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timp. Farmers found themselves compelled to pay higher rates at the very moment they were being forced to accept lower prices! for their products and they sometimes found that the price received was insufficient even to cover the railroad's bill.
On May 18, 1920, the Federal Reserve Board voted at Its secret meeting to deflate agriculture. In that year the purchasing value of farm products was 131 per cent above the purchasing value of farm products in 1913. In 1922 It was only 24 per cent above the pre-war value, representing a shrinkage in the purcliasing value of the 1921 and 1922 crops of six billion. In two short years the value of farm products depreciated 107 per cent, and that at the very time our exports of farm products were the largest in our history.
As a result of this decline in values It Is estimated that the value of all capital invested in agriculture declined from $79,000.000.000 In May, 1920, to $58,000,000,000 in 1922.
As late as 1926 the average farm family Income had only reached $736 per year. That amount included $030 for the estimated value of food, fuel, and housing furnished by the farm, leaving a cash yearly wage of only $106 for the average former of the United States. Think of it! One hundred and six dollars annual Income for the American farmer with an average Investment of $9,000! When you compare this family income with that of $1,250 for the common laborer, his plight becomes pitiable indeed.
During all these years when the roads were enjoying the revenues from the horizontal increases which created such conditions of prosperity for them, the farmers have been waging a desperate light to make both ends meet, pay their taxes and interest, and save their homes. Having saved the roads and created such rising values in their stocks as to create speculation and gambling therein unprecedented in recent years, the farmers feel that the commission having performed this work of reclamation should have long since begun the work of revision and readjustment to lighten and adjust the burdens of the horizontal increases.
For live years they have demanded such revision. The agricultural commission appointed by the President in its report demanded such revision. The President, in his message to Congress in December, 1923, said:
Competent authorities now agree that there should be an entire reorganization of the rate structure for freight.
Notwithstanding the demand of every farm organization in the United States, the representative agricultural commission appointed by the President and the several messages of the President to the Congress, the horizontal increases imposed by the commission in 1921 still remain. They have not been removed except here and there by patchwork and piecemeal as public demand became too insistent to be any longer Ignored.
The farmers feel that under these harrowing conditions existing during the last five years, more potential for revolutionary action than the Boston tea tax, the commission should assume the initiative for their relief; it should not continually wear its judicial robes and assume a judicial attitude toward readjusting the horizontal rates which it was so quick to impose; that it should exercise the same power to Initiate in revision and readjustment for the relief of the farmers as it exercised to save the roads.
Out of such conditions has come the demand not only for the repeal of section 15a but of the transportation act of 1920, and it may have been such conditions which impelled the Member of Congress to say in substance:
1 would begin my program of relief to the American people by abolishing the Interstate Commerce CommiHsion and turn the roads back to private regulation and control.
However unsatisfactory existing rate conditions may be— and it is admitted that they are indefensible—yet the remedy proposed would create conditions still worse. The proposal to abolish the commission and turn the roads back to private regulation and control immediately challenges a comparison of conditions under private and governmental regulation.
COMPARISON OK CONDITIONS UNDEH I'llIVATK AND GOVERNMENTAL
During their constructive period and up until 1887 the roads fxen'iswl full power of ownership, control, and regulation over tlicir properties. This included the exercise of the power to fix their own rates, which was equivalent to the exercise of a power to tax all the commerce of the country in railway transit.
They exercised this power so arbitrarily and oppressively as to create conditions which became intolerable; by secret rebates, midnight rates, circuitous-route rates, basic-point rates, missionary rates, unreasonable rates, rates that were unduly prejudicial and unduly preferential, and rates that were
discriminatory, they developed one seel ion of the country ojt the expense of the other. With one hand they distributed prosperity and with the other hand depression and desolation. In tie early days of outlawry in the West, the old-timers used to say with sympathetic consolation to the newcomer, "A town once visited is safe," but such could not be said of the policy of the roads under private regulation. They continued their exactions almost to the point of confiscation. Unsatisfied with fixing their own rates and running their own business, they pro-, ceedod to run everybody else's business, as well as that of the political affairs of cities, counties, States, and the Government itself. They insisted upon having their personal representatives as Members of the State and National Legislatures, as members of the State and Federal judiciaries to sit in cases in which they were parties defendants; but the findings of fact by our own agency, the commission, in numerous cases more vividly, accurately, and authoritatively describes the conditions under private regulation. I therefore will indulge your patience sufficiently to read from a brief extract of one of many decisions containing findings of fact of a similar character.
