<h2>CHAPTER 54</h2>
<h3>RAILROADS AND INDUSTRY</h3>
<h4>§ I. TRANSPORTATION AS A FORM OF PRODUCTION</h4>
<div class="sidenote">Productivity of transportation</div>
<p>1. <i>Transportation of goods and men is one of the most important modes
of production.</i> When utility was thought of as inherent in things rather
than as resulting from a relation between things and wants, it was usual
to consider only those industries as truly productive that brought
something physical into existence, as do agriculture and the extractive
industries. Even after it was recognized that a change of form also
imparted value, it was still denied that a changing of place could be
truly productive industry. But when production is seen to be the
bringing of things into right relations with wants, transportation may
be deemed to be the primary and typical mode of increasing income.
Movement is necessary to the existence of animals. The animal, in the
order of evolution a higher form of life than the more fixed plants,
goes to seek food, and has open to it a wider range of possibilities in
life. With slight exceptions, it is true that the only way in which
animals can bring about better place-relations between their wants and
goods is by moving themselves. To this power man has added that of
moving goods and thus adds enormously to income. Agents being valued in
accordance with their net productiveness, the nearness to market and the
ease of transporting the product are large factors in price. The
location of a field enters into its value as truly as do the chemical
qualities of the soil. A rocky field near a market may be richer, in an
industrial<span class="pagenum"><SPAN name="Page_526" id="Page_526">[Pg 526]</SPAN></span> sense, than the richest soil far remote, which can be used
by men only at the cost of their alienation from society. Means of
transportation set a limit to social and political groupings, to the
size of the market, and to the possibility of exchange. Indeed, all
exchange value is conditioned upon the possibility of transportation.</p>
<div class="sidenote">Original local advantages</div>
<p>2. <i>Natural differences in the grades of fertility and of accessibility
determine first the most valued locations.</i> Primitive man, dependent on
the bounties of nature, had to take things as he found them. Few places
unite the best grades of the essential things: water, food, fertile
soil, a favorable climate, protection against enemies. Between tribe and
tribe went on ceaseless war for the few favored spots of the earth.
Where transportation is possible, trade can supply one or more of the
missing elements. International trade began early, wherever it could, to
strengthen economically the weak localities. Advantages in
transportation are sometimes better than fertile soil and rich
resources. The early centers of civilization were on the banks of rivers
and the shores of seas. Around the Mediterranean were the ancient
empires. Trading-towns grew up at ports and at the favored points of
trade: Tyre, Sidon, Carthage, Florence, Genoa, Venice, Antwerp, London,
New York. The early settlements in America were grouped along the coast.
Without the cheap communication afforded by water, the colonies would
have been cut off from the benefits of continuing contact with the older
civilization. It would have been a great price to pay, even for a rich
continent.</p>
<div class="sidenote">Influence of waterways on local advantages</div>
<p>3. <i>The opening up of new water-routes of travel has profoundly altered
the prosperity of nations.</i> Sometimes the relation of cause and effect
is the reverse of that just noted. The conquest of Asia Minor by the
Turks closed the lines of travel with the East, destroyed the trade of
the Italian cities, and stimulated exploration for new routes. The War
of 1812 in America stopped the coast trade and forced on the wagon-roads
between the New England and the Southern states a<span class="pagenum"><SPAN name="Page_527" id="Page_527">[Pg 527]</SPAN></span> great traffic, which
declined quickly at the close of the war. Again, the growth of
population and industry shifts the center of trade, as it did from the
south to the north of Europe, and as it is doing from England to
America. The discovery of new routes, however, has wrought the most
rapid and sweeping changes. These three causes united, about the time of
the discovery of America, to overthrow the prosperity of the older
cities of Europe, while the opening of the resources in America, the
abundance of silver and gold, trade with the colonists and the Indians,
showered wealth and trade into the lap of Spain, Holland, Belgium,
England, and the northern cities of Germany. Such changes continue under
our eyes. The Erie Canal has an influence on values in every township
from New York to Buffalo, and along the lake shores to the head of Lake
Superior. The Suez Canal marked an epoch in ocean travel. The American
Isthmian Canal will affect the value of many investments, from the Gulf
of Mexico to the Pacific Coast. A marked change in transportation thus
shifts the level of values in a locality. Fortunes are made and lost.
