Hon. GERALD P. NYE, NATIONAL RIVERS AND HARBORS CONGRESS, Chairman Subcommittee Commerce Committee, United States Senate, Washington, D. C. MY DEAR SENATOR NYE: In accordance with permission granted by you, I submit herewith some comments on the statements of Mr. R. H. Aishton, president, and Dr. C. S. Duncan, economist, of the Association of Railway Executives. In the course of his statement, Mr. R. H. Aishton, chairman of the executive committee and of the advisory committee of the Association of Railway Executives, said (transcript, p. 144): "The rail carriers have steadfastly and consistently refused to be placed in a position of opposition to the development of any legitimate form of transportation service, whether over the highways, in the air, or on the water, which is economically justified; that is, pays its own way and is demanded by the public." Actions are said to speak louder than words and it is interesting to compare this statement with the following extract from the preliminary report of the Inland Waterways Commission, the chairman of which was the late Senator Burton, at that time a Member of the House of Representatives: "While the decline of navigation on the inland waterways was largely due to the natural growth and legitimate competition attending railway extension, it is also clear that railway interests have been successfully directed against the normal maintenance and development of water traffic by control of water fronts and terminals, by acquisition or control of competing canals and vessels, by discriminating tariffs, by rebates, by adverse placement of tracks and structures, and by other means." A little later (p. 145), Mr. Aishton said: "If and when competitive conditions are made fair and equitable, the rail carriers will be found cooperating with any operation upon the inland waterways and will have to take their chances on an even-handed basis with any competition that may arise. They expect to offer competition on a fair basis." A sample of the 'fair competition" used by railways against waterways is given in a report made by the Interstate Commerce Commission to the United States Senate, from which the following is condensed. For a good many years Capt. John Quill operated steamboats on the Alabama River between Montgomery and Mobile. Ostensibly, this line was competing with the Louisville & Nashville Railroad; actually, it was operated under an arrangement with the Louisville & Nashville, under which "the rates charged by the river line on competitive traffic were increased sufficiently to protect the rail rates. In return, it appears, the Louisville & Nashville guaranteed a minimum tonnage for which the river line was paid whether it performed the transportation or not. In this way prior to 1902 the Louisville & Nashville controlled the river rates on those commodities on which competition with its rails was possible." (33 I. C. C. 210.) Various river lines that were started were soon driven from the field, but in 1908 some real competition appeared, whereupon, in 1909, the Louisville & Nashville induced Capt. Norman A. Staples to get into the game. He had one boat and the Louisville & Nashville advanced him $50,000 with which to buy two more, taking his notes in return. In September, 1910, the rival line gave up the fight, in which it had lost $150,000. "As soon as this competitor was removed the Louisville & Nashville began pressing Captain Staples to pay the interest and principal on his notes. It appears that the rate war had proved as disastrous to Captain Staples as to his rival, for he, too, found it impossible to meet his obligations. On April 9, 1913, the accounts of the Louisville & Nashville carried a debit balance due from Captain Staples of $41,662.12. On this date this balance was, by direction of Milton H. Smith, president of the Louisville & Nashville, charged off as worthless." There is a sequel not shown in the commission's report, for, while his account had been crossed off the books as worthless, the Louisville & Nashville continued to hound Captain Staples for the payment of his debt until he committed suicide. In the course of his statement Doctor Duncan says (p. 154): "This is a total of over 244,000 tons moving on natural, as distinguished from artificial or improved waterways, with the exception of the Panama Canal which is considered a finished project. This bill is not proposed for the purpose of further great expenditures on these water courses. It is not advocated for the purpose of improving them. The advantages of natural waterways on the sea and, indeed, on the inland seas represented by the Great Lakes are generally admitted." The Great Lakes and the open ocean are undoubtedly natural waterways, but the harbors, without which these great bodies of water can not be practically used, are just as artificial as a canalized river. Doctor Duncan states, on page 152, that the Government has expended no less than $792,553,488 "on harbors and harbor entrances" and this is just as much of a subsidy" as the expenditures made on inland waterways. In