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He had not. His was a colossal mistake. The "club" called for its baggage-car back again. Its members were men who were surfeited with mahoganies and impressive stuffed chairs and thick carpets. They demanded their old dingy car, with its four little windows, its rough board floor and the wooden armchairs. They got it back. The big, new, showy car was sent off upon another route; and the baggage-car--itself a club to which many a soul enviously craves for admission--makes its run six times a week on one of the fastest expresses on the line.

Groups of men have staterooms regularly reserved for them in the parlor cars of the finest suburban expresses, and there is never a word said of what goes on behind those closed doors. There come whispers of "antes"

that are as high as a church steeple, but the railroad does not concern itself with the morals of its passengers to the point of breaking in upon closed doors. The porters may know, but the porters are traditionally wise and more than traditionally close-mouthed. One big New York editor hired a stateroom for his daily ride in and out to his suburban home. His secretary and his stenographer are closeted in it with him, and on the 50-minute ride twice each day he dictates the daily editorial utterances that delight a great congregation of his readers.

Special trains for Commuters are no particular novelty. Almost every big system has some daily suburban trains that are on its working time-tables and not upon the schedules that are given out to the public. A group of aristocratic Commuters living north of Boston in the district around Manchester have their private special into the North Station every summer morning. It is an all-parlor-car train, the most luxurious suburban on the line, yet not one Commuter in a thousand knows a thing about it. A similar train arrives and departs daily at the South Station. Others are in service out of New York. You can buy both exclusiveness and elegance from the railroad.

The Commuter is not more concerned about that 5:37 than is the railroad.

It makes train and Commuter both its concern, because that is the way it seeks to build up its profitable suburban traffic.

"We are getting more of the city out into the country each year," says a big suburban passenger agent; "and with the wide increase in the use of electricity as a motive power for the standard railroads this business is bound for increases that we can hardly foresee to-day. I think that I am quite safe in predicting that another decade will see the belt of from 30 to 50 miles outside of New York terminals as thickly settled as the belt from 10 to 30 miles is to-day settled. The railroaders have done their part by expensive increase in terminal and track facilities; they have helped the real-estate men in their broad advertising of the possibilities of suburban life: the harvest is all that now remains to be reaped."

CHAPTER XX

FREIGHT TRAFFIC

INCOME FROM FREIGHT TRAFFIC GREATER THAN FROM PASSENGER--COMPETITION IN FREIGHT RATES--AFTERWARDS A STANDARD RATE-SHEET--RATE-WARS VIRTUALLY ENDED BY THE INTERSTATE COMMERCE COMMISSION CLASSIFICATION OF FREIGHT INTO GROUPS--DIFFERENTIAL FREIGHT RATES--DEMURRAGE FOR DELAY IN EMPTYING CARS--COAL TRAFFIC--MODERN METHODS OF HANDLING LARD AND OTHER FREIGHT.

In England they speak of it as "goods" and regard it as almost a minor factor in the conduct of their railways. In the United States it is freight-traffic, and is the thing from which the railroads derive by far the greater part of their revenues. In England it is represented by delicious little trails of "goods-wagons," four-wheelers of from five to eight or nine or ten tons' capacity, the "goods" often left exposed to the rigors of winter, save for possibly a tarpaulin covering; in the United States, fast-freights and slow-freights crowd upon one another's heels; the sixty-ton steel car has long since come into its own.

If you do not realize the importance of the freight traffic, you should talk to those shrewd old souls in Wall Street who measure a carrier, not by its ticket sales, but by that fascinating thing that they call "tonnage"; you should go out upon the line and ask any operating man how his territory is holding up in traffic. He will answer you in tons, in freight-cars moved within a single twenty-four hours. If you are still unconvinced, go to the passenger man you know best. He will tell you that while he is pleading vainly with the biggest boss of all for some new Limited, eight or ten passenger cars all told, some shouldering freight-hustler has been welcomed into the inner sanctum and comes out with an O. K. for 800 or 1,000 box-cars or gondolas in his fist, a dozen new freight-pulling locomotives in addition, for good measure. There is your answer.

The passenger terminals may have all the magnificence in which we have seen them, but the freight terminals are the real core of a railroad's entrance into any town. For when you come to even the roughest figures, you find that in extreme cases--such as the New Haven's, where there is a congested territory, closely filled with thickly populated cities and towns--the passenger receipts will hardly do more than approach a balance with those from freight. In some cases the passenger earnings are hardly 25 per cent of the railroad's entire income; and cases like these are more common than the New Haven, holding New England as its own principality.

