Railroads and Wages OR THE DEBT THAT LABOR OWES TO TRANSPORTATION FOURTH EDITION By GUY MORRISON WALKER AUTHOR OF 41 WHAT SHALL WE BUY?” “SCIENTIFIC INVESTIGATION OF INVESTMENTS” “ TRUST COMPANIES ” “ AMERICAN MUNICIPAL BONDS ” “INTERURBAN RAILWAYS AS AN INVESTMENT” “SINKING FUNDS” “THE POSITION OF INDUSTRIALS” “GOLD BRICK FOREIGN LOANS” ETC., ETC. \Js v- S rA Copyright, 1902 By G. M. Walker EDWARD V. BROKAW * BRO. PRINTERS, ETC. 54 BROAD ST., N. Y. 18 Mrfjf JSUaa. RAILROADS AND WAGES, OR THE DEBT THAT LABOR OWES TO TRANSPORTATION. By Guy Morrison Walker. ^Tp HE idea that our great railroad corpora¬ ls tions are the enemies of labor and the .oppressors of business has become deep- £L seated. These railroad corporations have be¬ come so great and powerful and seem to ac- C °?if 1 !f h J hdr Cnds by such inexplicable methods that many have come to believe that they are a menace to good government. It is elieved that they are seeking to increase their power and extend their influence for the pur- pose of still further levying tribute upon the labor and commerce of the country and even more effectually crushing those who oppose them and protest against their discriminating rates than they have been able to do in the past Recognizing this fully, every State in the Union and Congress itself, has, in response to popular demand, enacted laws restraining the combination and consolidation of railroads and rates - Many decisions th e tionaliJvTd'*- h "' S “ Stalil « l the constito- tionality and justice of these laws. Yet in namVs H eV ' OUS *** the * reater raiIr0 ^ com” to be aVC i S ° ne ° n absorbln S Iines that aspired to be rivals, consolidating with competitors, Feeling Against Railroads. Hostile Laws Sustained. 4 Railroads and Wages But Consolida¬ tion Contin¬ ues. Corrupt Methods Suspected. Northern Securities Case. buying up connecting links, building feeders and swallowing up all manner of lesser rail¬ road companies until, while railroad mileage has greatly increased the number of companies has decreased, until almost the entire mileage of the country is controlled by a dozen groups of companies, and all this has been accomp¬ lished in the face of hostile legislation. In addition to this the companies have, in some mysterious way, evaded or anticipated all the attempts of commissions to regulate their rates. It is not strange, therefore, that the people have come to believe that all this has been ac¬ complished by the corruption of the courts and other public officials by the railroad companies and that popular feeling has been growing stronger and popular clamor louder, until there is no surer method by which a politician may leap into public prominence and favor than by leading an attack, even though an unsuccessful one, against these same railroad corporations whose growing power seems to threaten the very liberties of the people. The announcement of the organization of the Northern Securities Company for the purpose of securing a single ownership of two great competing railroad systems in the Northwest, was such a transparent evasion of the laws to prevent such a consummation that the whole Railroads and Wages 5 country was aroused, and the President himself not content to await the outcome of the actions begun by the several States through which the systems run, instructed the Attorney-General of the United States to take steps at once to prevent its accomplishment. The decision of the cases questioning the legality of this action is of great importance to American labor and really involves the contin¬ uance of American industrial supremacy over the rest of the world. Inasmuch as the ques¬ tions involved may become of political as they now are of economic importance, this study is offered to the American people with the hope that the facts that it contains may help to guide aright their political judgment and save them from following a course which, if persisted in, can but result in their reduction to a condition of industrial slavery. It is a well known fact, though one that we seldom stop to recall, that the price of the finished product in the markets of the world is made up of the cost of manufacture plus the cost of transportation. Reduced to its lowest analysis, the cost of every manufactured pro¬ duct is simply the cost of the labor to produce it, for the cost of raw material is simply the Decision Involves Industrial Future. Labor in Cost of Product. 