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, RjMLWAY RATES
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CORRESPONDENCE
BETWEEN
Ulattufartur^ra Aaaartaiian
of fork
AND
5itUtam d. Iromu
SENIOR VICE-PRESIDENT
NEW YORK CENTRAL LINES
ON SUBJECT OF RAILWAY FREIGHT RATES,
TOGETHER WITH CLIPPINGS FROM
NEW YORK NEWSPAPERS
IN RELATION THERETO.
JULY, 1908
r
CORRESPONDENCE BETWEEN
JAMBS T, HOILB
SECRETARY
MANUFACTURERS' ASSOCIATION OF NEW YORK
AND
WILLIAM C. BROWN
SENIOR VICE-PRESIDENT
NEW YORK CENTRAL LINES
RELATIVE TO QUESTION OF FREIGHT RATES
LETTER OF MR. HOILE
The Manufacturers' Association of New York
Manufacturers' Building, 198 Montague Street
Brooklyn, City of New York
(There is probably no other public body of citizens filling such an
important place as does this Association.—hew York Herald.)
JAMES t. HOILE,
Secretary.
JFr. W. H. Newman, July 1st, 1908.
President, N. Y. C. & II. R. RR.,
Grand Central Station, New York.
Dear Sir :
It is reported that the railroads within the territory covered
by the "Official Classifications" (governing that part of the
country east of the Mississippi River and north of the Ohio and
Potomac Rivers) propose to advance all class and commodity
rates.
If the roads mentioned decide, against the protests of the
commercial interests, to make such advances, it will undoubted¬
ly lead to similar and possibly more drastic action by roads
in other sections of the country.
1
We do not believe these advances are necessary. We be¬
lieve that any advances in the present rates would retard the re¬
turn of normal conditions, and delay indefinitely the era of
renewed prosperity. We feel that the claim of the railroads,
viz.: that rates have been constantly reduced, is insincere.
The present basis of rates between Chicago and New York,
which governs rate-making in the territory mentioned, has been
in effect for thirty years, and has never been raised or reduced
in all that time, although in the meantime we have had panics
and business booms.
The carriers have on numerous occasions advanced rates
through the medium of advanced minimum weights, or by ad¬
vancing the classification on numerous articles at different
times during this period, but the rates have remained firm and
well established.
We do not deny the right of the carriers to make rates, but we
believe it unwise from a tactical and political view, at the pres¬
ent time of depressed commercial conditions, to advance rates
arbitrarily without some considertion being given to the ship¬
ping interests.
The manufacturing and commercial interests have suffered
fully as much as the railroads by the recent depression, and
they are just as slow to recover from the effects. At this time, to
advance rates in the face of numerous protests is, in view of the
onerous burden it would place upon shippers, we believe, a
grievous mistake on the part of the railroads.
The railroads have profited very largely by recent laws,
whereas shippers have been injured in various workings of the
new law; and we protest against any additional burden being
put upon the shippers by the railroads.
We join with other commercial bodies in asking that the
question be put before the Interstate Commerce Commission,
in order that all shippers so desiring may be given a hearing
on the subject before these proposed advances are put in effect.
Yours very truly,
(Signed) JAMES T. HOILE,
Secretary.
2
REPLY OF MR. BROWN
New York Central Lines
New York Central & Hudson River R.R. Co. Lake Erie. Alliance & Wheeling R R. Co.
Lake Shore & Michigan Southern Ry. Co. Chicago, Indiana & Southern R.R. Co.
Michigan Central R.R. Co. Rutland Railroad Co.
Lake Erie and Western R.R. Co. New York & Ottawa R.R. Co.
Cleveland, Cincinnati. Chicago & St. Louis Ry. Co.
ORAND CEMTRAU STATION
New York, July 9, 1908.
Mr. James T. Hoile,
Secretary, Manufacturers' Association of New York,
Manufacturers' Build'g, 198 Montague St., Brooklyn, N. Y.
My Dear Sir :
Your letter of .July 1st, addressed to Mr. W. H. Newman,
President, has in his absence been referred to me; and I am
very glad indeed of the opportunity afforded to take up with
you and, through you, with your Association, this very impor¬
tant question.
I wish to call attention to the following quotation from
your letter:
"The present basis of rates between Chicago
and New York, which governs rate-making in
the territory mentioned, has been in effect for
thirty years, and has never been raised or re¬
duced in all that time, although in the meantime
we have had panics and business booms."
I beg to say, and later in this communication will endeavor
to demonstrate, that you are in error in your impression that
there has been no reduction in frieght rates in the territory
between Chicago and New York during the last thirty years;
but, for the sake of argument, we will assume that there has
been no increase or decrease during that time, and upon this
premise, I believe that I can convince you and every member
of your Association that in view of all the circumstances the
railroads are entitled to a very substantial increase in freight
rates.
3
In the first place, the average wage paid to railway em¬
ployes has, in the last 15 years, shown an increase of from
33 to 50 per cent. The average cost of almost every class of
material that railroads consume in tremendous quantities each
year has increased from 50 to 100 per cent.
To illustrate, I desire to call your attention to the following
increases which have occurred during the last ten years; and a
comparison of the prices of 1898 with those of 1878 would,
with the exception of steel rails and possibly two or three
other items, show a still further increase. During the ten
years from 1898 to 1908 there have been the following increases
in the cost of material:
Angle bars 50 per cent.
Gray iron castings 37.5
Malleable iron castings 21.3
Bar iron 42.8
Cut nails 95.4
Wire nails 45.6
Cast iron pipe 87.8
Steel rails 47.3
Track spikes 25.9
Cast iron car wheels 25
Barbed wire 32
Bridge timbers 80
Cross ties 76
Car siding 90
Tvocomotives 68.3
Box cars 72.8
Car axles
Locomotive steel forgings :
Crank pins
51
.105
Piston rods 57
Main aTid side rods 28
1dns list could he increased to include almost every item
of material used by the railroads.
Taxes have increased from an averge of $179.00 per mile
to an average of $349.00 per mile, or approximately 95 per
cent.