Wonder not that Wall Street looks askance at any new line until it can prove itself able to develop "train-load"--freight traffic, measured in thousands of tons.

Your general freight agent, who is a sort of official cousin to the general passenger agent, is the man who studies tonnage. More likely in these days of the exaltation of titles, he is the freight traffic-manager, with a group of subordinates around him and a traffic-skirmishing corps out on his own road and the other connecting roads, who are making friends with shippers, just as the young travelling passenger agents round up the theatrical managers and the brethren from the lodges. The travelling freight agents hang around sidings and breathe affection for manufacturers and wholesalers; they welcome to their very arms the business traffic-managers, who are really glorified shipping clerks for great big concerns. And while they cultivate the road in detail, their big boss studies the territory in general. The trade papers and the market bulletins litter his desk; he can tell you strength or weakness in this thing or that--why cotton is off, and wheat rushing upwards. Moreover, the freight traffic-manager, himself, is not above friendships. He will pack his own evening suit into a bag and go 500 miles willingly to give shippers his own private explanation of the national rate complication.

Did we say rate complication? That seems almost too simple a name for the subtle and intricate structure which tells us how much we must pay the railroad for the transportation of our goods. When we were visiting the passenger office, we saw something of the work of the rate-clerks there.

We learned that, in fact, the railroad creates various classes of rates in the first place; local or round-trip tickets, at, say, three cents a mile for occasional travellers; mileage books for more constant travellers, which bring a wholesale rate of two cents a mile; a third and lowest rate of something less than a cent for that urbane soul, the Commuter. For excursions, where many, many persons were to be moved at one time, perhaps upon a single train, other very low passenger rates were created. We also saw how the railroad, trying to base its passenger charges on the number of miles covered, is compelled to make delicate adjustments on through charges between competitive points.

We speak of these things now, because in a way the passenger tariff resembles the freight, and yet compares with it as a child's primer with a Greek lexicon. In an earlier day the thing was very much worse. In fact, at the very beginning there was no real scientific way in which the railroad might regulate its charges, and on some of the very earliest of steel highways the rates were made just half what they had been on the toll-roads, and without regard to the cost of transportation. Thus the competitive feature had its way early in the formulation of a rate-sheet; and there is evidence to assert that in those early days when the railroad had an opportunity it made its tariff as high as it thought folk would stand without a riot, and thus the now historic phrase "what the traffic will bear" came into coinage. As a matter of fact, in those days when scientific bookkeeping was unknown the railroad had no way of accurately knowing just how much it cost to operate, and how that cost should be fairly apportioned between the different classes of its traffic.

The thing went from bad to worse as the great land carriers developed.

Each made its rate-sheet according to its own sweet will; it classified freight precisely as it pleased, and the man down in New Orleans sending goods to New Hampshire was puzzled as to the charges that would accrue upon his shipment when it finally reached the northeastern corner of the country. The competitive feature grew to be the strongest in the making of the rate-sheet, unless it was the subtle influence of the railroad's favored friends, an influence that showed its ugly head oftener in the practice of rebating than anywhere else. The fierce competition that ruled between the railroads in the seventies has never been approached at another time. Ruinous rate-war after rate-war followed upon each other's heels, and little roads kept dropping into bankruptcy, one after another.

There was a time in 1877 when a man might ship a carload of live-stock free from Chicago to Pittsburgh, from Chicago away through to New York for five dollars; and there is hardly a more expensive commodity for the railroad to handle, than cattle. To appreciate what these wars meant to the carriers, bear in mind that the week after this particular one was settled it cost the old rate--$110 a car--to ship cattle from Chicago to New York.

Out of such guerilla warfare came the one possible thing--cooperation. The railroads were not then big enough to consolidate their properties, J. P.

Morgan had not then developed his fine art of welding them together. So they did the next best thing and made secret contracts--pooling. That is, they established a standard rate-sheet in their mutual territories and bound themselves to abide by it for a certain length of time. They figured out their relative percentages of business at the beginning of any agreement, and took from the combined earnings of the pool, the same percentages of receipts. The bitter outcry that went up across the land against pooling still echoes. That practice with another now also prohibited--rebating--really gave birth to governmental regulation of railroads.

[Illustration: "THE INSIDE OF ANY FREIGHT-HOUSE IS A BUSY PLACE"]

[Illustration: ST. JOHN'S PARK, THE GREAT FREIGHT-HOUSE OF THE NEW YORK CENTRAL RAILROAD IN DOWN-TOWN NEW YORK]

[Illustration: 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 cooperation. 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.

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