support of his statement that this bill is not advocated for the purpose of further great expenditures on natural water courses, he refers to a speech by Mr. Dempsey, in which the former chairman of the Rivers and Harbors Committee mentioned some of the principal projects contained in the rivers and harbors act of 1930. Taking as authority the act itself, instead of Mr. Dempsey's incidental reference thereto, we find that the expenditures authorized therein are distributed as follows: To be perfectly fair, this includes expenditures on intracoastal channels and other projects, which can not strictly be classified as harbors or harbor entrances, amounting to $15,349,500, leaving a total for harbors of $78,863,915. However, this reduced amount is greater by more than $30,000,000 than the total expenditure authorized on the Mississippi River system, which is $48,309,487. Mr. Aishton strongly insists that the railroads ought to be left free to operate water transportation lines wherever, whenever, and to whatever extent they please. This, of course, would include operations on the Great Lakes, "the advantages of which," according to Doctor Duncan, are generally admitted." It makes some difference, however, whether these advantages accrue to the public or to someone else. Incidentally, the Governments of the United States and Canada have already spent some $375,000,000 on the channels and the harbors of the Great Lakes and are preparing to spend between $30,000,000 and $40,000,000 more. Patrick Henry said: "I know of no way to judge of the future but by the past." At one time the railroads were allowed to operate steamship lines on the Great Lakes, and it is interesting to note just how they made use of this opportunity when they had it. The story and a decidedly interesting one it isis officially told in I. C. C. 33, pages 699 to 716. The report of the commission, in Lake Line Applications under Panama Canal act, shows that about the year 1900 the Pennsylvania, New York Central, Lehigh Valley, Rutland, Erie, and Delaware, Lackawanna & Western Railroads perfected control over a number of lake lines which had previously been independent. These independent lines had maintained through-route and joint-rate arrangements with boats on the Erie Canal. These were promptly terminated. They had also maintained rates lower than those on the railway lines with which they competed. Now, the boat lines competed neither with each other nor with the rail lines. They had nothing to say about rates or anything else for that matter and their railway owners began increasing the lake-and-rail rates by successive advances until they were almost the same as the all-rail rates. These high rates prevented the growth of lake-line tonnage and diverted traffic to the all-rail lines, which, of course, is exactly what they were intended to do. In summing up the commission said: "That the joint ownership and operation of these boat lines has resulted in real benefit to the people and that the operation is not in the interest of the public or of advantage to the convenience and commerce of the people is established by the facts as above indicated, and a complete monopoly is exercised by the owning railroads over the lake-line situation through the medium of the Lake Line Association. 66 These boat lines under the control of the petitioning railroads have been first a sword and then a shield. When these roads succeeded in gainging control of the boat lines, which had been in competition with paralleling rails in which they were interested, and later effected their combination through the Lake Line Association, by which they were able to and did drive all independent boats from the through lake-and-rail transportation, they thereby destroyed the possibility of competition with their railroads other than such competition as they were of a mind to permit. Having disposed of real competition via the lakes, these boats are now held as a shield against possible competition of new independents. The large financial resources of the owning railroads make it impossible for an independent to engage in a rate war with a boat line so financed." The actions of the Louisville & Nashville and of the trunk-line railways, as detailed in official reports of the Interstate Commerce Commission, shed a lot of light both on the reasons why the railroads are so anxious "that they should be given an equal right with others to engage in transportation by water," and on the reasons why, in the public interest, that "right" was taken away from them in the Panama Canal act. THE LONG-AND-SHORT-HAUL CLAUSE The railroads are also very insistent that "the fourth section of the interstate commerce act, the long-and-short-haul clause, should be administered so as to give necessary relief to rail carriers in competition with water lines." Operators of water lines feel that the Interstate Commerce Commission has already gone beyond the limits of fairness in interpreting the long-and-shorthaul clause. In a case recently decided the commission allowed the northand-south