Generally, these increases have been gradual and have been
offset in some measure by increased tonnage and increased effi-
4
ciency, resulting in decreasing the unit cost of transportation.
During the last eighteen months, however, the following tre¬
mendous increases have come in leaps and hounds, and the con¬
verging lines of cost and compensation in railroad operation,
which for years have been steadily approaching each other,
have been suddenly brought so close together as to alarm share¬
holders and investors; and it is certain that, in order to pay fixed
charges, taxes and operating expenses, with even a very mode¬
rate return to shareholders, there must be either a moderate
increase in freight rates or a very substantial reduction in
wages of railroad employes.
Becoming effective during the early months of 1907, in¬
creases in pay of railroad employes approximating one hundred
millions of dollars per annum were made.
This increase was not voluntary on the part of the railroads,
but was the result of weeks of conference between representa¬
tives, of the roads and those of the employes; and finally of
intermediation by Chairman Knapp, of the Interstate Com¬
merce Commission, and Commissioner Neal, of the Bureau of
Commerce and Labor.
The settlement was on a lower basis than the men thought
they should have, and higher than the roads felt they could
afford to pay; hnt the settlement undoubtedly averted a strike
which would have cost the commerce of the country a thousand
times the amount involved.
Following this tremendous increase in wages, legislation by
Congress and by a number of the States, restricting the hours
of labor of trainmen, enginemen, telegraph operators, block
signalmen, employes of interlocking towers and others, made a
furllier annual increase of approximately $25,000,000 in the
|iay rolls of the railroads of the country.
P>y legislation passed at the last two sessions of Congress
and by subseciueut rulings of the Postmaster-General, reducing
compensation for handling United States mail, approximately
$10,500,000 per annum has been taken from the revenue of the
railroads.
5
In the closing hours of the last Congress, the Employers'
Ijiahility Act, which applies only to railroad companies, was
enacted.
This law removes the last vestige of protection against per¬
sonal injury or death claims on the part of employes or their
families that was secured to the railroads hy the common law,
making the railroads liable for injuries caused by fellow em¬
ployes, even where every possible precaution bad been taken
by tbe company to secure safety, and the law also removes the
bar to recovery of damages for accidents wbich result from the
employe's own carelessness.
Under the operation of this law, the loss hitherto placed by
(he common law upon the individual—the employe—is trans¬
ferred to tbe employer—the railroad. That it was understood
the employer could not, under present conditions, bear the ad¬
ditional burden, and that it was not the intent of the framers of
the measure that the railroads should assume this burden,.is not
only clearly indicated but distinctly stated in tbe following
quotation from the report on the measure submitted by Senator
Dolliver, from the Committee on Education and Labor, when
it was under consideration by, the Senate:
"It is no part of the purpose of this legislation
to oppress or .add burdens to the business enter¬
prises of the country, but rather to promote the
welfare of both employer and employe by adjust¬
ing the losses and injuries inseparable from in¬
dustry and commerce, to the strength of those
who in the nature of the ease ought to share
the burden."
Again, in speaking of the risk and danger involved, the
report says :
"Yet, somebody must assume these risks, and
the tendency where the industrial life of the
community is thoroughly organized, has been to
modify the doctrine of negligence so as to allow
the burden of accident and misfortune to fall,
not upon a single helpless family, but upon the
business in which the workman is engaged; that
is, upon the whole community."
6
No person can approximately estimate what this legislation
will cost the railroads of the country.
As an indication of the effect of an Employers' Liability
Act, and in a direction of peculiar significance and vital import¬
ance to the members of your Association, 1 note the following,
taken from a report made by a special correspondent of the
"London Commercial Intelligence."
Speaking of the effect of the recently enacted law, he says :
"Tlie métallurgie industry is being hard hit
in this respect. 1 have before me a return show¬
ing the number of cases brought before the courts
for compensation, and I see that in the métal¬
lurgie industry alone no less than G,318 eases
came before the courts of France during the
three months ending December 31, 1907. The
number of accidents causing death was 2G4, and
in addition to the compensation awarded to those
who recovered, life annuities were awarded to 192
widows, and annual allowances, till of age, to no
less than 308 children."
This is the record for three months in one private industry,
probably exempt from the prejudice which public service cor-
])orations in this country invariably encounter.
That the enactment of this law will result in a most sub¬
stantial benefit to the employes of the railroads is best evi¬
denced by the untiring effort of the railroad men, strongly sup¬
ported by the President, in securing its passage, and every dol¬
lar of benefit to the employe must be paid by the employer—
the railroad.
The only possible manner in which this burden can be
})laced where it belongs, and where the frainers of the bill in¬
tended and distinctly stated it should rest—"upon the whole
community"—is by an increase in rates by the carriers com¬
mensurate with the new burden imposed. For the Govern¬
ment to impose this additional expense upon the transporta¬
tion interests without permitting such increase in rates, would
mean bankruptcy for piany railroads and great injustice for all.
The effect on the railroads of the conditions 1 have at-
7
tempted to describe is exactly the effect similar conditioiis
would have on any other manufacturing or mercantile business.
The railroads bear no "charmed financial life"; they are sub¬
ject to the same conditions and must retrieve losses in the same
manner as any other business.
Increased expense of produetion means increased price for
the articles produced.
I do not know that the basis of wages paid railroad men is
too high—the conditions of service are becoming more and
more exaeting every year, and there is no other business in the
world that compares with it in point of hazard, both for the
employer and the employe. In the case of the latter, risk of
life and limb; in the case of the former, danger of almost un¬
limited damages for accidents, which, in spite of the most com¬
plete and comprehensive precautions, seem unavoidable.
With the sympathy and co-operation of the business inter¬
ests of the country, a moderate increase in freight rates can be
made effective without the slightest injury to any department
of business activity.
The reduction in wages of railroad employes, on the other
hand, could only become effective at the end of a eonfiict with
organized labor widespread, prolonged, and which would cost
the business interests of the nation ten times the amount in¬
volved in any possible increase in freight rates.
