obtaining a right of way, the cost of transporting materials and of carrying on the work was enormous. Another consideration of great weight is the greater density of traffic which prevails on most European railways. It is a commonplace in railway economics that, wherever the traffic is dense, goods may be carried at a rate much lower than it is possible to make where the traffic is light. In fact, where roads are already provided with a full equipment, the additional expense of handling additional units of traffic may be comparatively trivial. The following table gives density of traffic upon European and American railways for the year 1902: United States, tonnage per mile of line, 793,3511 Germany, 600,300 1,090,600 1,150,000 4 2 Thus it appears that the conditions which tend to produce low rates in America are offset by circumstances of almost equal weight which should tend to produce low rates in Europe. It would seem, therefore, that so far as the more important economic and physical conditions are concerned, rates in Europe should be nearly as low as those which prevail in America. The vast discrepancy which does in fact exist must, therefore, be assigned to other causes, and among those causes the most potent are, without doubt, the comparative lack of competition and the stifling of private initiative in European communities through governmental interference. If, however, our average rates are low in comparison with average rates in other countries, is there not some other standard by which they may be adjudged to be too high? Are not rates on American railways, it may be asked, higher to-day than they have been in the past? 1 Report of the Interstate Commerce Commission for 1903, p. 112. Archive für Eisenbahnwesen, 1905. Ibid. • Estimate. And this question brings one to a consideration of the most plausible and effective charge against American railroads. There has been in fact a considerable advance in rates within the last few years, and if it can be shown that rates have been arbitrarily and unreasonably advanced during this period, a most effective point will have been scored against our present rate-making system. A comparison of present rates with those which have prevailed in the past is necessary to determine whether present rates may be justified upon reasonable grounds. No one contends that rates are high to-day in comparison with rates of fifteen or twenty years ago. In fact, when long-time periods are taken into account, it is found that there has been a remarkable decline in American rates, a decline such as has been witnessed in no other country. The following table shows the general course of rates in the United States for the past thirty-five years: Year. Average rate per ton-mile. Year. Average rate per ton-mile. .724 cents. 1870 1882 1.99 cents. 1899 ITIT 1887 1.03 1892 1897 1898 1903 1904 The decline in the average rate per ton-mile in thirty-five years has been 1.21 cents, or nearly 60.5 per cent. The increase from the lowest point in 1899 to the highest point attained since that time in 1904 has been .056 cent per tonmile, while the percentage increase has been but 7.7.1 The general course of rates has, therefore, been rapidly downward in the United States. In European countries generally, on the other hand, where government interference has been more minute, the decline of rates has 1 In 1905 the average rate per ton-mile was only 7.66 mills, representing a decline of 2.05 per cent as compared with the rate of 1904, and an advance of only 5.8 per cent over those of 1899. The passenger rate for the year 1905 was only 1.962 cents per mile, which is the lowest average rate yet attained in the history of this country. been during this period comparatively insignificant. In France, where every rate made by the railroads must be approved by a government commission and by the Secretary of the Interior before it can be enforced, there has been practically no decline during the period in which the decline in America has been rapid. In 1870 the average rate in France was 1.625 cents per ton-mile. In 1903 it had fallen to 1.55 cents, an absolute decline of only .075 cent as against a decline in America during the same period of 1.22 cents, while the percentage decline in France has been but 4.3 per cent as against 60.5 per cent in the United States. In fact, the opinion of all experts is unanimous that to whatever cause it may be due, the decline in American rates has been nothing short of phenomenal. It must be admitted, nevertheless, that there has been a considerable advance in American rates since 1899, when the lowest point was reached. Is not this advance easily accounted for, however, when one takes into consideration the prosperity which the country has enjoyed since that time? Railway stockholders, and many bondholders as well, were heavy losers during the period of depression which preceded 1899, and should railway capital be denied the privilege of recuperation, which all other forms of capitalistic enterprises enjoy during periods of prosperity? However, it is not the slight advance of rates but the increased amount of business which has made the railways, within the last few years, comparatively prosperous. At the same time, coupled with the general prosperity which has attended the increased amount of business done has come a considerable rise in the prices of nearly all commodities, while there has occurred also a considerable advance in the rate of wages. For these reasons the cost of operation upon our railroads has been greatly increased. Whatever the cause, the fact of this rise in the price of services and commodities is incontestable. In other words, a smaller quantity of labor and materials can be purchased with a given amount of gold coin to-day than could be purchased six years ago. To prove this fact we have but to glance at the three best tables of American prices. In each table the percentage basis is the average of the same table for the ten-year period 1890 to 1900, and for comparison we have averaged the index numbers for the fiveyear period 1895 to 1899. The tables of the United States Bureau of Labor embrace 260 important commodities, of which the average wholesale prices for the year are computed on the basis of the average quotations upon the first day of each month. According to this table the average of the index numbers for the five-year period 1895 to 1899 is 93.6, while for the year 1905 the index number is 115, showing an advance of 24 per cent. Bradstreet's tables embrace 100 articles of common consumption. Using the same method of computation, the average, according to his tables, is 93.72 for the period 1895 to 1899, and the index number for the year 1905 is 119.6, showing an advance of 28 per cent. The tables computed by Dun apply only to the necessaries of life. According to these tables the average for the period 1895 to 1899 is 93.08, while the index number for the year 1905 is 116.6, showing an advance of 25.2 per cent. These various tables, compiled independently, apply to the prices of different sets of commodities. It is remarkable that their results should be so substantially similar. This evidence establishes beyond any reasonable doubt the fact of a considerable advance of prices. But a general advance in the prices of commodities, according to another way of stating the same fact, is only a relative decline in the value of that standard in which prices are measured. When measured in the amount of commodities and services which it will buy, gold has therefore declined about 25 per cent in value since the period 1895-1899. Would it then be unreasonable to expect that gold, being less valuable for the purchase of commodities and labor, should also be less valuable in the purchase of transportation? What are the facts? If we take similar periods for the computation of average railway rates, we find that there has been no advance whatever, the average rate for the first period, 1895-1899, being 7.84 mills per ton-mile, while that of 1904 was only 7.80 mills per ton-mile. Thus while average prices have advanced 25 per cent, there has actually been a slight decline in average railway rates. It will be noted that we use the average rate for 1904 instead of that for 1905, as in the case of prices. This would by no means be a fair basis for comparison were it not for the fact that the indications are that the average rate for 1905 when published will be found to be much lower than that for 1904. The past year has been marked by many severe rate-wars, by drastic reductions on the part of State Commissions, and by comparatively few advances.1 An important distinction is here to be indicated which is not often recognized. There are two sorts of rates, which may be designated respectively as nominal and real. Nominal rates are measured in money, while real rates consist of a percentage of the value of the commodities transported. To determine the real rate, that proportion of the value of the goods transported, which must be given for the service of transportation, must be ascertained. This distinction may at first seem useless, and the method of computing real rates certainly refuses to lend itself to exact statistical analysis. Nevertheless, real rates, 1 The above forecast has proved correct. According to the Statistics of Railways published by the Interstate Commerce Commission, the average rate per ton-mile for 1905 was only .766 cent. The indications now are that the report for 1906 will show still further reductions, thus practically wiping out the advance which has occurred since 1899. On the other hand, prices have been rapidly advancing, to the extent that the tables for 1906 show an advance of nearly five per cent over those of 1905. |