In regard to financial transactions of the New York, New Haven & Hartford Railroad Co. (July 11, 1914, 31 I. C. C. 32, at p. 33), the commission states:
The difficulties under which this railroad system has labored In the past are internal and wholly due to ltn own mismanagement. Its troubles hare not arisen beeauw of regulation by governmental authority. Its greatest losses and most costly blunders were made in an attempt to circumvent governmental regulation; and to extend Its domination beyond the limits fixed by law. • • • It has been clearly proven how the public opinion was distorted; how public officials who wero needed and could be bought were bought: how newspapers that could be subsidized were subsidized; how a college professor and publicist secretly accepted money from the New Haven while masking as a representative of a great American university and a guardian of the interests of the people; how agencies of Information to the public were prostituted, wherever they could be prostituted, in order to carry out a scheme of private transportation monopoly Imperial in its scope; the unwarranted expenditure of large amounts in educating public opinion; the deposition, without knowledge of the directors, of hundreds of thousands of dollars for influencing public sentiment: the habitual chain of unltemized vouchers without any clear specification of details; the practice of financial legerdemain In issuing large blocks of New Haven stocks for notes of the New England Navigation Co. and manipulating these securities back and forth; fictitious sales of New Haven stock to friendly parties with the desire of boosting the stock and unloading on the public at the higher market price; the unlawful diversion of corporate funds to political organizations; the scattering of retainers to attorneys of five States who rendered no Itemized bills for service and who conducted no litigation in which the railroad was a party; extensive use of a paid lobby in matters as to which the directors claimed to have no information; the attempt to control utterances of the press by subsidizing reporters; the payment of money to and the profligate use of free passes to legislators and their friends; the Investment of $400.000 in securities of a New England newspaper; together with a combination of many other causes set forth herein have resulted in the present deplorable situation in which the affairs of this road .are Involved.
Nothing disclosed In the record before us Is to be more regretted than the readiness of great banking institutions In our financial centers to loan enormous sums of money upon exceedingly precarloiiH security in aid of such schemes as have been devised In the wrecking of these railroads. Not only this, but the high officers of such institutions, while acting ostensibly as directors of the railroads, have in fact been little more than tools and dummies for the promoters. The trustees of other people's money seem to hare had little compunction about violations of their trusts for the benefit of the promoters and at their demand.
Until this commission or some other governmental body with adequate power primarily controls the issue of carrier securities and within reasonable limitations the application of the proceeds thereof, stockholders and other investors In carrier securities will certainly from time to time be subjected to such perils of mismanagement and resultant losses as have accrued to the stockholders of the New Haven, the Rock Island, the 1'ere Marquette, the Cincinnati, Hamilton ic Dayton, and others.
OliR PBOGHESS HAS BBEN SLOW BUT SUBSTANTIAL
To abolish the commission and to return to such conditions as existed under private regulation would be little short of a national calamity. To publish to the country that after 50 years of contest and effort to regulate we have accomplished nothing is a gross misstatement of fact and a grievous injury to a sound public opinion.
While the development of our regulatory' power has been a slow and laborious process, it was made so by the continuous opposition of the roads and their circumvention of the law. By continuous oppression and circumvention the people were finally lashed into action In their own self-defense.
Beginning in the seventies, the first contest culminated In the interstate commerce act of 1887. The Hepburn Act of 1906 was the second step; the Mann-Elkins Act of 1910 was the third step; the Clayton Antitrust Act of 1914 was the fourth step; the transportation act of 1920 was the fifth step. These acts mark the big epochal events in the development of regulatory power (luring the last half century. They mark the culmination of the periodic contests in this forum, on this floor, where the representatives of the people wrung from the grasping hands of the roads the power they had so oppressively used against them.