It is fourteen years since the so-called Debs strike stunned
the business of the country; but the memory of that struggle,
with its riots and disorder, the actual destruction of property
by mobs, as well as the appalling loss to the nation by reason of
the interruption of its commerce, is fresh in all our minds.
I want to say to you that I fear this strike, bad as it was,
would be like a summer shower compared with the blackness of
the storm which confronts the business interests of the country
if the railroads are compelled to attempt to enforce a general
reduction of wages.
Union labor was never so well organized, never so united,
and never so abundantly able from a financial standpoint, to
8
oppose what they would honestly believe to he an uncalled for
reduction; and organized railroad labor would have the united
support of every department of organized labor of the nation.
The credit of the railroads has been injured largely by the
growing and well-founded conviction on the part of the invest¬
ing public that on the present basis of cost of operation and
compensation for service rendered, the permanent payment of
interest on bonds, to say nothing of a fair return upon the
money invested by shareholders, is extremely uncertain.
How well founded this conviction was, and is, may be best
illustrated by calling your attention to some illuminating but
extremely startling figures.
The tremendous increases in expenses which I have referred
to in detail became effective at successive dates during the first
half of the year 1907; and I have looked up the statement of
about 80 per cent, of the principal railroads of the country,
and find that, during the last half of the year, (after all the
increases had become effective) while gross earnings of the rail¬
roads increased $57,413,078 over the same period of the pre¬
ceding year, their expenses increased $80,335,823; and, despite
the tremendous increase in tonnage handled and gross earn¬
ings, net earnings decreased $23,833,745.
This showing was not the result of any depression or falling
off in tonnage. Traffic was moving in unprecedented volume.
Furthermore, the condition which these figures reflect is even
more serious than is indicated on their face.
There is hardly an operating official on any of our rail¬
roads who did not recognize the fact very early after the taking
effect of these large increases, that the most drastic methods of
retrenchment and economy would he necessary to offset in part
the sudden and tremendous increase in operating expenses, and
many of the economies adopted during the last six months of
1907 passed far beyond the line which divides true from false
economy. Yet, in spite of these extreme measures of retrench¬
ment, the startling loss in net revenue resulted.
These are general and somewhat indefinite figures, in that
9
tliey (lo not refer to particular roads; and, in further corrobora¬
tion, 1 call attention to the following specific cases covering
principal roads representing all sections of the country. The
figures cover the last six months of the year 1907.
The Union Pacific Eailroad, with an increase in gross earn¬
ings of $3,855,646, shows an increase in operating expenses of
$5,282,877, due to the tremendous increases in cost of mate¬
ria], pay-rolls, etc., making a decrease in net earnings of
$1,427,231 as compared with the same period of the preceding
year.
The Erie Kailroad, with an increase in gross earnings of
$596,430, shows a decrease in net of $2,636,694.
The St. Louis & San Francisco Kailroad, with an increase
in gross of $2,092,061, shows a decrease in net earnings of
$1,546,273.
The Santa Fe Kailroad, one of the best managed roads in
the United States, with an increase of $2,986,818 in gross
earnings, shows an increase of $6,555,351 in operating expenses,
making a decrease in net earnings of $3,568,533.
The Southern Pacific Kailroad, with an increase in gross
earnings of $6,975,042, shows an increase in operating ex¬
penses of $11,245,788, and a decrease in net earnings of
$4,270,746.
The Pennsylvania Kailroad, east of Pittsburgh, with an
increase of $7,258,400 in gross, shows an increase in operating
expenses of $8,921,900; making a reduction in net earnings of
$1,663,500.
The New Haven Kailroad, with an increase of $1,194,183
in gross earnings, shows an increase in operating expenses of
$2,516,196, making a decrease in net earnings of $1,322,013.
The Missouri Pacific Kailroad, with an increase in gross
earnings of $178,698, shows an increase in operating expenses
of $2,187,911; making a decrease in net earnings of $1,709,214.
The Louisville & Nashville Kailroad, with $815,877 increase
in gross, and $2,542,766 increase in operating expenses, shows
a decrease in net of $1,726,899.
10
The gross earnings of the New York Central Kailroad in¬
creased $2,327,621, while operating expenses show an increase
of $3,866,752; making a decrease in net earnings of $1,639,131.
In giving these figures I have tried to select railroads repre¬
senting fairly all sections of the country. They show that
operating expenses increased about 60 per cent, more than gross
earnings; indicating that no increase in volume of business will
make good the tremendous increase in expenses; and demon¬
strating clearly that there must be secured an increase in net
earnings, by a moderate increase in freight rates, or a decrease
in expenses by a substantial reduction in pay.
During the first quarter of the year, the New York Central
lines, traversing, as they do, the most populous and most pros¬
perous section of the United States, have but little more than
earned their fixed charges, making scant provision for dividends
and none whatever for betterments. Two of them—the Cleve¬
land, Cincinnati, Chicago & St. Louis, and the Lake Erie &
Western—located in the garden of the United States, and
serving some of the largest and most important cities in the
country, have passed from the list of dividend-paying roads.
The reports from hitherto prosperous railroads located in
and serving every portion of the United States show that this
condition is universal.
Dividends of the most prosperous railroads are being re¬
duced and on others entirely suspended. Others roads, unable to
earn their operating expenses and fixed charges, are being
placed in the haiids of receivers.
The first effect of this condition was to close the usual
sources from which large sums of money have heretofore been
readily available for necessary improvements by the sale of
long-time low interest-bearing bonds, and to force the railroads
to resort to short time notes bearing high rates of interest,
absorbing all the available funds of the banks, making it diffi¬
cult, and in many cases impossible, for other business enter¬
prises to borrow money at all, and forcing interest rates for all
to an almost prohibitive figure.
11
'I'his condition will be repeated the moment the railroads
attempt to resume the purchase of equipment in large quanti¬
ties, or the great work of improvement, which was interrupted
by the panic, unless the credit of the roads can be restored,
enabling them to sell securities of long tenor at a reasonable
price and bearing a reasonable rate of interest. It is, perhaps,
unnecessary to say that this resumption can never come, except
by such restoration of credit, and I do not believe such restora¬
tion of credit can be brought, about save by an increase in rail¬
way rates, which will promise a revenue sufficient to make rail
way securities a reasonably dependable investment.