6 Railroads and Wages Transporta¬ tion also Labor. Modern Labor Escapes Burden. cost of the labor to produce it, whether it be digging ore from the mines, gathering ivory- in the forests of Africa, or shearing wool from the backs of sheep. Under primitive conditions even transporta¬ tion is simply labor and the cost of transporta¬ tion is simply the cost of the human labor necessary to carry the finished product to mar¬ ket. This condition is still to be seen in oriental countries, particularly in China, where the greater part of China’s tea crop is borne to the waterways on the backs of men, and in Africa, where strings of negroes still bear to the coast the ivory gathered in the forests of the interior. By the development of modern means of transportation, labor in civilized communities has been relieved of the burden of transporting its manufactured products to market by the costly and laborious methods that still prevail in less favored communities. The farmer of Kansas and Nebraska sells his great surplus of wheat and corn at a good profit in the markets of Europe because American railroads trans¬ port his grain from these farms fifteen hundred miles in the interior down to the coast at a cost of approximately one-third of one cent per ton mile. In China the farmer in the interior raises no more of any particular product than his immediate community is able to consume for Railroads and Wages 7 the reason that the means of transportation that there exist are so expensive that even his small surplus is unable to pay its way to a nearby market. It is hard for those who are familiar with the modern means and methods of transportation to realize how much they owe thereto and how much the wage that is paid to labor in civilized communities is the result of the introduction of these modern methods of transportation. The peculiar industrial and economic conditions which prevail in China to-day are due to the primitive and expensive methods of transporta¬ tion that there exist, for practically her entire commerce is carried on the backs of men or by such primitive means of conveyance as wheel¬ barrows, carts or pack animals. The province of Honan in China, lying about six hundred miles inland from the coast, with an area about equal to that of the State of New York, but with a population of over twenty-two millions, has a foreign commerce that aggre¬ gates only about five hundred thousand dollars a year. The great province of Sze Chuan, with an area of two hundred thousand square miles and a population equal to that of the United States, is practically an unknown world, be¬ cause almost its only means of communication is by the small boats that desend the Yang Tse Present Wages Re¬ sult of Modern Transporta¬ tion. Example of China. 8 Railroads and Wages Labor Cheap but Cost High. Wages De¬ pend on Breadth of Market. Transporta¬ tion Facili¬ ties of the World. river and the returning boatmen who trudge into the interior carrying on their backs such small bundles as they are able to bear. Al¬ though the men engaged in this traffic are only paid about eight cents a day for their work and they board themselves out of that pittance, this method of transportation costs about ten cents per ton mile, or nearly fifteen times the average freight charge of the American railroads and more than thirty times what American railroads charge for the transportation of grain. The value of every commodity depends upon the breadth of the market for it and particu¬ larly is this true of the value of labor. For labor necessarily depends for its value on the facilities which exist for transporting its pro¬ ducts to market. Thus we see that in China where the facilities for transportation are the poorest in the world we find the cheapest labor, cheap because it is confined for a market for its products to the territory im mediately surround- it and is cut off from the markets of the world by the high cost of reaching them . In all China there are in operation less than one thousand miles of railroad. The following table gives the population, total miles of railroad and the miles of railroad for each ten thousand of population in the leading industrial countries of the world: Railroads and Wages 9 Miles Miles Country. Population, of Road, per 10,000 Great Britain. 41,454,578 21,855 5 .27 France . 38,641,000 26,234 6.78 Germany - 56,343,000 21,392 5.57 Austria . 47,102,000 22,545 478 Italy . 32,449,000 9772 3-0i Russia .128,932,000 28,589 2.21 United States. 76,303,000 202,000 26.47 It will be seen from the preceding table that America the average man in America is four times better Four Times served with railroad transportation facilities Better than the average Frenchman, who next to our- Served, selves are the best served by their railroads of any people in the world; while the average American is five times better served in this re¬ spect than is the average inhabitant of Great Britain or Germany, who are our chief indus¬ trial rivals. From this it is easy to see how much greater is the opportunity of the average American to market the products of his labor and how much wider is the market which these products may reach. Transportation rates are not only governed Rates De- by the methods of transportation employed, pend on but in civilized countries where practically the Skill and same methods of transportation prevail they