From time to time during that period numerous other amendments were enacted, but these are the big charters of governmental regulation.
OPPOSITION OF THE ROADS
Every important provision of every act and amendment conferring additional power upon the commission was stubbornly resisted by the roads; first, before the commission, then in the Federal courts, and finally in the Supreme Court of the United States. Such opposition required years and years for a final judicial determination of their regulatory provisions. Our progress has been slow, but it has been continuous and substantial. It has been according to the rules of the game. rThe people of this country have treated the roads fairly. They (did not resort to any undue advantage but only to the orderly (processes of the law under the commerce clause of our Con'stitution.
POLICY OF THE ROADS ILL-ADVISED
From time to time during our history, railway executives ;have been held up to us as the great captains of industry, as having contributed so liberally to the development of the country; but it will be observed and remembered that their liberal contributions were furnished from other sources. Their policy of oppression and discrimination, of determined resistance, was shortsighted and ill-advised. Their leadership failed totally In the development of a spirit of cooperation with the people. They developed no sense of appreciation of the power that created them and the source of those revenues which maintained them. Like the saloon keeper, they finally regulated themselves out of the regulating business. Like the drunken automobile driver, they became dangerous to the public. Like dangerous incompetents, the people in their selfprotection were finally compelled to take away their power to fix rates nnd to exercise the power of guardianship over their properties; and yet they boast of leadership!
RESULTS OF GOVERNMENTAL REGULATION
To abolish the commission and turn the roads back to private regulation and control would reinstate them as the custodians of our national prosperity, with the power of distribution! It would be equivalent to the Gaulish invasion of ancient Rome. In politics it would make Teapot Dome look like a Sundayschool contribution. It would nullify the work and progress of 50 years!
If it has not done anything else, governmental regulation has produced two outstanding results. It has stripped the ronds of their political power, driven their personal representatives from the legislative halls and from the sanctuary of the judiciary, and made for cleaner and better government. It. has stripped the roads of the power to fix their own rates, which is equivalent to the power to tax the commerce of the country in mil transit, and has given to the people a new sense of power and freedom in the control of their commerce.
Because rate conditions are unsatisfactory iiml generally in a chaotic condition is 110 reason why we should abolish the commission mid turn the roads back to private regulation.
By Supreme Court decisions, we have cleared a large field 1'or the proper exercise of regulatory power; a field sufficiently large under diluent administration to apportion the burdens of commerce equitably to every section and industry alike: and that is all the jieople demand. It is what they are entitled to have done.
Our problem to-day is one of efficient administration. Thus far thi1 commission has failed to administer our regulatory power to the satisfaction of the people. This is evidenced by the general demand for a revision and readjustment of rates during the last five years.
NATION-WIDE DEMAND FOK REVISION AND READJUSTMENT
All the representative farm organizations, the chambers of commerce and civic organizations of the Mid West section of the. country have been demanding revision and readjustment during this period. The Agricultural Commission, appointed by the President, and the President in his message to Congress have voiced such demand. In his message of December, 1023, live years ago. the President said:
Competent authorities agree that an entire reorganization of the rate structure for freight Is necessary. This should be ordered at once by the Congress. * * •
In speaking of agriculture he said:
Indirectly the fanner mnst be relieved by n reduction of national and local taxation. He must be assisted by the reorganization of th« freight-rate structure, which could reduce charges on his production.
In his message of December 3, 1924, the President, speaking of consolidation, said:
It opens large possibility of better equalization of rates between different classes of traffic so as to relieve undue hardens upon agricultural products and raw materials generally, which are now not possible without ruin to small units, owing to the lack of diversity of traffic.
COMPARISON OF THE EAST WITH THB WEST
The section west of the Mississippi River contains 69 per cent of the area of the United States, 47 per cent of the railroad' mileage, and 30 per cent of the population. It produces 54 per cent of the principal grain crops, about 60 per cent of the cattle produced in the United States, and originates 30 per cent of the tonnage. Thus, we see that 47 per cent of the railroad mileage of the United States is in 69 per cent of the area populated by 30 per cent of the people, who furnish 30 per cent of the tonnage originated.