This was the effect of these sudden and tremendous . in¬
creases in expenses on the railroads. Let us glance briefly at
the almost immédiate etfect upon the prosperity of the coun¬
try at large.
During the year 1907, the iRew York Central lines paid out
to car and locomotive manufacturers in the United States more
than $31,000,000, almost every dollar of which was paid out for
labor in some form or other.
During the year 1908, with the exception of a compara¬
tively small number of locomotives, not a dollar will be ex¬
pended for this purpose; and this record is being repeated by
almost every railroad in the country.
Nearly $11,700,000 was expended during the year 1907 for
rails and ties. During the present year less than half this
amount will be expended.
During the year 1907, approximately $32,000,000 was ex¬
pended by the New York Central lines alone in reducing
grades, improving alignment and providing second, third and
fourth tracks. At the present time, from the Atlantic to the
Pacific and from the Gulf to the Great Lakes, work of this char¬
acter is almost entirely suspended.
If the railroads could resume the purchase of equipment
and material and the great and vitally necessary work of im¬
proving their facilities, the present depression would, in my
opinion, vanish in a day; and the re-employment of the hun-
12
dreds of thousands of idle workmen would, by their purchasing
power, start running to their capacity thousands of idle manu¬
facturing plants all over the land. I believe these results would
very speedily follow the taking effect of the suggested increase
in freight rates.
The effect of a moderate increase in railroad rates, accepted
by the public and approved by the Interstate Commerce Com¬
mission, in restoring confidence in railway investment, would
do more to put in motion the wheels of industry and start the
country upon a new era of prosperity, than anything else that
could possibly be done.
I sometimes think that the question of freight rates and
their effect on the price of commodities to the consumer is not
very accurately known. We are prone to jump at conclusions,
instead of carefully analyzing figures and thus reaching con¬
clusions which are exact.
The question of freight rates, in order to get a fair perspec¬
tive, and to reach an absolutely fair conclusion, must be fol¬
lowed to its last analysis, which is its application to, and effect
upon, the individual consumer.
The whole fabric of freight rates, from the first shipment
of raw material, is simply a transfer or carrying forward of
freight charges, until it reaches the final purchaser or consu¬
mer, and he pays the freight. When the New York Central
lines paid the various locomotive and car manufacturing
companies approximately $31,000,000 for equipment and
material furnished in the year 1907, the railroad paid every
farthing of freight that had accrued on every pound of iron
and steel from the time the first pick was struck into the ground
that mined the ore; it paid the freight on every foot of lumber
from the time the axe was struck into the tree from which the
lumber was cut, and it paid the freight on every dollar's worth
of provisions used and clothing worn by the employes of these
companies and their families while working on this equip¬
ment.
When the New York Central lines paid for the three million
13
lies aud approximately one hundred and eighty-five thousand
tons of rail used in 1907, it paid every penny of freight that
had accrued on the ties and the rail from the time one was
standing timber and the other was iron ore in the mountains
of Minnesota. The railroad fed and clothed the workmen and
their families and paid the freight on the provisions used and
clothing worn by them from the time the tree was felled in the
forest and the ore dug from the ground, until, passing through
the thousands of hands, the ties and rails were finally laid in
the track.
The consumer buys what his family consumes—flour, but¬
ter, meat, sugar, tea, coffee, and the like—by the pound. He
buys his kitchen stove or his range, and his heating stove, or
his refrigerator, once in ten or fifteen years, according to the
quality of the utensil and the care given it in its use.
Let us consider for a moment what the freight rate means
to the consumer, and what an increase of ten per cent, would
signify to him.
Troy, New York, is quite an important stove manufactur¬
ing point. The freight on a steel range, selling at retail for
from $55.00 to $60.00, and weighing from 400 to 500 pounds,
from Troy to Chicago, is about $1.11; to Cincinnati, 90 cents; to
Indianapolis, 99 cents; to St. Louis, $1.30. An increase of ten
per cent, would add from 9 to 13 cents to the cost of each stove
to the consumer who finally buys and uses the stove. Taking
the low average of ten years as the life of a stove and dis¬
tributing this increase over the ten years, would make it cost
the consumer for increased freight charges from one to one
and three-tenths cents per year.
The rate on gloves from Gloversville, N. Y., to New York
City or Brooklyn, amounts to about nine-tenths of one cent per
dozen pairs, or seven and one-half one-hundredths of one cent
per pair of gloves, which retail at from 75 cents to $2.00 a pair.
An increase of ten per cent, would add nine one-hundredths of
one cent per dozen, or seven and one-half one thousandths of
one cent per pair.
14
The rale on knit goods, cotton and woolen underwear,
sweaters, etc., from Troy, Cohoes, Amsterdam, Little b\lls,
TJtica, Fort Plain, and all other points in New York and West¬
ern New England to Chicago, the great distributing point for
the West and Northwest, is 44 cents per hundred pounds. The
average price to the consumer of a suit of underwear is from
$1.00 to $3.00. The freight per suit to Chicago is forty-four
one-hundredths of one cent. An increase of ten per cent,
would add four one-hundredths of one cent to this cost to the
consumer. To St. Louis and other Mississippi Eiver points the
freight is fifty-four one-hundredths of one cent per suit. An
increase of ten per cent, would add five-one-hundredths of one
cent to the cost of underwear to the consumer.
Do you not think that either the manufacturer or consumer
would very gladly accept this almost inconceivably small addi¬
tion to cost if, as a result of such small increase in rates applied
uniformly to the freight traffic of the country, the railroads
could again resume their tremendous purchases of material and
equipment, enabling the large locomotive and car manufactur¬
ing companies, the rolling mills, the iron mines, and other in¬
dustries that to a very great extent are dependent on the rail¬
roads' purchases, to resume operations and to re-employ millions
of men who are out of employment; making this vast army of
men now idle, and with no purchasing power whatever, patrons
of the retail establishments in the thousands of communities
in which they live, and enabling these establishments in turn to
buy the stoves and ranges manufactured at Troy, and the
gloves, knit goods, cotton and woolen underwear, sweaters,
etc., from the manufacturers at Gloversville, Utica, Amsterdam,
Little Falls, Fort Plain, and the many other manufacturing
points represented in your Association.