Capitaliza- are governed by skill in operation and by the tion. fixed charges that it is necessary to pay upon 10 Railroads and Wages American Railroad Capitaliza¬ tion Low. Fixed Char¬ ges High in Europe. the investment necessary to build up the trans¬ portation systems. No where else in the world has railroad operation been reduced to the science that it has in this country, where our train loads average almost double those of Europe and our ton mile rates are not only the lowest, but are scarcely one-third those of our nearest competitors. In all this the American laborer has a great advantage over the laborer in any other part of the world. The average capitalization of American railroads is only $61,884, while the average capitalization of the railroads of Europe is almost twice that sum, amounting to $113,890 per mile, and the rail¬ roads of Great Britain and Ireland are capital¬ ized at $268,051 per mile. This means that the charge of American railroads upon the pro¬ ducts of labor for transporting them to market, necessary to pay the fixed charge upon the in¬ vestment in the roads is only one-half as much as European railroads must tax the product of their labor in order to place that product in the market and only one-fourth as much as English railroads are forced to tax the products of English labor, in order to pay their fixed charges or the interest upon the sum invested in them. While the market for any given product is controlled by that nation which can combine Railroads and Wages ii the lowest cost of manufacture, together with the lowest cost of transportation to market; the price of that product in the market, is gov¬ erned by the next to the lowest possible com¬ bination of these two elements, or in other words, by the cost to the nearest competitor. That nation which makes the cheapest and reaches the market cheapest need not sell its products as cheap as they can be made and delivered in order to control the market, but only to sell a little cheaper than its nearest competitor can make and deliver. After one of the competitors for a market has secured control of it by reducing the sum of his cost of making and delivering below that of his nearest rival, he may thereafter, by the reduc¬ tion of one of the elements of cost, be able to increase his profit without danger to his con¬ trol of the market. He may even reduce one element of cost so much as to be enabled to increase the other element of cost and still make the combined cost less than it was before. In other words, when one country has secured control of the market for any given commodity by being able to make and deliver it cheaper than it can be done by any industrial rival, that country may, by reducing its cost of transporta¬ tion to market, greatly increase its profit and still control the market without in any manner Lowest Cost Con¬ trols Mar¬ ket. Price fixed by Com¬ petitor. Lower Rates Make Higher Wages. 12 Railroads and Waees reducing the price of its wages. It may, in fact, so materially reduce the cost of transportation that wages in that country may be materially increased without endangering its control of the markets of the world. Rates and It is just this that American railroads have Wages of enabled us to do in the markets of the world the World, and what this means to American labor is shown by the following table, which shows the cost of transportation per ton mile and the average wage per day that is paid to labor in the leading countries of the world: Cost of transportation per ton mile Wages Country. in cents. per day. China . $ .10 Japan . .05 .23 Russia . .. .022 •34 Italy . .024 .26 Austria .. .0225 •So Germany . .0150 .90 France . .0190 .80 England . .0260 1.04 United States .. .0069 2.60 From this it will be seen that in China, where the cost of transportation amounts to ten cents per ton mile, wages only average ten cents per day. In Japan, which by reason of a small rail¬ road system and fair means of water commui- Railroads and Wages 13 cation, has reduced its average cost of trans¬ portation to five cents per ton mile, the wages are about twenty-three cents per day. In Rus¬ sia and Italy, which of civilized countries have the lowest railroad mileage in proportion to population and a high average cost per ton mile for transportation, the average wage is only thirty-four and twenty-six cents per day, respectively. In Germany, France and Eng¬ land, which approximate each other in the aver¬ age cost of transportation per ton mile and in their average mileage of railroad in proportion to their population, there is a fair approximation in the average wage. While in our own country, where we have the greatest railroad mileage in proportion to our population, and the lowest cost of transportation, we have the highest average wage to be found in the world, the highest wage in fact of which there is any re¬ cord in history. In the face