One community rises and another sinks. Increments and decrements of
value on a great scale are unearned, and all classes of goods are
affected, though in varying degrees.</p>
<h4>§ II. THE RAILROAD AS A CARRIER</h4>
<div class="sidenote">Technical vs. economic efficiency of transportation</div>
<p>1. <i>Different modes of transport are more or less economical relatively
to the other industrial conditions.</i> Not only new routes but new agents
of travel change the scale of values. In early societies, undeveloped
industrially, first men, then domestic animals, were used as beasts of
burden. The first vehicles are technically simple in design and
construction; on land are used drags, sleds, carts; on waterways are
used rafts, canoes, barges, and boats. Primitive means of transportation
had to be inexpensive, for poverty and the uncertainty of early society
forbade the tying up of large resources<span class="pagenum"><SPAN name="Page_528" id="Page_528">[Pg 528]</SPAN></span> in them. Technical efficiency
of means of transportation may be contrasted with economic efficiency.
Technical goodness is absolute, and is measured in speed and weight of
cargo; economic efficiency is relative, and varies with the money cost
and money value of the services. A turnpike is more efficient than a mud
road, yet in some districts it is bad economy to build it. A railroad is
more efficient than a cart, yet in some places even pack-horses are more
economical. To be economical, the expenditure needed to supply the
efficient agent must be warranted by the volume and value of traffic.</p>
<div class="sidenote">Economic advantages of natural waterways</div>
<p>2. <i>The most economical means of transportation before the railroad were
the waterways, natural and artificial.</i> Some natural waterways still
afford the most economical means of transportation between favorably
situated ports. Coal is shipped most cheaply in sailing vessels from
Wales around Cape Horn to ports along the western coasts of America. A
part of California's regular fuel-supply is obtained in this way. Coal
has been shipped from Pennsylvania to Europe, and in the anthracite
coal-strike in 1902, some was shipped from England to America. Invention
has reduced the cost of construction and operation of vessels and has
increased their safety and speed, thus multiplying the efficiency of the
natural waterways. The large cities in America are situated on
waterways, usually where there is a break in transportation requiring
reshipment, as, for example, at New York, San Francisco, Buffalo, New
Orleans, Cincinnati, Chicago, Minneapolis, and St. Paul. Likewise many
of the small cities and villages, serving as local trading centers, owe
their existence to similar though less powerful influences.</p>
<div class="sidenote">Merits and defects of canals</div>
<p>Canals are begun as connecting links in a system of natural waterways to
extend the advantages of cheap transportation. The Erie Canal not only
serves the three hundred miles of territory along its banks, but it
opened to commerce all the lands tributary to the Great Lakes. The great
advantage of canals is cheapness of operation due to the simplicity of
the machinery needed and to the great loads that can be moved<span class="pagenum"><SPAN name="Page_529" id="Page_529">[Pg 529]</SPAN></span> with
small power. A cent a ton-mile is a paying rate on a canal. For heavy,
slow-moving freight, the railroads can hardly rival the canals at their
best. As canals, however, can be built only along a level country and
where the water supply is at a high level, their construction is limited
to a small portion of the country. The law of extensive diminishing
returns applies strongly to the construction of canals. The first canals
are easily constructed and economically operated, but it is only with
greater cost and difficulty that the system can be successively
extended. In temperate climates their use is limited by ice to a part of
the year, and the summer's drought sometimes limits it still further. At
its best, therefore, the small land-locked canal is fitted only to be a
supplementary agent in the system of transportation wherever industry
demands high speed and great regularity. Far different is the case of
the oceanic canal in a tropical climate.</p>
<div class="sidenote">Superior advantages of railroads</div>
<p>3. <i>The railroad is rapidly surpassing in importance every other agency
of transportation.</i> Even in respect to cheapness, the unique virtue of