The freight on a refrigerator, such as is used by the ordi¬
nary family, from points in Indiana and Michigan to New
York is approximately 75 cents; an increase of ten per cent,
would add 7^ cents to the cost of the refrigerator which sells
for from $15.00 to $50.00, delivered in New York City. I ask
15
you, as a representative of a large manufacturing association,
if the manufacturer could not afford to pay this small addition
in freight rates ? Could not we all, as consumers, afford to pay
cents more for the refrigerator if such an addition, fairly
and equitably distributed, would return to steady, well-paid
employment the hundreds of thousands of men now out of em¬
ployment, enabling them again to become purchasers of the
stoves, the refrigerators, and the many other products of the
Nation's manufacturers ?
The rate on butter and eggs from points in Eastern Iowa to
New York—a distance of approximately 1,200 miles—is 84
cents per hundred pounds. On dressed poultry from the same
points to New York, the rate is 9CJ cents.
The eggs are sold to the consumer by the dozen and the
other commodities by the pound; and the consumer pays
every farthing of freight that has accrued from the lime the
egg is laid, which he buys in the "original package," or as
dressed poultry, or from the lime the cow is milked from which
the butter is made.
An increase of ten per cent, would add eight one-hun¬
dreds of one cent per pound to the price the consumer pays
for butter and eggs, and it would add nine and one-half one-
hundredths of one cent per pound to the cost of dressed poul¬
try, for which he pays from fifteen to twenty-five cents per
pound.
The freight on an ordinary suit of clothes, including hat
and shoes, for a distance of three hundred miles, from any of
our large jobbing or distributing centers, is approximately 3^
cents; a ten per cent, increase would add a little more than
three-one-hundredths of one cent to the cost of a suit, which
sells for from $10.00 to $35.00.
The rate on flour from Minneapolis to New York, in car¬
loads, is 25 cents per 100 pounds, or 12^ cents per 50 pound
sack. The flour is sold to the retailer in New York at approx¬
imately $1.48 per 50 pound sack. An increase of ten per cent.
16
in freight rates would add but 1:^ cents to the price of a fifty-
pound sack, or a little more than two-one-hundredths of one
cent, per pound.
The rate on dressed beef from Chicago to New York is 45
cents per hundred pounds. The average price of this beef to
the retailer in New York is approximately 11| cents per
pound. A ten per cent, increase in freight rates would add less
than five-one-hundredths of one cent per pound.
The freight rate on a harvester for 300 miles, boxed and
crated, by the carload, as they are shipped, would be $1.76. A
ten per cent, increase in this freight rate would amount to
about 17^ cents. The machine sells for $130.00.
The freight on a cream separator—by the carload—from
Coughkeepsie to Chicago, is approximately 48 cents; to Minne¬
apolis, 74 cents; to Kansas City and Omaha, 95 cents; to Mon¬
treal, 35 cents. One of these separators retails for from $45.00
to $60.00 each. An increase of ten per cent, in the freight
rate would add from three and five-tenths cents to nine and
five-tenths cents to the price of the separator which the pur¬
chaser would have to pay.
The freight on a mower, weighing from 750 to 900 pounds
and selling for about $45.00, from Poughkeepsie to Chicago, is
approximately $2.06; to Montreal, Can., $1.51; and to points
in Central Ohio from $1.40 to $1.50 each. A ten per cent, in¬
crease would add approximately twenty cents to the price of the
mower at Chicago; 32 cents at Minneapolis; 39 cents at Kansas
City and Omaha; 15 cents at Montreal, and from 14 to 16 cents
at points in Ohio.
Would the manufacturer who makes these implements,
would the farmer who buys and uses them, object to this very
moderate addition to the cost if, by reason of it, thousands of
well paid, steadily employed consumers, were added to those
who buy the grain and other products of the nation's farms.
This list could be enlarged to embrace every commodity
which railroads handle, and the same process of analysis
would in every case reach substantially the same result.
17
As before stated, luy arguinent has been on the assumption
that you were correct in your statement that the rates have
not been either raised or reduced in the last thirty years; and if
this was the case, in view of the tremendous increase in cost of
producing the commodity of transportation, which the rail¬
roads produce and sell, 1 do not believe that any fair-minded
man, giving the matter careful, unprejudiced consideration,
can reach any other conclusion than that the railroads are en¬
titled to a substantial increase in freight rates.
I beg to state, however, that you are in error in your state¬
ment that there has been no reduction in freight rates during
the last thirty years.
The following were the class rates in effect between New
York and Chicago in 1877 compared with 1908 :
Eastbound—
Decrease
1877. 1908. per cent.
First class $1 50 75c. 50
Second class 1 10 65c. 41
Third class 85 50c. 41
Fourth class 40 35c. 12%
(In addition, there are the fifth and sixth classes, which
were not in existence in 1877, which take a rate of 30 and 25
cents per 100 pounds respectively, and include many articles
which before took the fourth class rate of 40 cents.)
Westbound—
Decrease
1877. 1908. per cent.
First class 75c. 75c.
Second class 70c. 65c. 7
Third class 60c. 50c. 17
Fourth class 45c. 35c. 22
Fifth class 35c. 30c. 14
(And a sixth class has been established, which takes a 25
cent rate, and which includes many commodities which for¬
merly took fourth and fifth class rates.)
The rate on grain and flour from Chicago to New York dur¬
ing this period was as follows:
18
Wlieat. Com. Flour.
1877
1887
1897
35c. 35c. 35c.
25c. 25c. 25c.
20c. 15c. 20c.
16c. 16c 16.7c,
13c. 13c. 14c.
1908 Domestic
Export..