East of the Mississippi River and north of the Ohio River, including the States of Pennsylvania, Maryland, and the New England States, is 12% per cent of the area of the United States, 47 per cent of the population, and 48 per cent of the tonnage originated. This area also produces 70 per cent of the value of the manufactured products of the United States.
From this picture of the two sections it is easy to visualize the long haul of the West and the short haul of the East, and it shows that eastern agriculture Is in a more favorable economic position than western agriculture; that its near-by prosperous cities furnish a continuous, steady market—markets so near that they permit of truck transportation when rail rates are unsatisfactory. The short and inexpensive haul leaves the farmers of the East a profit on their products which in the West is often entirely absorbed by the long haul and high freight rates. The farmers in the West are not so favorably situated. They are on the high-rate plateau in the interior and have the long haul with which to contend and the high rates to markets.
The high rates are deducted from the prices that the farmers receive for their products, and when they buy their implements, their clothing, their necessities of life, their material and equipment for the farms from the markets of the Kast, the rates, are passed on and added to the price of everything they buy. The freight is deducted from everything they sell and it is added to everything they buy. In effect, therefore, like Jones, the farmer pays the freight both ways—it cuts him like a two-edged sword; and with the rates on agricultural products 53 i>er cent higher than they were before the war, they absorb the little profits that he would otherwise make.
This explains why the East is not so directly interested in the question of revision and readjustment of rates as it is interested in service.
AVERAGE HAUL IN THE EAST AND THE WEST
I give below the average haul in each of the regions, dis tricts, and the United States, as compiled from the monthly reports of Cluss I steam railways to the commission for 1927:
District and refflon Average haul
Eastern district: (miles)
New England region 113.07
Croat Lakes region 154. 13
Central eastern' region 151.30
Eastern district 140. t>7
Pocnhontas region 205. 00
Southern region 201.52
Southern district 222. OS
Northwestern region 105. 50
Central western region LJrtO. 37
Southwestern region 208.47
Western district 222. 71
United States 184.1«
Tims it will bo seen that the haul in the southern and western districts is 73 miles, or one-third, longer thun the haul In the eastern district.
In 1914 the Interstate Commerce Commission granted on increase of 5 per cent on practically all the rates north of the Potomac and Ohio Rivers and oast of the Mississippi. In 1917 the rates in the same area were increased approximately 15 per cent. On June 25, 1918, the United States Railroad Administration advanced rates 25 per cent all over "the United States. it is 80 per cent greater. On high-class groceries, furniture, and so forth, it is 73 per cent greater.
On May 18, 1020, a meeting was held of the Federal Reserve Board and the Federal Advisory Council and Class A directors of the Federal reserve banks. At this secret meeting held on that day they voted to deflate agriculture. The restriction of credits, the breaking down of prices, the increasing of freight rates and the discount rates for farm paper were secretly discussed and agreed to; but that was not all. That meeting of the Federal Reserve Board decided to rehabilitate the roads. Why? Because it was representing the interests financing the roads instead of representing the public. It decided on an increase in freight rates. It passed the following resolution:
Rnolrcd, That this conference urges as the most Important remedies that tile Interstate Commerce Commission and the United States Shippins Roard give increased rates nnd adequate facilities such immediate effect as may be warranted under their authority, and that a committee of Hve be appointed by the Chair to present these resolutions to the Interstate Commerce Commission and the United States Shipping Board with such verbal presentation as may seem appropriate to the committee.
Why "verbal presentation"? So as to leave no trace! Following the above resolution—that is. on August 26, 1920—the most radical change in all our history was made.
A horizontal increase in rates in the eastern group of 40 per cent wns made: in the southern group, 25 per cent; in the western group, 35 per cent; in the Mountain-Pacific group, 25 per cent; and on iutraterritorial traffic, ">3% per cent. In 1922 there were two 10 per cent decreases, one on agricultural products and the other on nonagricultural products. On its own initiative, and in cases presented, other decreases in various sections of the country have been made from time to time, so that while these percentage changes do not give us a complete, correct picture of the rate changes a;id the existing rate status at the present time, yet they do give a general idea of the comparative stutus of freight rates and the method employed in milking such increases.
