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The investigating committee of the Pennsylvania Railroad in their report expressed their opinion of the importance of this consideration as follows:
Changes must take place in time, and under an incompetent, dishonest, or speculative president, which is by no means impossible, what havoc and destruction of values might be made of your property, causing deep disgrace and wide-spread suffering !
On page 213 of the Appendix may be found a table giving the length of main line and of branches under the control and management of sev. eral of the principal trunk railroads of the United States. The geographical and commercial considerations which limit the control of rail. roads are more fully set forth in the section of this report which relates to the subject of competition.
3.-THE ECONOMY OF TRANSPORT BY RAIL.
Railroads having become important highways of commerce between States and sections of the country, it appears to be proper in entering upon a discussion of the commercial movements of the United States to consider the more important conditions which determine the cost of transportation by rail and the manner in which these conditions influence the conduct of railroad managers.
In the discussions which have taken place relative to commerce on railroads very erroneous views have been expressed in regard to the cost of transportation. A failure to appreciate the bearing of circumstances of an economic nature, apon the cost of transportation has led to disastrous results in railroad management and to worse than futile legislation in attempts at governmental regulation. The cost of moving freight upon railroads, instead of being a simple question susceptible of a single answer, is one of great difficulty and complexity.
The public have been greatly misled by tables purporting to give the cost of transportation on different classes of roads, the only distinction observed being that of “light grades” and “heavy grades.” Within the last four or five years, however, a few men of scientific and practical attainments have entered upon a thorough investigation of the subject, and the results reached by them are of great value. Much remains to be done in this direction. It was ascertained by Mr. Albert Fink (late superintendent and general manager of the Louisville, Nashville and Great Southern Railroad) that the average cost of transport on the various lines operated by that company varies from 1.18 cents per ton per mile to 19.1 cents per ton per mile, the average cost on the more expensive lines being more than ten times the average cost on the less expensive ones.
The average cost of transportation not only differs on different roads, but it varies widely with respect to the carriage of different commodi. ties on the same road. Mr. Fink also states that the results of the special computations made by him proved that the cost per ton per mile in some instances did not exceed one-seventh of one cent, and in others was
as high as 73 cents per ton per mile, the latter rate being 511 times greater than the former, the lower cost applying to freights moved in cars that would otherwise bave run empty, and the higher cost to freights in small quantities, carried in the direction of the principal movement.
The elements of cost of transportation on railroads may be classified as follows: First, cost of maintenance of the road; second, terminal expenses; third, transportation-expenses proper, or cost of movement of freight; and, fourth, general expenses, including rental of offices, salaries of officers, and all expenses connected with the general conduct of the affairs of the company. Referring to these distinctions of prime importance, Mr. Fink, in his treatise on railroad transportation (page
The confusion which exists in the minds of some people on the subject of railroad tariffs arises from the prevailing practice of combining the charges for three distinct services in one and applying a measure to the whole which can only be properly applied to a portion of it.
CIRCUMSTANCES AFFECTING THE COST OF TRANSPORTATION BY RAIL.
There are various circumstances affecting the cost of transportation on railroads, some of which may be noticed.
(a) Gradients.- The gradients of the railroads constituting important bighways of commerce differ very much, the maximum being about 125 feet to the mile. Auxiliary motive power is frequently required in order to overcome the heavier grades. Differences of opinion exist as to the effect of gradients of known declivity upon the cost of transportation.
A somewhat generally accepted proposition is that the resistance on a grade of 20 feet to a mile is double that on a level road. The effect of grades upon cost of transportation varies very much on different roads, owing to the different weight of the locomotives employed, the cost of coal, and the magnitude and direction of the tonnage moved. A sufficiently accurate idea of the general effect of grades may be inferred from the following data as to the load wbich a 33-ton locomotive can baul over different grades, the information being furnished by the Baldwin locomotive works of Philadelphia:
The tractive power of a locomotive is limited by its adhesion to the track, which is about one-sixth of its weight, on its driving wheels.
(b) The cost of transportation on every road is affected greatly by the cost of the road itself.-Suppose two roads of equal length and having an equal amount of traffic, one of wbich has cost $20,000,000 and the other $10,000,000. Evidently the traffic on the former road must earn more than that on the latter in order to yield the same rate of interest on the investment.
(C) The cost of transportation on railroads is greatly affected by the wages of labor and the cost of material.—The wages of labor and the cost of material are even 50 per cent, greater in certain localities than in others.
(d) The cost of fuel is a very important element affecting cost of transportation.—A road passing over coal-beds will be able to procure its supplies of fuel at low rates, while the cost of fuel on a road which must pay the expense of transporting coal several hundred miles will be much greater. The railroad companies of Ohio and Pennsylvania procure coal for about $1.50 per ton, whereas the railroad companies of Wiscon. sin and Iowa are obliged to pay $4 to $5 per ton for coal of an inferior quality.
(e) The cost of transportation on the more northerly roads of this country is greatly affected by frost and snow.—No accurate computation can be made of the effect of froșt and snow upon the cost of transportation; but careful estimates, based upon the most reliable data which can be procured, indicate that on many of our northern roads the cost of operating during the winter-months is from 10 to 25 per cent. greater than during the other months of the year. Great expense is sometimes incurred in removing snow after a severe storm.