These figures show that the rate ou wheat and com for ex¬
port was 270 per cent, higher in 1877 than in 1908; while on
flour it was 250 per cent, higher.
It is true that class rates do not show anything like the ratio
of reduction that is shown on farm products eastbound; but it
is also true that the fact that the railroads have made these
tremendous decreases in rates of freight on farm produets has
been one of the most potent influences in the upbuilding and
prosperity of the great agricultural West and Middle West, and
this prosperity has been the foundation on which the great
manufacturing industry of the United States has been built,
and upon which the future prosperity of the manufacturing
business of the nation must depend.
1 have written you at great length because I appreciate fully
the importance of the Manufacturers' Association of New
York and the influence it will exert in the settlement of this
question.
The interests of the manufacturer, the merchant, the miner,
the farmer, and the railroads are inseparately interwoven. In¬
jury can come to neither wi^out hurt to all the others, and the
blow to the railroads which I have attempted to describe was
quickly and disastrously reflected in every department of busi¬
ness activity of the nation.
I doubt if any question which is pressing for consideration
at this time exceeds in importance the one I have attempted to
outline. Upon its righteous determination rests the issue of
an early return of prosperity or an indefinite continuance of
present depressed conditions, emphasized and darkened by a
conflict with organized labor such as the business interests of
the nation have never experienced.
19
The question deserves the most careful, unprejudiced study
and investigation at the hands of every business man in the
country. Without such study and investigation no man should
attempt to form or express an opinion. With such an investi¬
gation, carefully and conscientiously made, by members of
your Association or any kindred organization of business men
of the nation, the railroads may safely submit the facts and
with full confidence await the decision.
Yours very truly,
(Signed) W. C. BKOWN,
Senior Vice-President
20
CLIPPINGS FROM NEW YORK PAPERS, CONTAIN¬
ING CRITICISMS OF MR. BROWN'S LETTER TO
MR. HOILE AND REPLIES THERETO.
New^York Times, July 13, 1908.
SECRETARY HOILE DECLARES FOR THE MANUFACTURERS
THAT RAILROADS ARE PLAYING POLITICS—WAGE
CUT THE REAL REMEDY.
Secretary Hoile, oí the Manufacturers' Association of New
York, after a careful perusal of Mr. Brown's letter, at his home In
Farmlngdale, L. I., yesterday, replied to a number of the state¬
ments It contains. He said. In part :
"I do not Intend for a moment to question the motives of Mr.
BroTvn, nor Is It my desire to enter Into a controversy with him, par¬
ticularly through the newspapers.
"For many moons the prayer of the railroad managers, ad¬
dressed to Washington, D. C., has been: 'Don't bother us and let us
alone.' That Is now the prayer of the shippers to the railroad man¬
agers.
"If the railroads Insist upon tl\e proposed 10 per cent. Increase
at this particular time we shall ha^e to see what can be done with
and through the Inter-State Commerce Commission. It may be a
fact that there should be a 10 per cent. Increase In freight rates.
The time, however, for that Increase Is not now.
"It may be true, as Intimated by Mir. Brown, that the freight
rate question Is not properly understood as to its effect upon the
cost of an article to the consumer, but to most people It Is quite
clear that, notwithstanding the bold announcement 'Jones pays the
freight,' It Is the consumer who has that honor. And If the normal
freight charge Is $1, and that rate Is Increased 10 per cent., it means
In practice to the consumer, that on ten purchases he pays $11
Instead of $10 freight charges.
"If the railroads are going to arrange rates for the benefit of
the labor unions the manufacturers had better have this thing out
right now, and the sooner the better.
"While the manufacturers are not opposed to the labor unions,
and particularly those connected with the running of trains, our
21
experience as manufacturers, and those affiliated with the building
trades, has been far from satisfactory.
"If the two conventions, the Repubiican and the Democratic,
can play with the anti-injunction plank, it is quite a different propo¬
sition when the railroad managers put a similar proposition up
to the manufacturers. Politicians can throw a bluff, and they do
throw hluffs. And the railroad managers every now and then play
politics. They can play politics with the politicians, but when it
comes to their playing politics with the manufacturers, it is a far
different proposition- We are standing against that sort of thing
as a matter of principle.
"The railroad companies are not the only ones who are being
pinched by the present situation. The manufacturers are also being
pinched as it is. Many of them have stock in their possession which
has depreciated DO per cent, since last Fall. The blow which re¬
sulted from the flnancial depression last Fall is still being felt keen¬
ly all along the line. We are ail carrying our end of the load. Per¬
haps Mr. Harriman could infoirm us how the panic last Fall was
caused.
"It is no use for the railroads to hold out the threat of a strike
should they meet the situation by decreasing their payrolls. If
that comes, let it come, for the railroads have only to face a situa¬
tion that every employer of union labor faces. The manufacturers
face the same proposition as the irailroads do in this respect. It is
one of the unfortunate results of union labor. The statement by Mr.
Brown that a strike would be precipitated should the railroads de¬
crease the payrolls does not answer our statement that the advance
of rates would work disaster to the manufacturers.
"If an advance in rates wäre made on the Long Island Railroad
and not on the New Jersey Central it can be readily understood
that the man along the Jersey Central is going to get his goods to
New York cheaper than the man along the Long Island Railroad.
That would scarcely be fair to the men who are engaged in the
same business, but whose manufacturing plants are in different
localities. The point is this—the advance is not to be made univer¬
sal, as we understand it. If that understanding is corirect the in¬
crease in freight rates becomes inequitable, because it is discrim¬
inatory.
22
New York Times, July 14, 1908.
SUGGESTS A BOARD TO ARBITRATE RATES.
Vice-President Brown Says Such a Commission Would Satisfy the
New York Central.
DEFENDS THE WAGE SCALE.
Counting High Cost of Living, Pay of Men Isn't Too High, He Says—
Railways Not Playing Politics-
Senior Vice-President Brown of the New York Central replied
yesterday to the interview of James T. Hoile, Secretary of the
Manufacturers' Association, as published in yesterday's Times.