of these figures it is impossible to escape the conclusion that there is a definite, fixed relation between wages and the facilities and cost of transportation; that in the absence of transportation facilities and in the presence of a high cost or rate of transportation, indus¬ try languishes, labor finds little to do and wages remain low. While as transportation China High¬ est Rates, Lowest Wages. America Lowest Rates, Highest Wages. Relation Between Wages and Transporta¬ tion. 14 Railroads and Wages Industrial Develop¬ ment Due to Railroad. What High Rates Would Mean. facilities increase and transportation rates grow lower and cheaper industry thrives, mar¬ kets widen, commerce grows and wages in¬ crease by leaps and bounds. The industrial development of America, the great demand for labor and the high wages that exist in our country to-day are due pri¬ marily to our wonderful railroad development and to the wonderful cheapness of our trans¬ portation rates. It is a mistake to imagine that manufactures can thrive or agriculture flourish in advance of adequate transportation facilities. Were the farmers of Kansas and Minnesota compelled to pay such transportation charges as the farmers of China, it would cost them $150 a ton to ship wheat from their farms to New York, or $4,500 for a 30-ton car holding 1,100 bushels. In other words, their wheat worth only 60 cents a bushel on the farm would cost $5.00 a bushel delivered at tide¬ water. Were the steel mills of Pittsburg compelled to pay only as much as the manufacturer of Japan for the transportation of their products to market, it would cost them $25 a ton to deliver steel rails on board ship. Pittsburg rails costing $25 a ton at the mill would cost $50 a ton in New York, while Chicago rails Railroads and Wages 15 facing a transportation charge of $50 a ton would have to be manufactured for nothing in order to compete with Pittsburg rails in the Atlantic Co~st market. Neither the products of the farm nor of the factory can pay such charges for transportation to market. It is easy to see that industrial de¬ velopment in competition with conditions as we know them in America is impossible in a country like China where coal mined by cheap Chinese labor at a cost of only 25 cents per ton at the mouth of the mine is raised by the mere cost of transportation to $8.00 per ton when transported a distance of less than forty miles. Under such conditions the consumption of coal is naturally limited to a small radius around each mine and it is impossible to develop any mining industry. The miners of this country should recognize the fact that were it not for the wonderful cheap rates made by our Ameri¬ can railroads for the transportation of coal that not one mine in one hundred would be open to-day and that most of them would be seeking employment, as are the inhabitants of most other countries at wages averaging about one- fourth what they are earning to-day. Industrial Develop¬ ment Im¬ possible. Mines De¬ pendent on Railroads. i6 Railroads and Wages Transporta¬ tion is China’s Problem. Develop ment in Japan. Conditions in Great Britain. With her utter lack of transportation facili¬ ties, the great problem of China for centuries has been how to equalize the great supply of labor that has existed in every community with the limited home demand for it. It being im¬ possible to manufacture or to raise food pro¬ ducts for export, each community in China has manufactured only what it could itself consume. The community has preyed upon itself and the constantly increasing supply of labor has been met by a steadily decreasing demand for it until wages have been reduced to the lowest possible point at which human existence can be maintained. In contrast with the labor conditions that exist in China the recent railroad development in Japan has resulted in a wonderful rise in wages. Wages have increased within the last twenty years from an average of eight, ten, and twelve cents per day to twenty, thirty and forty cents per day, according as that labor is skilled or unskilled, while her exports to foreign countries have increased over 800 per cent. The reason why England with a high cost of railroad transportation as compared with Ger¬ many and France is still able to pay to her labor a higher wage than either of her com¬ petitors, is due to the extraordinary amount of cheap water transportation facilities that she Railroads and Wages i7 possesses which equalize her high railroad rates. In our country it is well known that as the rail¬ roads have reached out into the new country, wages have steadily increased and the prices of farm products have steadily risen. Wages have always been low in those parts of the country far ahead of or removed from railroad facilities, and to-day the lowest wages found in the United States are in those States which have the poorest railroad facilities. Whenever the railroads came into a new community the wages almost immediately doubled. The fol¬ lowing table, showing the cost of transporta¬ tion per ton mile for each decade of the last fifty years and the average wage of American labor at the same time, shows what the in¬ crease of our transportation facilities and the reduction of our railroad rates has done for American labor: Cost of transportation per ton mile Wages. Year. in cents. per day. 1850 . 