such that an open breach was prevented at the last moment. The prompt intervention of the Federal authorities was a noticeable feature on this occasion. It may somewhat safely be predicated that further serious disturbance in future is unlikely to occur.

[487] U. S. Industrial Commission, XIX, 1901, pp. 272-290; Annals of the American Academy of Political Science, 1898, pp. 324-352.