ference in rates reduced as already shown, it will continue to be injurious. Although very large flour shipments continued to be made early in 1899, in order to meet previous contracts or to dispose of stocks on hand, there was later in the year a great decrease in the demand for American flour. The exports from Minneapolis during September, 1899, were one-fourth less than during September, 1898, while exports from Duluth decreased more than one-half. At present American flour has a reputation which tends to keep up the demand, but when it is found that European millers are able to secure the same quality of grain and, owing to lower freight rates and cheaper labor, to turn it into flour at a reduced price, the American millers will probably find it very difficult to export, especially since the margin of profit in milling is very low.1

Justification of discriminations discussed.—The representatives of several railways, as well as one or two shipping merchants, declare that it is justifiable to make lower rates on grain for export than on grain for domestic use. The price of grain in foreign markets is determined by the competition of sources of supply all over the world, and American grain can be sold there only if it meets the market price. At times the conditions of competition are such that only by making a very low freight rate could American wheat be sold at all. The low export rate relieves the country of a surplus and is beneficial to the farmers; it is similar to the practice of manufacturers in selling their surplus abroad at lower prices than at home. If the railroads were compelled to make an equally low rate on grain for domestic use, they would be unable to make any profit whatever."

One or two representatives of the railways also assert that the competition of Canadian carriers is more severe as to export grain than as to domestic grain, and that lower export rates are thus forced upon American railways.3

On the other hand, Mr. Prouty, of the Interstate Commerce Commission, declares that the investigation of that body showed that the market conditions in Europe during 1899 did not necessitate low export rates, but that the reduction in these rates was due primarily to the bitter competition of the American trunk lines. Several other witnesses hold the same opinion, and especially contend that these low export rates scarcely existed prior to 1899, and that no special change in conditions has arisen to necessitate them. America can produce grain as cheaply as any country, and lower export rates are less justifiable on grain than they would be on manufactured products.+

Railway officers also defend the making of lower rates on grain as compared with flour. The chief argument is that grain is easier and cheaper to handle, both as regards the weight which can be loaded into cars and as regards terminal services. Moreover, water competition is stronger in the case of wheat than of flour, especially because of the greater convenience with which grain can be loaded and unloaded from vessels. It is claimed also that railways can get full train loads of grain, and can get them at times when shipments are especially desired. Railways always charge higher rates for more valuable and more elaborated products than for cheaper crude products.5

Other witnesses, however, declare emphatically that the railways can handle flour as cheaply as wheat. Flour for export, which is always in bags, can be piled up so as to make the load quite as heavy as that of wheat, and equal to the

1 Barry, pp. 243, 246; Vanlandingham, p. 196; Sager, pp. 447, 448, 453; Gallagher, pp. 539, 545, 546, Evans, pp. 435-437.

2 Neall, p. 166; Kelley, p. 188; Callaway, p. 234; Spencer, pp. 276, 281; Fish, pp. 336, 337; Tucker, p. 563; Snydacker, p. 397; Blanchard, pp. 628, 629; Gallagher, p. 543.

Blanchard, p. 628.

Prouty, pp. 146, 147; Vanlandingham, p. 195; Morton, p. 490; Barry, pp. 247, 248; Bacon, pp.424, 425. Callaway, pp. 232, 233; Bird, pp. 473, 474; Tucker, pp. 563, 564; Blanchard, pp. 672, 673.

Barry, pp. 244-250; Vanlandingham, pp. 197, 203-205; Bacon, p. 424; Evans, pp. 435-438; Sager, pp. 449,450; Gallagher, pp. 540, 541, 543; Neall, pp. 164-166.

full capacity of the car. If the actual weight of carloads of flour averages less than that of wheat, it can be due only to the fault of railways, which often furnish small, old-fashioned cars for flour shipments. The expense of handling at terminals is not to be considered, since the cars are loaded by the miller and unloaded by the consignee. Grain shipments tend to concentrate themselves during a short period after harvest, when they interfere with other shipments and prevent the securing of return loads. The gradual shipment of flour throughout the year is an advantage to the railways. It should be to the interest of the railways also to favor milling interests because of the traffic in mill supplies and in the goods consumed by mill employees. One or two witnesses think that the reason for discrimination is that railways are interested in grain elevators and are themselves dealers in grain (see above, p. 8), while others believe that the officers of railways are interested in the terminal elevators and transfer facilities at the seaboard ports, especially at New York, and derive a profit from handling grain. This last argument is specifically denied by the representatives of the railways.1 Import rates.-It appears also from the testimony that railways sometimes make lower rates on goods imported from other countries than on the same goods produced in this country. Indeed, instances were mentioned in which the through rates, including ocean transportation, from European countries to inland points, or to the Pacific coast, have been considerably lower than the rates from points in this country, over the same routes, to the same destination.