3.50 $1.23 i860 . 2.74 1.50 1870 . 1.99 1.97 1880 . 1.26 2.13 1890 . .92 2.50 1900 . .69 2.60 Wages Doubled in United States. Railroad Rates and Wages in America. i8 Railroads and Wages It will be seen that, as our transportation rates have steadily fallen, the wages of labor have steadily risen, and that, too, in an almost constant proportion . In the last fifty years our railroad mileage has grown from a few thousand miles of scattered and disconnected links into a great railroad system of over two hundred thousand miles. Every mile of which is in connection with every other mile, equalizing labor conditions and levelling prices through¬ out the whole country, preventing either local famine or local waste of surpluses. This and the reduction during that same period of our railroad rates from 3J4 cents per ton mile to 6.9 mills or less than one-fifth what they were fifty years ago, has enabled us to accomplish the greatest miracle that the world has ever seen. A Modern During those fifty years our population has Miracle. grown from 23 million to over 76 million and over 18 million foreigners have emigrated to our shores. Yet in the face of this great supply of labor, and most of it extremely cheap labor, that has been poured in upon us, we have been enabled to develop our industries and create such a demand for labor that we have more than doubled our own average wage and at the same time delivered our finished products in Europe so cheaply that Europe, even after ship- Railroads and Wages 19 ping its surplus supply of labor to us, has been unable to bring about any material increase in its own wages. The reason that the iron mills of Saxony have been idle has been because German rail- read rates to the coast have been more than the combined charge of American railroad rates from interior points to our sea coast and the added cost of transportation across the seas. Why do the industries of Germany lan¬ guish? It is because the government control of German railroads has abolished competition and maintained German freight rates at figures nearly three times greater than those fixed by private competition here in America. In Amer¬ ica the necessity for lower rates forced many roads into receiverships, but this resulted in a scaling of their debts and their reorganization or a basis which lower rates were able to support. This relief, however, is impossible to the government owned railroads of Europe, for the attempt to reduce railroad rates based upon the present capitalization or cost of those roads to their governments would impair at once the security of government investments, and so the German laborer must struggle for a wage scarcely more than one-third that paid to the American laborer in order to equalize this dif- Why Ger¬ man In¬ dustries Languish. Govern¬ ment Con¬ trol Pre¬ vents Low Rates. 20 Railroads and Wages Wonderful Results of Low Rates* High Wages Produced by Rail¬ roads. ference which prevails in the freight rates of the two countries. It is almost impossible to believe some of the things that have been accomplished and brought about by the wonderful cheapness of American railroad rates. Of what use was it to discover that California could raise fruit for the whole world when that State had but a population of 1,500,000 to consume it? But this fact becomes of great importance when it is known that by reason of our fast freights and cheap railroad rates, California apples are shipped across the Continent, then across the Atlantic and sold in London so cheap that Scottish apples paying English railroad rates for a distance of only 600 miles, are unable to compete with them. It is useless to enumerate other instances, for we are all familiar with them. Our railroads are at the foundation of our industrial prosperity. Their cheap rates for transportation are the prime factors in our industrial supremacy, and it is time forAmeri- can labor to realize it. There is no question but that the high standard of American wages has been brought about and made possible by our low transportation charges . Our wages have, in fact, continued to advance until the standard is so high that in many branches of Railroads and Wages 21 industry it is becoming difficult to maintain our command of the world's market, the struggle for which is growing fiercer with each day. Europe, still thirty years behind us in transpor¬ tation rates, which she has heretofore equalized by low wages, is reaching after us and