HORIZONTAL INCREASES BEAK HEAVIEST ON FARM PHODCCTSj
The horizontal increases thus made have resulted in disproportionate increases upon long-haul, carload traffic of agricultural products. In making those increases no attention was paid to how high a rate was, or how low a rate was, or how long the haul was, or the value of the product, or what it would bear to carry it to market. By horizontal increases the low-price farm products were compelled to pay the same as high-class manufactured articles. This, in connection with onethird longer haul for farm products, bus made the horizontal increase almost unbearable. They have exacted what little profits the farmers would have made during the last five years, when they have been waging their desperate fight for the retention of their homes upon the farms.
That such an unscientific and inequitable system of rate-making should be tolerated by the commission is almost unbelievable. Though the horizontal increases may have been necessary to save the roads, what excuse is there for their retention after the roads have been saved? This is something the farmers are unable to understand. They believe that the retention of the horizontal increases imposed upon agriculture is inexcusable; they are indefensible. For five years they have been demanding their readjustment, and such demands have been voiced by the President to the Congress. The commission has had full pnwer. It needed no extra congressional act, and yet the increases still remain. If permitted to continue, they will again lash the people of the Mid West into action, as the oppressive powers of the roads did in the seventies!
Appointed by President Harding to make a careful and thorough study of rates, with a riew to relief from the undue burdens upon agriculture, and with his long experience and intimate familiarity with the commerce of the country, perhaps no other person is better qualified to speak on this subject than Herbert Hoover, our Secretary of Commerce.
In his address on September 28, 1920, at Mitchell, S. Dak., he Raid:
One of the underlying causes contributing to the present difficulties of our mid-west farmers hi the increased railroad rales arising from the war. » « • Owing to such increases nnd the distance from senboard, our mid-west farmers must, for instance, pay from 6 cents to 12 cents a bushel more on grain to reach the world's markets than they did before the war. Therefore the foreign farmers reach the world markets at a lower cost in proportion to pre-war than our mid-west farmers.
We can roughly visualize this if we set up a new measuring unit in the shape of the number of cents It takes to move a ton of wheat on different routes. For instance, during pre-war times to move a ton of
South Dakota wheat by the cheapest route cost 1,190 cents to reach Liverpool, while Argentina wheat cost 723 cents. To-day the Increased freight charges on this ton of wheat moving from Argentina, which is farther from Liverpool than Is South Dakota, is 117 cents, while the South Dakota farmer has had his charge moved up 408 cents. This uneven increase in transportation charges has prejudiced the situation of our mid-west farmers in competition with those foreign countries: and, more than that, the prices which the farmer receives in the foreign competitive markets influence the price of his whole products, not only the price of the export balance; therefore, the effect of war increase of transportation rates to seaboard is far greater than its effect upon the part of the crop exported out of the Jlid West. It at once tends to depress the return on the whole crop. It is unquestionably one of the contributing causes of our postwar agricultural difficulties.
1IIGH BATES PREVENT INDUSTRIAL DEVELOPMENT OF THE WEST
The vast empire west of the Mississippi River is the meat and bread basket of the East. It produces the foodstuffs to feed the industrial workers as well as those of all other occupations and professions. It is the best market the East has for its manufactured product. Its consuming capacity and its capacity to pay are larger than that of any other market in the world, and likewise the East is the best market for the agricultural products of the West. It has the largest consuming capacity and capacity to pay of any market for farm products in the world. These markets are joining each other—depending one upon the other—and there is every economic reason why there should be the closest cooperation in removing from the channels of commerce every unnecessary burden.
The country west of the Mississippi River has approached the industrial stage in its development. . When it needs building material for its roads and bridges and cities in the creation of its markets at home, and when it proceeds, as it is about to proceed, in this new epoch of industrial development, to curtail its long haul and cut its freight bill in two and to create a market at home, it finds an insurmountable barrier at the Mississippi River on the east and the Panama Canal on the west.
