such as described, are the only proper measure of the relative burden of transportation charges upon the industries of our country. Obviously it is of little concern to the producer just what may be his absolute money income and expenditure. That which is of especial interest to him is his relative income and his outlay. It is, therefore, the proportion of the value of his wheat which must be paid for its transportation that determines the real burden of the transportation charge upon him. On the other hand, it is the amount of labor and of materials which the money received for transportation will buy which is of interest to the railroad in determining whether or not it can derive a profit from the rates charged. If now real rates are accepted as the proper basis for determining the course of rates in this country the whole situation assumes an entirely different aspect. The tables given above show that the proportion of goods of all kinds which had to be given for their transportation in 1905 was about 25 per cent less than during the period 1895 to 1899. In other words, real rates have declined 25 per cent in less than ten years.

This fact may be verified by a comparison of rates and prices upon almost any important commodities. The following table shows the decline in the rates on grain:

Average prices.
Wheat Oats

1

Average rate per bu. Chicago to New York Export rates

Year

Corn

Thus during the first period, 1895 to 1899, one bushel of wheat would purchase the transportation of 5.4 bushels, while during the period 1899 to 1904, one bushel of wheat would purchase the transportation of 7.9 bushels. One bushel of oats would purchase the transportation of 1.9 and 3.7 bushels in the two periods respectively, while one bushel of corn would purchase the transportation of only 2.3 bushels in the first period, but more than 5 bushels in the second. Even more striking results may be obtained if we take the through export rates from St. Louis, Kansas City, or Duluth. Thus we find that there has been a decline of from 32 per cent to 51 per cent in the real rates on grain. As we shall see presently, there has been a similar decline from the railroad point of view, since the money which is received for transportation will buy less labor and materials than it would five or ten years ago.

Even if we take the rate for the year 1899 as a basis for comparison, instead of the averages for the two five-year periods, we still have a decline of more than 17 per cent in the real rates since that year. The use of the year 1899 as a basis for comparison is, however, manifestly unfair. During that year the railway revenue per ton-mile was the lowest in the history of this country. Furthermore, the year 1899 was marked by more disastrous rate-wars than any other period since the eighties. It was in order to protect themselves from these rate-wars that the railroads made such rapid progress toward consolidation during the two succeeding years. Then, too, the years 1898 and 1899 were marked by more secret rebates and departures from the published rates than any period since 1887. This point is substantiated by the following quotation from the Report of the Interstate Commerce Commission for 1898, which was reprinted in the Report for 1899:

Tariffs are disregarded, discriminations constantly occur, the price at which transportation can be obtained is fluctuating and uncertain. Railroad managers are distrustful of each other, and

shippers are all the while in doubt as to the rates secured by their competitors. . . . Enormous sums are spent in purchasing business, and secret rates are accorded far below the published charges. The general public gets little benefit from these reductions, for concessions are confined mainly to the heavier shippers.

The only comment necessary upon the foregoing statement is that every such secret reduction tended to reduce the average revenue per ton-mile, which is necessarily computed upon the basis of the rates actually charged rather than upon what would have been collected if the published tariffs had been enforced upon the entire amount of traffic. Since the passage of the Elkins Law, however, these secret rebates have rapidly diminished. With the quotation cited above, compare the following from the Report of the Commission for 1904:

Without further reference to the changes effected by this amendatory legislation [the Elkins Law], the Commission feels warranted in saying that its beneficial bearing became evident from the time of its passage. It has proved a wise and salutary enactment. It has corrected serious defects in the original law, and greatly aided the attainment of some of the purposes for which that law was enacted. No one familiar with railway conditions can expect that rate-cutting and other secret devices will immediately and wholly disappear, but there is a basis for confident belief that such offenses are no longer characteristic of railway operations. That they have greatly diminished is beyond doubt, and their recurrence to the extent formerly known is altogether unlikely. Indeed, it is believed that never before in the railroad history of this country have tariff rates been so well or so generally observed as they are at the present time.1

If it is true that the practice of giving secret rebates is becoming much less common, we are brought to the conclusion that the advance in nominal rates, since the year 1899, may largely be accounted for by the withdrawal of the large number of secret concessions from the published

This broad statement has been somewhat modified by more recent Reports of the Commission.

rates which has taken place since that time. In other words, the advance of rates has been an advance in the special rates obtained by large shippers rather than an advance in the published rates. The enforcement of the published tariffs has tended to increase the average receipts per tonmile without a corresponding increase in the published rates. The advance in the published rates has therefore been much less than the average rates per ton-mile would seem to indicate.

The following statistics show the decline in the real rates which has taken place from the standpoint of income and expenditure to the railways: The increase of gross receipts of railways for the year 1902-1903, which was due to the increase of rates since 1899, was $67,556,299. The increase in the cost of labor, due to the advance in the rate of wages, was $40,373,501, while the increase in the cost of fuel, due to an advance in its price, was over $41,000,000. Thus the increase in the cost of these two items alone was 20 per cent greater than the additional revenue derived from the advance in the nominal rates. Following is a table of the average prices of the two principal materials used by the railroads: 1

One dollar received by the railroads for transportation

during the first period, 1895 to 1899, would, it appears,

1 United States Statistical Abstract, 1904.

buy about 24 per cent more steel rails and 40 per cent more coal than in the five-year period since 1899. The following table gives the prices of some other materials which enter into the expenses of railway operation :

From the above table it will be seen that the advance in the prices of many of the principal railway materials has been even greater than the advance in average prices of other commodities. From the railway point of view, therefore, the decline in real rates has been even greater than from the standpoint of the general public.

One other point remains to be considered under this head. There are those who would readily admit all the preceding arguments, who, nevertheless, would insist that rates have not declined as rapidly as they should. They urge that the many improvements which have been adopted since 1899, the increase in the trainload, and the enormous increase of the traffic, have enabled the railroads to reduce expenses of operation out of all proportion to the decline in rates. They insist that the public has been deprived of its fair share in the advantages accruing from the growth of business, and from the introduction of many modern labor-saving improvements.

That there have been many such improvements adopted, that the total amount of traffic has been greatly increased, and that the public is entitled to a portion of the advantages which accrue from these changes may be admitted. But is it true that these ameliorations have been sufficient to offset the advance in prices of materials and labor so