a better development of transportation facilities is going on in all her different countries. The American laborer must recognize the fact that without other relief he must stand a reduction in wages or lose control of the mar¬ ket. To lose control of the market means that the price of the finished product will be made by another nation than our own and that our profits for manufactures will be reduced to the vanishing point. This means to subject the whole race of American laboring men to the domination of foreign competition. There is no possible way of maintaining our domination of the world's markets except by a reduction of wages or by a still further reduction of the cost of transportation. Our laboring people must therefore recognize that their only hope, not only of better pay, but even of maintaining their present industrial position, depends upon the ability of our railroads to continue as they do to-day to deliver our manufactured products at a cost which defies competition. Markets Endangered by High Wages. 22 Railroads and Wages Burdens on Railroads Fall Upon Labor. Labor De¬ pends on Railroads. This being true, it follows that anything which hampers or interferes with these trans¬ portation facilities will interfere and fall with double weight upon the labor whose products are to be transported. That every imposition laid upon our transportation systems is an im¬ position upon labor itself; that every advantage taken from these transportation facilities robs the labor that benefits by low railroad rates; that eve ry tax and burden laid upon our trans¬ portation facilities is doubly a tax and a burden upon labor which is at the mercy of these same transportation facilities to find a market for its product s. Every obstacle placed in the way of cheapening the cost of transportation prevents and makes impossible any rise in wages. It is surprising when our attention is called to the manner in which we have hampered and burdened our railroads that we have succeeded as we have. It is time for our laboring men to recognize that their future is inseparably bound up with that of the railroads of our country. It is these railroads that have enabled our workingmen and mechanics to fatten off the work that they are doing for the whole world while foreign workmen are idle and all Europe is wildly pro¬ testing against the American invasion. If our Railroads and Wages 23 railroad rates were doubled, at which fi gure they would still be lower than those of any other country in the world, it would close al¬ most every mill and factory in our countr y away from tidewater. In order to maintain our position, railroad rates will doubtless become even cheaper than they are to-day. But it is to be hoped that this will not be accomplished by the reduction of the wages of railroad laborers to the standard of Germany, whose railroads only pay their engineers and firemen a wage ranging from eight to ten cents per hour for a ten hour day, and whose laborers work for a pittance of from five to seven cents per hour. When it is recognized how completely labor and industry are dependent upon these great railroad systems for transportation all parties should join in endeavoring to secure for our great transportation systems every facility for still further reducing their cost of operation and so make possible the lowering of their already marvellously low transportation rates. Were it possible, our railroads should be relieved from taxation. Not only should every obstacle in the way of their combination or con¬ solidation for the purpose of securing greater economies of operation be removed, but very Lower Rates Possible Without Lower Wages. Labor Must Se¬ cure Relief for Rail¬ roads. 24 Railroads and Wages Taxation of Railroads Should Stop. Labor Should Recognize Debt. facility therefor should be offered, for the only alternative is a reduction in wages. Every known and conceivable legitimate scheme or plan to secure the best through connections should be urged in order that the straightest, shortest and fastest lines obtainable may carry our enormous surpluses in the greatest tram loads ever seen into the markets of the world. And l abor instead of antagonizing and fight¬ ing - ^ great railroads should recognize its gre at debt to them for its present prosperity and still more its dependence upon the m for the future continuan ce of the sa me. Our whole people should join in securing every reasonable immunity from taxation or oppress ive regula¬ tions for our great transportation systems, so that as we have used them to attain our present position in the industrial world, we may, by removing all obstacles from their way, make them the means of maintaining American wages at their present high standard and at the same time secu re for American labor its rightful heritage7~the markets of the world and the industrial supremacy of the earth. AUG Z 1911