railroads on the Pacific coast to lower their rates to meet the competition of steamship lines, provided the rates for the short haul to intermediate points should not be more than 100 per cent greater than the rate for the long haul between the termini. That is to say, in order to meet water competition the railroads are allowed to charge some of their patrons four times as much per ton-mile as is charged to others on the same line. On page 145 it is said: 66 "The railroads do not take the position that they are opposed to water transportation under any and all circumstances. If the proposed waterways are a necessary, a reasonable, and an economic development, the rail carriers have no right to complain, even though their special interests are affected. If, on the other hand, the proposed waterways are not necessary, not reasonable, and not economically sound, the railroads have not only the right as taxpayers but it is their duty to protest against the undertaking." On page 161 we find the following: 66 While rail tariffs represent the total costs that have to be paid, the water tariffs represent only what is directly and immediately paid by the shipper and do not include those important hidden costs of carrying charges and maintenance which for the waterways are paid out of the general tax fund, that is, are a contribution by the Federal Government. When these two costs are set up on a comparable basis they show as follows: Ohio River. 7 parallel railroads___ . "When total costs are considered rail transportation is actually cheaper than by water with admittedly superior service by rail.” No authority is given for these figures, but they are taken from a volume entitled "An Economic Survey of Inland Water Transportation in the United States," which was published a year or two ago by the Bureau of Railway Economics, an institution which was "established by railways of the United States for the scientific study of transportation problems." This volume of 238 pages contains a large amount of historical, geographical, and statistical material, combined with arguments designed to lead the reader, gently but surely, to the conclusion that, everything considered, the “total cost of transportation on inland waterways is, always and everywhere, greater than it is by rail. One of the principal arguments advanced-and one in which some extraordinary errors occur-is based on the relative circuity of routes by river and by rail. For instance, it is said that the river distance from Pittsburgh to Cairo, 979 miles, is 51,1 per greater than the rail distance of 648 miles. I am inclosing a pamphlet entitled "What the Railway Program Means," on page 9 of which will be found a map showing the Oh'o River and competing railway lines. As appears from the map, this "cross-lots' railway route leaves the Ohio River at Pittsburgh, crosses it at Steubenville touches it again at Cincinnati, and for a few miles below, and not again until it reaches Cairo. The Ohio River, in its course from Pittsburgh to Cairo, flows past 66 counties, with a population of 2,326,426, and 527 communities large enough to be named in a business atlas, including 94 incorporated towns and cities with a population of 954,447, not one of which is touched by this railway route which the Bureau of Railway Economics says competes with the river. That would be all right if there were no other railway route between Pittsburgh and Cairo, but a glance at the map shows that there is another route which runs close beside the river nearly all the way. Between Pittsburgh and Cincinnati the difference between rail and river is less than four miles and between Pittsburgh and Cairo it is 56.5 miles, or 6.1, instead of 51.1 per cent. Another extraordinary error occurs in the discussion of relative ton-mile costs by rail and river. It is stated that the "Ohio section," which consists of the Ohio River and its tributaries, had cost the Federal Government to June 30, 1929, an aggregate of $250,130,031, of which amount $178,000,000 represents capital construction costs or "cost of new work." Four per cent interest on this amounts to $7,120,000. On the Ohio section 2,702,416,316 ton-miles of traffic were reported for 1928. Maintenance costs for the fiscal year 1929 were $4,340.000. Cost of conveyance was est mated at 4 mills per ton-mile. From these figures the Bureau of Railway Economics derives the following table: Here the author of the bureau's book adds: "Allowance of 50 per cent for circuity, 4.12 mills," making a total of 12.36 mills per ton-mile. In the first place, as has been shown, the percentage of circuity is not 50 but only 6.1, but circuity has nothing to do with the case. Given a certain number of tons, hauled a certain number of miles for a certain amount in dollars and cents, it is simply a matter of grammar-school arithmetic to find the ton-mile cost. When once the correct answer has been found, neither circuity nor anything else can change it. 66 Railway freight tariffs have been aptly called a compound conglomeration of incomprehensible incongruities" but amid all these complexities, no instance can be found of a freight rate made up on a ton-mile basis-10 cents for 10 miles, 100 cents for 100 miles, 1,000 cents for 1,000 miles, etc. "Ton-mileage" and "percentage of circuity" help, however, to get the reader so confused that he can not detect the sophistry of the railway argument. 