Remedy.-In view of the discriminations which are thus shown to have existed between the rates on goods exported or imported and goods of domestic origin and destination, it is urged by several witnesses that the power of the Interstate Commerce Commission be specifically extended to cover export and import traffic. It is claimed by some that the commission already has such power, but this is denied by many railway men, and the courts have held, as regards import traffic, that the commission has no power.3

DISCRIMINATIONS BETWEEN PLACES.

Many witnesses presented evidence concerning what they considered to be unjust discriminations in rates as between different places. Mr. Knapp points out that such discriminations are not secret, but result from unfairness of published tariffs.4

Long and short haul.-The form of place discriminations which is most conspicuously recognized in the interstate-commerce act is that of higher rates for a shorter distance over the same track than for a longer one. The so-called long and short haul clause of the act, however, declares such differences illegal only where conditions are similar, and it has been held by the courts that dissimilarity of conditions is caused by water competition, and even by competition among railways themselves. The witnesses point out that terminal points are naturally subject to such competition to a far greater degree than intermediate points. In the Southern States, largely on account of water competition along the Atlantic and Gulf coasts, and in the Western States also, on account of ocean transportation, the rates to terminal points are often conspicuously lower than those to intermediate points. The policy of the railways is stated by the members of the Interstate Commerce Commission to be to charge a gradually increasing rate to local points according to distance, until the rate becomes such that it would cost no more to ship the goods through to the terminal point and back to the local station.

'Blanchard, p. 673.

"Vanlandingham, p. 205; Prouty, p. 146; Reagan, pp. 340, 349; Morton, p. 493; Kindel, p. 260; Kelley, p. 188.

3 Vanlandingham, p. 213; Gallagher, p. 539; Sager, pp. 447, 453; Barry, pp. 246; Reagan, p. 349. P. 133.

Since terminal charges are an important factor in rates, the intermediate rate may thus be materially higher than the through rate.1

Numerous specific instances were submitted by a witness residing in Colorado to show that the rates for the shorter haul from Chicago and other Eastern points to that State were much higher than those for the haul to Pacific coast points. Moreover, the rates on various commodities from Colorado to the Pacific coast and other Western points were shown to be often higher than those from Eastern points to the same destination. Thus the freight on books from Chicago to San Francisco was $1.75 per hundred pounds, and from Denver to San Francisco $3. The rate on boots and shoes from Chicago to Denver was $2.05, and from Chicago to San Francisco $1.50, etc. The witness claimed that the jobbing and manufacturing interests of Colorado have been very greatly injured by these discriminations.2 Other instances of higher rates for shorter hauls over the same road were mentioned by witnesses in connection with more general complaints as to differences in rates, often by separate roads, in favor of one market as against another.

A few witnesses think that the provision that dissimilar conditions may justify lower rates to competitive than to intermediate points should be repealed, or at least that the Interstate Commerce Commission should be given final authority to decide as to the justice of rates to different places on the same line.3

Several representatives of the railroads, owever, declare that discriminations between long and short hauls are made only under stress of necessity, and that if the rates for the shorter hauls are themselves reasonable, there should be no objection against lower rates to through points. At least one of these witnesses thinks that the entire long and short haul clause should be dropped from the interstate-commerce act.+

Other place discriminations.-Most of the discriminations between places of which complaint was made are between different terminal points or central markets, as distinguished from discriminations between terminal and intermediate points. Frequently the rates complained of are not made by the same railway system, but by different ones, with or without agreement among themselves. Thus the trunk lines from the West to the Eastern seaboard compete actively, especially for the export traffic in grain and grain products. It is a matter of indifference often to grain shippers whether their goods go by way of New York, Philadelphia, Baltimore, or other ports. Each railroad and each terminal point considers itself entitled to a certain proportion of traffic, and naturally the opinion of each differs from that of the other. In the particular case referred to an agreement was reached more than 20 years ago permitting railroads reaching Philadelphia to charge a rate 2 cents less per hundred pounds than those reaching New York, and granting those reaching Baltimore and more southern ports a similar "differential" of 3 cents. Each of the ports is inclined to complain that this adjustment of differentials is unfair.5