THE BARRIER AT THE MISSISSIPPI KIVEtt
What is this barrier at the Mississippi River? It is the sudden jump in freight rates, which, for commerce, is almost as effective as a wall. For each 300 miles east of the river the rate on steel is 47.5 cents per hundred. For each 300 miles west of the river the rate is 83.5 cents per hundred. The rate west is more than 75 per cent higher than the rate east. This is the barrier that prohibits the West from shipping in iron and steel from the East. It is the tollgate whose keeper exacts the heavy exactions from the consumers in the West as they buy the manufactured products of the East
By this transportation embargo, the West is prevented from building up its cities and markets at home. Such difference in rates not only applies to steel but to other products.
RATES ON CLASSIFIED GOODS
Freight is divided generally into numerous classes, each with its own rate, and there are other special commodity rates. We only refer to the five main classes. Class 1 includes dry goods, shoes, and high-class merchandise; class 2 includes hardware, cutlery, tools; class 3 includes high-class groceries, furniture, and so forth; class 4 includes the general run of heavier groceries, such as salt; and class 5 includes carload lots of steel, and so forth. Here (indicating] are the rates per 100 pounds from New York to Kansas City through St. Louis on the various classes. Bear in mind that the distance from New York to St. Louis is 1,050 miles, and from St. Louis to Kansas City is 300 miles.
On the general run of heavier groceries, such as salt, it is 71 per cent greater.
Oil the carload classes, of which steel is a typical example, it is 75 per cent greater.
The jump in the rate level at the Mississippi River in each cnse is so great as to prevent the industrial development of the country west of the Mississippi River and to exact from farm prices the profit that would permit the farmers to enjoy a degree of prosperity.
In the seventies or eighties, when the country was sparsely settled, there might have been some reason and justification for the erection of such a barrier, but since no reason exists to-day, there is no valid claim made anywhere for its continuance, and yet It still remains—the rate level has not been readjusted.
We have had seven years of rate making, with full power to the commission to revise and readjust rules, hut the barrier has not been removed. The West says:
Take down the barrier, remove the unnecessary burdens upon commerce, and let it flow an freely as possible between the several Rtutes.
THE BAUR1EU ON THE WEST
Take the barrier on the West—the Panama Canal—the through rates are so low to the coast and the interior rates so high as to erect another barrier on the West which casts a heavy burden upon the interior.
COMPARISON OF I.VTKB1OK AND COAST BATES
The rate on dry goods from Chicago to Enid, Okla., a distance of 832 miles, is $2.275 per hundred. The rate on dry goods from Chicago to San Francisco, a distance of 1,429 miles farther, is $1.58 per hundred. Thus we see that the rate from Chicago to Enid. Okla., is 53 per cent greater than the rate from Chicago to San Francisco, although the distance of the latter is 1,429 miles farther from Chicago than is Enid".
Stated in another way, the hauling of a 30-ton car of dry goods from Chicago to San Francisco, San Francisco being 1,429 miles farther from Chicago than is Enid, Okla., costs $41.70 less than hauling the same tonnage from Chicago to Enid.
Take the rate on steel. From Chicago, a distance of 2,300 miles from San Francisco, for domestic consumption it is $1 per hundred. For export it is $0.40 per hundred. These rates apply on the same commodities between the same points, subject to the same minimum pound weight and the same rule of law which requires earnings in excess of cost.
A 40-cent rate on steel for 2,300 miles when exported to China or any other foreign country and the rate of $1 per hundred when used in construction at home obviously means that one of two things is true—the 4O-cent rate covers all the cost and some profit for the 2,300-mile haul to the coast or it is an illegal rate m;iintained in defiance of law, and that is a burden upon commerce which the consumers of freight should not be required to pay.
When recently interrogated in reference to these rates to the coast. Commissioner Esch blandly explained that they were rates put into effect by the railroads and the commission had never been called upon to determine their validity.
The continuation of such undue preferentials raises the question whether or not the American farmer in the West is not entitled to as much consideration as the Chinaman in the Far East.