waterways in favored localities, the railroad has been making rapid
gains. Improvements in roadbed, rails, cars, engines, and other
equipment are reducing greatly the cost of conducting traffic on the
main lines of roads. The adaptability of the railroad excels that of any
other agent of transportation; it can go over mountains or tunnel
through them. In certainty its superiority is marked; floods and snows
may delay it for a day, but there is no seasonal stoppage of traffic. In
speed, the railroad so far excels that the canal can survive only by
dividing the traffic, taking the lower grades of freight, and leaving to
the railroad the passenger traffic and fast freight.</p>
<div class="sidenote">Results of the rapid growth of railroads</div>
<p>Because of these qualities, the extension of the railroads in the last
fifty years has been so rapid that it has not given time for a gradual
adaptation of industry. It has worked in many places revolutionary
changes. The building of railroads in the Mississippi valley in the
seventies lowered the<span class="pagenum"><SPAN name="Page_530" id="Page_530">[Pg 530]</SPAN></span> value of Eastern farms, ruined many English
farmers, and depressed the peasantry in all western Europe. With the
prices that resulted when the fertile lands of the Western prairies were
opened to the world's markets, the stony and worked-out lands of the
older districts could not compete. Great regions are still to be opened
in this manner in Russia, Siberia, Africa, and South America. While one
can only speculate upon the effects this development will have, the
changes promise to be less sudden and tremendous than those of the last
twenty years. Many minor changes, of no less moment in limited
districts, result from the building of railroads. Local trading-centers
decrease in importance. Villages and towns, hoping to be enriched by the
railroads, see trade going to the cities. Commerce becomes centralized.
Enormous increase of value at a few points is offset by losses in other
localities.</p>
<h4>§ III. DISCRIMINATION IN RATES ON RAILROADS</h4>
<div class="sidenote">Monopoly power of railroads</div>
<p>1. <i>The railroad has more monopoly power in fixing rates at points along
its lines than is the case with other agents of transportation.</i> The
ownership of the wagons, ships, and canal-boats of a country is usually
divided. Every point along the line of the turnpike or the canal and at
ocean ports enjoys competition between carriers, the great shipping
combinations not having been successfully formed as yet. In the early
days of the railroads it was believed that a company or the government
would own the rails and charge toll to the different carriers, who would
own cars and conduct the traffic as was done on the canals. Experience
soon showed the utter impracticability of this scheme and the need of
unified management. The railroad, therefore, has a monopoly at all
points on its line not touched by other carriers. This, like all other
monopoly, is limited by the need to secure some business and to meet
competition at terminal points. The railroads in private hands early
began to "charge what the traffic would<span class="pagenum"><SPAN name="Page_531" id="Page_531">[Pg 531]</SPAN></span> bear" at every station, thus
practising various forms of discrimination disastrous in their effects
on the citizens.</p>
<div class="sidenote">Discrimination as to goods</div>
<p>2. <i>Discrimination as to goods is charging more for transporting one
kind of goods than for another without a corresponding difference in the
cost.</i> When reasonably understood, this proposition does not apply to a
higher charge for goods of greater bulk, as more per pound for feathers
than for iron, the "dead weight" of car being much greater in one case
than in the other. It does not apply where there is a difference in
risk, as in carrying bricks and powder, or coal and crockery; nor where
there is a difference in trouble, as in shipping live stock and wheat.
Any difference that can reasonably be explained as due to a difference
in cost is not discrimination; on the other hand a difference in cost
without a difference in rate is discrimination. Discrimination as to
goods may be by value, as low rates for heavy, cheap goods and high
rates for lighter, valuable ones. Coal always goes at a low rate as
compared with dry goods, and sometimes more is charged for coal to be
used for gas than for coal to be used for heating purposes.