66 One other error must be pointed out. The bureau's book states that "seven railway companies operate lines more or less parallel with the Ohio River section" and gives figures to show that the average amount per ton-mile received by these seven roads was 8.83 mills. Since all the tributaries of the Ohio are included in the "Ohio section," all the railroads paralleling these tributaries should be included also and the fact is that there are four other roads which parallel portions of the "Ohio section" for considerably longer distances than do some of the seven which were included. Oddly enough, one of the roads omitted was the Cleveland, Cincinnati, Chicago & St. Louis, which makes a part of the “cross-lots," or short-line route from Pittsburgh to Cairo. With these four roads included, the average rate per ton-mile is found to be 9.72 mills, or 1.48 mills more than the actual rate on the Ohio River, instead of 3.53 mills less as claimed by the bureau's book. Having proved at least to their own satisfaction that transportation by water is both greater in cost and inferior in service to transportation by rail, it follows that inland waterways "are not necessary, not reasonable, and not economically sound," and, that being the case, the railroads have officially announced that it is not only their "right as tax payers but it is their duty to protest against all further expenditures on the part of the Federal Government for the improvement of navigable waterways, Respectfully yours, S. A. THOMPSON, Secretary. [From National Waterways, Pittsburgh, Pa., August, 1931] WHAT THE RAILWAY PROGRAM MEANS (By S. A. Thompson, secretary and treasurer, National Rivers and Harbors Congress) The Association of Railway Executives, at a meeting held in New York on November 20, 1930, adopted a "Declaration of Policy Deemed Necessary to the Continuance of Adequate Transportation Service to the Public." In the interest of fairness, and in order that the reader may know whether quotations therefrom are accurately made and be enabled to judge whether comments made thereon are justified, that “declaration" is printed in full at the end of this article. Beneath and beyond this "railway policy," which is clearly stated in the annexed "declaration," there is a "railway program," which is nowhere plainly set forth but is indicated by the publications of other railway organizations, by the utterances and the writings of prominent railway officials, and by certain activities initiated or inspired by railway influence. It is the purpose of this article to comment on the "policy" and to point out what the “ program is and means. The first part of the "declaration of policy" is devoted to a portrayal of the conditions in which the railways found themselves at the end of 1929 and to a statement of the causes by which, it is claimed, those conditions have been brought about. As a part of this statement a number of statistical tables are used. Some of these, while true as far as they go, do not go far enough, thus telling only half the truth-and half truths seldom lead to correct conclusions. Some of the others, without some added explanations, will almost certainly be misinterpreted by the average reader. Take, for instance, the first table, which is headed "Growth in railway traffic." This shows that, in every decade from 1890 to 1929, the increase in ton-miles of revenue freight carried by United States railways was less, measured by percentage, than in the decade before. Percentage has a place and a use, both of which are important, but it does not tell the whole story. Here is another table, taken from the Census Reports. To complete the picture, we must know the actual amount of increase as well as the percentage and, while 8,251,445 made an increase of 35.6 from 1850 to 1860, 17,064,426 made an increase of only 16.1 per cent between 1920 and 1930. When the Interstate Commerce Commission was considering a general reduction of freight rates in 1922, the statistician of the commission prepared a chart on which a dotted line showed the traffic, in ton-miles of revenue freight of United States railroads from 1890 to 1921 and a solid line indicated the trend of that traffic. This trend line was projected forward to the year 1930. For use in an address before the American Statistical Association in New York, Mr. Julius H. Parmelee, director of the Bureau of Railway Economics, extended the dotted line to show the traffic from 1922 to 1928 in order that the actual results might be compared with the projected trend. This chart, as amended by Mr. Parmelee, is reproduced herein. Further information as to the growth of railway traffic is gained by comparing the figures for the ten years preceding the World War with those |