VIOLATIONS OF LAW
These illustrations of existing freight structures show a violation of section 4, which declares our policy in transportation matters, of section 2 of the interstate act, prohibiting discrimination; of section 3. preventing unreasonable preferentials and advantages that nullify the minimum-rates provision of section 15. They disrupt the grt;up plan of rate making and prevent the equalization of rates and their equitable apportionment to the commerce of the country; they compel the interior to make up the losses incurred on the competitive rale for the long haul. Why not give farm products the same preferentials?
Recently the Associated Press carried the story of an entire traiultMid of corn, composed of 50 cars, leaving my home city, Enid, Okla., bound fur Europe. That corn was loaded by the Enid Terminal Elevator Co., where it was stored (luring the last few months. The train contained about 80,000 bnshels. Tlie Frisco hauled (he train to Fort Worth, from where the Santa Fe took it to Galvestnn. At the Gulf it was loaded upon a boat headed for Europe. The domestic rate on the corn from Enid to Galvestou, a distance of 595 miles, was 32.5 cents l>er hundred pounds. The export rate was 31.5 per hundred pounds, or a preferential in favor of export rates of 1 cent per 100 pounds. If the 40-cent rate on steel from Chicago to San
Francisco, a distance of 2,300 miles, was applied to this shipment of corn, it would result in a saving of freight on the haul of 595 miles of $10,150.70. Or, considering the matter from another viewpoint, the export preferential on steel is 00 cents per hundred pounds. The export preferential on corn is 1 cent per hundred pounds, or a 3 per cent preferential. If corn for export enjoyed the same export preferential as steel, the rate on corn for export would be 12.5 cents per hundred pounds instead of 31.5 cents per hundred, which would result in a saving of $9,120 on the train of corn from Enid to Galveston.
Take another illustration: In 1926 there were about 1,385.471 short tons of wheat exported from the Gulf coast. Supposing that Wichita, Kaus., was a central point of its production. The rate on wheat from Wichita, Kaus.. to Gnlveston for domestic consumption is 46 cents per hundred pounds and for export 44 cents per hundred pounds. There is, therefore, a 2-cent preferential on export wheat from Wichita to Galveston, or a preferential of about 4 per cent.
Using those rates on the wheat exported from the Gulf coast, the total freight cost would amount to $12,192,144.80. There is a GO per cent preferential on steel for the 2,300-mile haul from Chicago to San Francisco. If there was a 60 per cent preferential on wheat for export, it would mean an export rate on wheat of 1C cents instead of 44 cents per hundred pounds. Applying that to the wheat exported from the Gulf, the total freight cost would be $4.433,507.20, or a saving to the producers on 1,385,471 short tons of wheat of $7,758,637.00.
Now, suppose this wheat had been carried 2.300 rnilos on a 40-ceut rate, which is the rate applied to steel for export from Chicago to San Francixco, the total freight cost would be $11,837,680. Allowing such freight costs per mile, the costs for hauling from Wichita, Kans., to Galveston, a distance of 723 miles, would bo $3,484,158.69, whereas the cost under existing rates would be $12,192,144.80.
In other words, application of the rate on steel on a mileage basis would result in a saving to the farmers, to the wheat growers, shipping to the Gulf for export of $8,707,986.80.
Just why during its long period of depression and surplus, agriculture has not been given an equivalent preferential with steel does not appeal-. Is it because the dummy directors referred to by the commission as the tools of financial interests financing the roads have been using the transportation facilities of the people as a means of disposing of their steel products, in which they were equally interested, at the expense of agriculture?
It explains how United States Steel has been disposing of its surplus abroad at a profit at the appalling expense of surplus farm products depressed at home. Give the fanners of the country a 60 per cent reduction on basic crops for export ami the surplus, with its ruinous price depression of the domestic market, will disappear.
THE EXCUSE FOR 8CCII ntEFERE.N'TIALS
The railroads attempt to justify this system of rate making under the guise of meeting water transportation through the Panama Canal. They claim that the interior sections of the country must make good the losses in freight revenues diverted through those waters. lu other words, the people, having built the canal with their tax moneys, must now pay the roads in excess rates for the resulting losses in freight revenues.