Discrimination as to goods is the most usual and, if reasonably
employed, one of the most justifiable of the various kinds of rate
discriminations.</p>
<div class="sidenote">Local discrimination</div>
<p>3. <i>Discrimination between places (local discrimination) is charging
different rates to two localities for substantially the same service.</i>
This occurs when local rates are high and through rates are low; when
rates at local points are high and at competing points are low; when
less is charged for shipments consigned to foreign ports than for
domestic shipments; when more is charged for goods going east than for
goods going west. The causes of local discrimination are: first,
water-competition, found at great trade centers such as New York and San
Francisco; second, differences in terminal facilities, making some
places better shipping-points than others; third, competition by other
railroads, which is concentrated at certain points, only four thousand
(one tenth) of the stations of the United States being junctions;
fourth,<span class="pagenum"><SPAN name="Page_532" id="Page_532">[Pg 532]</SPAN></span> the influence of powerful individuals or large corporations and
the personal favoritism shown by railroad officials.</p>
<div class="sidenote">Its effects</div>
<p>The effect of discrimination is to develop some districts and depress
others; to stimulate cities and blight villages; to destroy established
industries; to foster monopolies at favored points; and to sacrifice the
future revenues of the road by forcing industry to move to the competing
points to get the low rates. The power of railroad officials arbitrarily
to cause rates to rise or fall is happily limited in practice by the
need of earning as large and as regular an income as possible, but even
as exercised it has been at times as great as that possessed by many
political rulers.</p>
<div class="sidenote">Personal discrimination</div>
<p>4. <i>Discrimination between shippers (personal discrimination) is
charging one person more than another for substantially the same
service.</i> This most odious of railroad vices, rarely practised openly,
is done by false billing of weight, by wrong descriptions or false
classification to reduce the charge below published rate-sheets, by
carrying some goods free, by issuing passes to one and not to all
patrons under the same conditions, or by donations or rebates after the
regular rate has been paid. In some cases a subordinate agent shares his
commission with the shipper, and the transaction does not appear on the
books of the company. In other cases favored shippers are given secret
information that the rate is to be changed, so that they are enabled to
regulate their shipments to secure the lower rate.</p>
<div class="sidenote">Causes of personal discrimination</div>
<p>One group of reasons for personal discrimination is connected with the
interests of the road. It is to build up new business; it is to make
competition with rival roads more effective by favoring certain agents,
as is very commonly done in the Western grain business; it is to exclude
competition, as by refusing to make a rate from a connecting line or to
receive materials for a new railroad which is to be a competitor; and it
is to satisfy large shippers whose power, skill, and persistence make
the concession necessary. Another group of reasons has to do with the
interests of company officials.<span class="pagenum"><SPAN name="Page_533" id="Page_533">[Pg 533]</SPAN></span> It is to enable them to grant special
favors to friends; or it is to build up a business in which they are
interested; or it is to earn a bribe that has been given them.</p>
<div class="sidenote">Evils of personal discrimination</div>
<p>That the evils of personal discrimination are great, need hardly be
said. It introduces uncertainty, fear, and danger into all business; it
causes business men to waste, socially viewed, an enormous fund of
energy to get good rates and to guard against surprises; it grants
unearned fortunes and destroys those honestly made; it gives enormous
power and presents strong temptations to railroad officials to injure
the interests of the stockholders on the one hand and of the public on
the other.</p>
<p>Apart from government, the railroad represents the greatest single
economic factor in personal distribution. It has introduced a new form
of problem into economic society. It has created a monopoly comparable
to the prerogatives of feudal lords. No other industrial agency in
private hands so affects all the producing forces of society and
exercises such a potent influence on values.</p>
<hr class="chap" />
<p><span class="pagenum"><SPAN name="Page_534" id="Page_534">[Pg 534]</SPAN></span></p>
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