When Mr. Brown was seen yesterday in his office at the Grand
Central Station by a Times reporter he was asked;
"Mr. Brown, what reply have you to make to the statement of
Mr. Hoile that the railroads, through fear of union labor, propose
increasing rates rather than decreasing wages?"
"This is not the case," said Mr. Brown. "If wages paid railroad
employes were unduly high as compared with wages paid in other
departments of business activity, in positions comparable with the
positions in railway service, then it would be fair to consider the
question of reducing wages; but, as a matter of fact, this is not the
case. Taking into consideration the cost of living, which is almost
as high in every particular as during the height of business, pros¬
perity in 1907, the present basis of wages paid railroad men is not
too high; whereas, compared with freight rates in any other country
where railroads are operated, or compared with the former basis of
irates in this country, or taken in connection with the large in¬
creases in cost of material of every character, freight rates in the
United States are too low.
"I happen to have before me a letter from Mr. O. C. Barber,
President of the Diamond Match Company, of Akron, Ohio, under
date of July 7th last, in which he speaks of the wages paid coal
miners in mines in which be is interested. He says :
" 'At our mines at the present time we have no difficulty in get¬
ting cars, neither have we any difficulty in selling the coal at rea¬
sonable profit, and we have to-day working in these mines Russian
miners who cannot speak the language of the country, making as
high as ?8 per day.'
"The engineers pulling our highest class passenger trains, the
Twentieth Century Limited, the Empire State Express, etc., cannot
23
make $8 per day. There is hardly a trainmaster in the United
States, and not a great many Division Superintendents of railroads,
who make as much as .$8 a day.
"The tJruth of the matter is that the pay of iron and steel work¬
ers, brick masons and carpenters averages higher than the pay
of engineers, firemen, conductors, and trainmen on the railroads.
The former have reasonably regular hours and are subjected to
little of the exposure to all kinds of weather and the constant risks
that make life insurance almost an impossibility for railway em¬
ployes in train and yard service, as well as the Indispensable re¬
quirement in railway service of working night or day as conditions
may demand."
"Have you anything to say in regard to Mir. Hoile's charge that
the railroads are playing politics?" Mr. Brown was asked.
"There is no desire or disposition on the part of the railroads
to play politics. I endeavored in my reply to Mr. Hoile to give
figures which are susceptibie of verification and they should cer¬
tainly be accepted ör disproved."
"What have you to say to Mr. Hoile's suggestion that the ques¬
tion will probably be submitted to the Inter-State Commerce Com¬
mission?"
"Speaking for the New York Central lines, as I am not author¬
ized to do more than this, I should be perfectly willing to sub¬
mit the question to the Inter-State Commerce Commission either
before or after the taking effect of the rates; and if the Inter-State
Commerce Commission does not care to undertaKe the consider¬
ation of the question until it reaches them—after the taking effect
of the rates—I should be perfectly willing to leave it to a fair com¬
mission, similar perhaits to the Coal Commision appointed by Pres¬
ident Roosevelt in 1902. I think the railroads can demonstrate the
merit of their claims for an increase in rates to any fair-minded,
conscientious commission to which the question may be submitted."
"Mir. Hoile states that he understands the proposed rates will
be discriminatory," suggested the reporter.
"I do not know where Mr. Hoile gets this understanding of the
situation," said Mr. Brown. "One purpose in deferring the taking
effect of the new rates until October 1 was to give time for such
thorough consideration of the matter in all its phases as to avoid
any discrimination, and in making any inörease in rates that may
be determined on to preserve existing differentials and relation
of rates so that all shippers will be on the same relative basis of
rates as now-''
24
New York Evening Post, July 14, 1908
VIEWS OF PROPOSED ADVANCES IN FREIGHT RATES.
Douglas Dallam, secretary and treasurer of the National Whole¬
sale Dry Goods Association, said yesterday:
"Mr. Brown and the other parties to the increase agreement
betray their lack of full knowledge of the freight and business sit¬
uation when they say that a 10 per cent, increase would distribute
itself in a minute way among consumers. In the dry goods bus¬
iness, which, by the way, furnishes the best paying traffic the rail-
iroads get, the additional 10 per cent, would be paid directly by the
jobbers. In the final analysis, to use Mr Brown's favorite expres¬
sion, the charge might fall on the general public, but it would take
years for this adjustment to he made.
"There is no possible way in which the wholesale distributer
could add the extra tax, to the retail price of his silks, calicoes,
and other commodities. He simply would have to call upon his
bankers for more money. Is it the part of wisdom to further cur¬
tail the working ability of the distributers of merchandise—the peo¬
ple who in a iarge way create the business for the railroads?"
W. S- Armstrong, president of the New York Credit Men's
Association and member of the Board of Trade's committee on
transportation, said:
"It would be a case of building higher on a false foundation,
which would be the worst possible thing the roads could do. The
tax would be a direct one on the vital forces of the country; would
further paralyze the sinews, and therefore never should have been
seriously considered. Mir. Brown holds contrary views, it appears,
but the expression of them only creates the impression that his
other arguments are just as faulty. He has attempted to analyze;
he will be surprised when the shippers and other business men be¬
gin to analyze railroad rates.
"Mr. Brown was asked pertinent and direct questions by the
manufacturers, none of which he answered. The gist of his recent
letters and speeches is that either rates must be raised or wages
lowered; that a 10 per cent, increase in the former would not ser¬
iously injure any one. I doubt if any other railroad executive of
prominence in the country would openly endorse the latteir view.
"If wages are too high in places they should he lowered to the
proper level; if freight rates are too low on certain commodities
they should be increased.
25
"In any event, the mercantile and industrial interests of the
country are not responsible for the situation in which the railroads
find themselves. Greater financial—and political—damage will be
done by wrongfully maintaining wages and wrongfully raising
freight rates than by doing the sensible thing at all odds, as the
railroads finally will be forced to do."
New York Herald, July x6, 1908.
MAKES HER SUIT COST 13-100THS OF A CENT MORE.
How a Woman in Chicago Would Be Affected by Ten Per Cent.