Similar adjustments of rates have been made with a view to putting the leading cities of the central West more or less on a par as distributing points for goods shipped from the East and as marketing points for grain and other products. Railway officers point out the immense difficulty of adjusting rates so as to do justice to different sections and cities, and the practical impossibility of satisfying all. They declare that the attempt of each railway, each section, and each city to get the largest possible proportion of traffic has been the chief cause of rate wars and disturbances, especially in the Northwestern States. Since repre

1 Knapp, pp. 134, 137; Clements, pp. 154, 155; Vanlandingham, pp. 202, 206.

2 Kindel, pp. 251-264.

Dousman, p. 361; Bacon, p. 420; Clements, pp. 154, 155; Reagan, p. 342; Hyland, p. 352.
Spencer, pp. 275, 281, 284; Blanchard, p. 628; Tucker, p. 560.

Kelley, pp. 185, 186; Neall, p. 173; Callaway, pp. 224-226; Blanchard, p. 673,

Blanchard, pp. 630, 631; Bird, p. 472; Ripley, pp. 597, 598,

sentatives of each of the leading cities are prepared to make complaints against each of the others, a large number of such conflicting complaints being actually made before the Industrial Commission,' it becomes very difficult for any public authority to decide as to the justice of the rates in any particular case.

Special reference was made by several witnesses to the effect of transportation by way of the Gulf of Mexico and the railways of the central West upon rail rates between that section and the Eastern seaboard. Some witnesses think that an undue proportion of traffic is diverted to Kansas City, St. Louis, New Orleans, and Galveston, and that the rail rates favor those points, while other witnesses think that the natural conditions-distances, grades, etc.-would justify the Southern ports in demanding a much larger proportion of the traffic than they actually receive.

POOLING.

A large number of witnesses discussed the question of permitting railways to make pooling and other agreements. It was pointed out that pools were to be distinguished from other agreements as to rates or as to other matters. In the pool an agreement is made as to the proportion of business to be allotted to each of the roads entering the arrangement. Either tonnage is diverted from the roads receiving more than the agreed proportion or a money payment representing the profit on the surplus tonnage is made. Pooling agreements seldom fix rates, although, of course, rates are in practice greatly affected by them.3

The interstate-commerce act specifically prohibits pools, while the antitrust act of 1890 has been interpreted as prohibiting associations and agreements among railways with a view to fixing rates. It is now advocated by many witnesses that railways should be permitted to make agreements of any kind, and that pooling contracts should be not only legalized, but made enforceable by law. The chief difficulty, it is said, with the pools which formerly existed was that they were outside of the pale of the law, and that there was no way of punishing a railway belonging to a pool which should attempt to divert traffic to itself or should refuse to divide returns. The advocates of pooling include nearly all of the railway officers who appeared before the Commission. A number of shippers, representatives of commercial bodies, members of the Interstate Commerce Commission, and other expert students of transportation also favor pooling, but usually only with the proviso that much more effective governmental control than at present be exercised over rates and over pooling contracts. It was declared by two or three witnesses also that a very general consensus of opinion in favor of pooling exists on the part of other persons throughout the country.4

Arguments against pooling are vigorously presented by Mr. Stickney, of the Chicago Great Western Railway, by two officers representing the Chicago Board of Trade, by Mr. Vanlandingham, the commissioner of the St. Louis Traffic Bureau, and by one or two others; their general position being that the practice would tend to maintain high rates by checking the legitimate competition between railways. Mr. Vanlandingham, however, would permit railways to agree as to rates.5

1 Complaints regarding discriminations against Chicago, Kennard, p. 365; Mallory, p. 588; discriminations against St. Louis, Vanlandingham, pp. 194-199, 206; against Kansas City, Bookwalter, pp. 570-578; Mallory, p. 588; against Milwaukee, Bacon, p. 418; against La Crosse, Dickinson, p. 549; against Norfolk, Nebr., Fuller, pp. 442-446; against Grand Rapids, Musselman, p. 556.