(f) Volume of traffic.—This is the circumstance which perhaps affects the cost of transportation on railroads more than any one which has yet been mentioned. A large amount of freight can be carried at much less cost per ton per mile than a smaller amount. Upon this condition more than upon any other, railroad managers base their general estimates of cost of transportation. The importance of this consideration may be illustrated by the following table, wbich gives the cost of transportation on each line operated by the Louisville, Nashville and Great Southern Railroad Company:
The differences in the cost of transportation are due mainly to differences in the amount of traffic over the several lines.
It appears that the cost of transporting a ton of freight one mile on the main stem, including the interest charges, was only 1.78 cents, and that the cost of the same service on the Glasgow branch was 19.10 cents. Both lines were managed by the same company with the same degree of skill and economy, and the difference in the cost per ton per mile was due to the fact that the traffic on the main line is so much greater, consisting chiefly of through business, in large quantities--much of it in car-loads- whereas the traffic on the Glasgow branch was exclusively of the class termed “local," in small quantities, generally less than a car-load.
The work performed with respect to movement was precisely the same in the two cases, and yet the cost of performing it was more than ten times greater in the one case than in the other.
The effect of an increase of traffic upon the cost of transportation is due largely to the fact that several sources of expenditure in the operation of railroads are either very little or not at all affected by the quan: tity of freight carried. · Among these expenditures may be mentioned repair of bridges and maintenance of roadway, not including iron. There are also other expenditures which are increased by an increase of traffic, but not in the same proportion. Those expenses which are termed "fixed," being very little or not at all affected by the volume of traffic, vary from 30 to 80 per cent. of the total cost of transportation on different roads.
The difference in the cost of transportation due to magnitude of traffic was very clearly set forth by the presidents of the Chicago and North western and the Chicago, Milwaukee and Saint Paul Railroads in a memorial to the Wisconsin legislature, as follows:
The railways which radiate from Lake Michigan and run like lattice-work throughout the West, gather up business and centering at Chicago pour it by train-loads on to the through lines to the East. The latter have simply to forward it. It is this fortunate condition which gives the New York Central Railroad 16 miles of freight-cars daily. The western roads are feeders; the eastern lines are receivers. The latter are saved the expense of picking up this business by driblets. It comes to them in volumes. Trains follow each other in quick succession, and their constant movement insures economy.
As an illustration of the relative importance of magnitude of traffic and of distance, as elements in the cost of transportation, the following extreme case may be stated: Assume a local point situated on a rail. road 50 miles from New York City. The person who ships grain from that point to New York in small quantities brings it in sacks to the railroad station, where it is stored until a car is in readiness for its reception. It is placed in the car by hand, and in the same car are loaded the miscellaneous products of that locality seeking a market at New York. This car may not be more than one-half or even one-fourth loaded. It remains upon a side track until the train of which it is to constitute a part arrives on its way to New York. The time of this train, the steam-power of the locomotive, and the service of the employés of the road are consumed in the work of receiving the grain into the freight-house, in delivering it into the car, and in connecting the car with the train. On the arrival of the train at New York, the grain is handled in connection with various classes of freight, in the expensive manner incidental to the transaction of a package traffic. The grain is then delivered by hand to the consignee, and the sacks in which it was contained are afterwards returned, being billed, receipted for, and finally delivered to their owner by the agent at the local station.
No computation is necessary in order to prove that the cost of transporting grain but 50 miles may, in such a case, be in excess of the cost of transporting it several hundred miles if in the latter case it is spouted into cars from grain-elevators and hauled in trains of twenty cars carrying 400 bushels each, or 8,000 bushels in all, and running day and night, with no other interruptions than may be necessary for taking in supplies of fuel and water. The effect of distance upon the cost of transportation may, in certain cases, be the element of least importance. It is, however, to be obServed in this connection that efforts have been made to defend certain unjust discriminations by arguments based upon considerations such as those presented in this illustration-discriminations for which the cir. cumstances of time, distance, and amount of traffic afford no justifica tion whatever. While the facts set forth in the illustration just presented should be considered in treating of discriminations, each case must be determined upon its own merits.
(9) The length of haul or distance which commodities are transported is an important element of the cost of transportation.-Freight which is carried a short distance is very much more affected by the expenses of bandling, warehousing, and billing than freight carried a long distance.
The terminal expenses may be the same for the transportation of goods one mile as for a thousand miles.
Mr. O. Chanute, civil engineer, in an article published in 1874 in regard to the elements of the cost of railroad freight traffic, illustrated the manner in wbich terminal charges affect the cost of hauling a trai of 130 tons on the New York Central Railroad, the station expenses being the same in each case, as follows:
10 miles cost 4.062 cents per ton per mile.
1. 216 200
1. 058 232
1. 037 500
0.963 1, 000
0.932 The practical effect of distance in the determination of rates is shown in the following table compiled from facts embraced in a memorial presented to the Wisconsin legislature in 1871 by the presidents of the Chicago and Northwestern and the Chicago, Milwaukee and Saint Paul Railways :