Freight Rise.
COTTON DRESS GOODS USED TO ILLUSTRATE.
Figures Are Provided by William C. Brown, Senior Vice-President
. of New York Central.
MILLIONS TO THE RAILROADS.
Advance, Distributed Minutely Among the Buyers, Keeps Men at
Work and Their Families from Starvation.
"Increases of ten per cent, in freight rates may present, when
reduced to actual figures, extremely small fractions—almost incon¬
ceivably small when viewed by the consumer- But to the railroads
those fractions in their aggregate mean the difference between
pinching poverty and a reasonable degree of prosperity. To hun¬
dreds of thousands of workingmen they mean the difference between
steady, well paid employment and walki-ng the streets looking in
vai*n for work."
With this statement William C. Brown, senior vice-president of
the New York Central and Hudson River Railroad, summed up yes¬
terday a further defense of the position of railroad authorities and
financiers, as stated in interviews in the Herald, that there must
be an increase in freight rates or a wage reduction if the railways
of the United States are to escape a paralyzing attack of "arterio¬
sclerosis," as aptly and vividly presented by the simile applied in
the Hërald's editorials on this vital subject, and become the fore¬
most factor in bringing to the nation at large a stable return of
buoyant prosperity.
Of the alternatives presented Mr. Brow i asserted that mod¬
erate rate advancement offers the best expedient and carries the
26
least possibility of causing any industrial disturbance. He answered
the contention of Douglas Dallam, sedretary and treasurer of the
National Wholesale Dry Goods Association, that he had "betrayed
his lack of knowledge of the freight and business situation" when in
his formal letter on the subject the New York Central oflBcer held
that a ten per cent, increase would "distribute itself in a minute
way among the consumers."
iMr. Brown said :
"I have read very carefully what Mr. Dallam has said, and 1 am
very glad to suggest a method by which the dry goods jobber can
and should distribute the proposed increase, if made. The present
rate on cotton dress goods from New York to Chicago is fifty-five
cents a hundred pounds. This figures out about eleven-hundreths
of one cent a yard, including the weight of the case or box. An
increase of ten per cent, on the freight rate would add eleven one-
thousandths of a cent a yard to the cost of the goods in Chicago.
Allowing twelve yards of dress goods for a woman's dress, an in¬
crease of ten per cent, in the present freight rate would add thir-
teen-hundredths of a cent to the cost of the suit.
"The present rate on winter dress goods between New York
and Chicago is seventy-five cents a hundred pounds, or approximate¬
ly seventy-five hundredths of one cent a yard, including the boxing.
A ten per cent, increase would add seventy-five one-thousandths of
one cent a yard to the cost of the goods at Chicago, or an increase
on the cost of a dress of twelve yards of about nine-tenths of one
cent.. Mr. Dallam will simply have to add to the present price on
cotton goods eleven one-thousandths of one cent a yard; to the
present price of winter goods seventy-five one-thousandths of one
cent a yard.
"I realize this is dealing in extremely small fractions, almost
inconceivably small to the consumer; but to the railroads—hand¬
ling millions of tons of freight as they do—means the difference be¬
tween pinching poverty and a reasonable degree of prosperity. It
means to hundreds of thousands of workingmen the difference be¬
tween steady well paid employment and walking the streets looking
in vain for work."
Reminded of the position of Mr. Knapp, of the Interstate Com¬
merce Commission, who has not favorably regarded the suggestion
that the rate matter be referred to an independent commission or
board of arbitration, Mr. Brown said: —
"I agree fully with Mr. Knapp in this. The regular and legal
method of handling these matters seems to me best and really the
only effective way. I am satisfied that the equity and fairness of
27
th« railroads' position would appeal to any commission that might
be agreed on, and, so far as I can express the sentiment of the rail¬
roads, they would be willing to leave It to such a commission. I
realize, however, that the finding of a 'special' commission of this
kind could not. In the nature of things, be final, and that the ques¬
tion can only conclusively and authoritatively be decided by the
Interstate Commerce Commission, which was created for that ex¬
press purpose"
Answering the charge of Mr. W. S. Armstrong, President of
the New York Credit Men's Association, that the proposed Increase
In freight rates would be a case of "building higher on a false
foundation, would be a direct tax on the vital forces of the coun¬
try, and would further paralyze the sinews," Mr. Brown stated :
"I do not think his point is well taken. The foundation for an
increase of freight rates lies in the fact that for ten years there has
been a continuous rise in the price of almost everything except
freight rates. The demand on the part of the railroads for an in¬
crease in freight rates at this time is not based on the existing de¬
pressed business conditions. A moderate increase in freight rates
would have been necessary on account of the tremendous increase
in wages, advanced cost of material and increased expenses incident
to recent legislation, even if the volume of business during 1908 had
been fully as great as in 1907.
"As shown In my letter to J. T. Holle, secretary of the Manu¬
facturers' Association of New York, during the last six months of
1907, while the gross earnings of the railroads increased about
$57,750,000 over the same period of 1906, their expenses Increased
almost $80,500,000 and net earnings decreased almost $23,000,000.
This showing was not the result of any depreciation or falling off
In tonnage. Traffic was moving In unprecedented volumes, and
If these flguires indicate anything It Is that no Increase In volume
of business will make good the tremendous Increase In expenses.
And they demonstrate unmistakably that there must be some In¬
crease In net earnings by a moderate Increase In freight rates or
a substantial reduction in the pay of railway employes.
"For very many reasons the former alternative Is by far the
better. The one controlling reason, however. Is the fact that, by
comparison with the wages of men employed in other departments
of business activity, the wages paid railroad men are not too high.
On the other hand. It is a fact that, considered in connection with
the great increases made in the wages of railway employes during
the last ten years and with recent legislation which curtails the
hours of labor and adds burdens Impossible of estimation In con¬
nection with personal Injury claims, and In consideration of the
further fact that almost every Item of mateirlal used by railroads
shows an Increase during the same period of from twenty to one
hundred per cent, the present basis of freight rates In the United
States Is too low."
28