2 Vanlandingham, pp. 197, 206; Knapp, p. 133; Callaway, p. 225; Fish, pp. 321–330. Newcomb, p. 97; Cowen, p. 314; Blanchard, pp. 677, 643, 665; Ingalls, pp. 286, 297.

4 Public officers, etc.: Knapp, p. 138; Prouty, p.150; Newcomb, pp. 96-98; Johnson, p. 62; Reagan, p. 345; Seligman, pp. 614-617. Railway men: Blanchard, pp. 640-649; Woffindin, pp. 565,566; Callaway, pp. 235-238; Ingalls, pp. 286, 296-300; Spencer, p. 280; Cowen, pp. 314, 315; Bird, p. 474; Tucker, pp. 558-561; Morton, pp. 491, 495, 499; Ripley, p. 593. Shippers: Neall, p. 173; Evans, p. 441; Kelley, pp. 190, 191; Counselman, pp. 390, 391; Bacon, pp. 420, 426.

Hyland, pp. 351, 353; Vanlandingham, pp. 214, 216; Stone, pp. 532-535; Stickney, p. 463; Carter, p. 585.

Pooling and competition.-The argument in favor of pooling rests on the position, as stated by several witnesses, that competition between railways is abnormal and destructive, tending to reduce rates to an unprofitable figure, to cause sudden fluctuations injurious to the stability of business, and to induce discriminations between individuals. Several witnesses maintain that the conditions of competition in the railway business are entirely different from those in the production and sale of ordinary commodities; that the poorest railway, such as one which is in the hands of receivers, and therefore not forced to pay dividends, can cut rates with a view to diverting traffic unduly, and can thereby force other railways to make unprofitable rates. The experience of the past with rate wars is referred to as evidence of the destructive character of railway competition. It is pointed out that the control which the Government can and does exercise over railway rates makes competition unnecessary, in a way which would not be true as to other business.'

At the same time the defenders of pooling claim that pools would not absolutely prevent competition and would not permit railways to charge excessive rates. The competition of water carriers, not only those immediately parallel to railways but often those far distant, would in many cases keep down rates. The chief influence affecting rates is the competition of different markets, frequently of markets all over the world. If the railways in one section should attempt to maintain excessive rates, products of that section could not compete with those of another section, perhaps far removed. Reasonable competition, moreover, still exists among pooled railroads themselves, especially in the way of offering greater facilities and conveniences, for the sake of justifying a claim to a larger proportion of the business. The experience of the country with pools in the past is cited as showing that rates have not been maintained at excessive figures, but have actually been reduced under pools. It is also asserted that pooling is recognized in all leading European countries as a necessary remedy for excessive rate cutting and discriminations, government roads even entering pools with private lines, and that it has not tended toward excessive rates.

On the other hand, it was claimed by two or three witnesses that competition is as natural, necessary, and beneficial in the railway business as in any other; that pooling would mean nothing else than monopoly, and that pools in the past have had injurious effects, tending toward excessive rates, and not preventing other evils.

Pooling and discriminations.-Pooling is especially advocated by railway officers and others on the ground that it would tend to check discriminations between persons and between places, which it is claimed are the natural result of excessive competition. It is urged that the only method by which discriminations can be prevented is by interesting the railways themselves to prevent them.

A few witnesses, however, maintain that railways would still be inclined to grant discriminating rates for the sake of increasing their proportion of traffic, in order to secure a larger allotment when the proportions of the roads in the pool should be fixed for the next time."

To this it is replied that as a matter of fact the proportion of business allotted to each road is determined by other considerations than temporary changes in tonnage."

Control of pooling by the Interstate Commerce Commission.-All of the members of the Interstate Commerce Commission, general students, and representatives of

1 Knapp, p. 138; Seligman, p. 615; Blanchard, pp. 635-640; Ripley, pp. 593, 594; Tucker, pp. 560, 561.

2 Blanchard, pp. 643-647, 651-656, 664; Ripley, pp. 593, 595; Cowen, pp. 314, 315; Ingalls, p. 299; Callaway, pp. 235-238; Newcomb, p. 96.

Stone, p. 532-537; Stickney, p. 460.

See especially Blanchard, pp. 644, 675, 683; Ripley, pp. 594, 596; Tucker, p. 558; Musselman, p. 557, and other witnesses already referred to generally.

Vanlandingham, pp. 214, 216; Hyland, p. 351; Greeley, p. 374; Stone, p. 535.

6 Ripley, p. 596.