At the present time they are talking about building another canal. If the second canal should be as ruinous to the farmers of the Middle West as the first one has been, it will depopulate that vast section of the country. The roads should be compelled to stand upon their own l>ottom and meet the competition of the country the same as other industries. They have compelled the people, through the exaction of water competition rates, to fight inland waterway commerce. Just think of it! With the exactions from the people the roads have been driving the boats from the inland waterways. Every time a boat has shoved its prow into the bank of one of the interior rivers, the roads have met it with cut-throat rates to the river points and higher rates to the intermediate points, until to-day the only steamboat navigation on the Mississippi River is that subsidized by the Government.
RATK CONDITIONS IN THE SOUTHWEST
In Consolidated Southwestern cases, decided April 5, 1927, the Interstate Commerce Commission found the classification rates between points in the Southwest and Kansas-Missouri territory to be in a general chaotic condition, complicated and unsatisfactory, with undue prejudice against different points.
Quoting, the commission said:
The record discloses mutual competition under Inequitable rate conditions between points in Oklahoma, Arkansas, western Louisiana, Texas, Kansas, and southern Missouri. In other words, the opportunity to do business Ih sometimes foreclosed by freight rates. That communities, as well ne individuals or industries, may be adversely affected by rate maladministration is clearly Illustrated by the testimony in this case.
A TYPICAL EXAMPLE
Take Miami, Okla., as n typical example. It is 13 miles from Baxter Springs, Kaiis. The spread in first-class rates from St. Louis is 32.5 cents. Between the other class rates the spreads are correspondingly disproportionate. A dealer in Miami received from Detroit 572 Ford automobiles during 1922. The freight charges amounted to $55.07 per automobile. On a similar shipment to Baxter Springs, Kans., the charge would l>e $51.55 per automobile. To meet that competition the dealer suffered a pecuniary loss of $2,207.80 a year. Merchants at Miami are unable to compete with merchants in Baxter Springs, where the freight is a material factor. In their struggle for commercial existence, many of the people of Miami are moving to Baxter Springs.
In picking a location for a jobbing house or factory one of the first things to be considered is the freight-rate situation. There is keen rivalry between towns in the Southwest for the location of new industries to meet the increased need of the growing population. There is thus an endless chain of actual and potential competition in the distribution of goods or class rates not only within the territory but from and to the border States nnd cities beyond. Towns paying for like service higher rates than others or paying rates higher, distance considered. than others are placed at a disadvantage and often are deprived of their natural advantage of location.
In its Investigation the commission found undue preferential nnd discriminations in rates on farm products in the same ratemaking district.
A COMPADISOX OF WESTERN CBA1N RATES
The following is a memorandum showing a comparison of western grain rates in the same rnte-making district. In comparison with the rates of other States in the district it will show vicious discrimination against the farm products of Oklahoma and Texas.
It will thus be seen that the Oklahoma-Texas scale on a 300-mile haul is 30 per cent higher than the Kansas scale and <i2Va per cent higher than the Minnesota scale: on the 400mile haul the discrimination is nearly 41 per cent in favor of Kansas points nnd nearly 66 per cent for Minnesota points. The discrimination is shown to be existent all along the line, the Kansas grain rates being from 20 to 30 per cent lower on shipments to Kansas City tlian are Oklahoma grain rates, generally, to the same point, and Minnesota grain rates to Minneapolis are still lower than are the Kansas rates. If we could secure the Minnesota scale on shipments from Oklahoma to the Gulf, it would mean a reduction of approximately 60 per cent in our wheat rates.
ILLUSTRATING THR DKLAY IN HATE RELIEF
The proceedings in the oases cited were instituted in 1023 and finally submitted to the Interstate Commerce Commission on June 10, 1925. and by it decided on April 5, 1927. Bocau-je of suspension orders the decision will not become effective until May, 1928, and not then if further deferred.
The freight conditions described by the commission have existed in that southwestern country for years. The rates were fixed by the roads under private regulation and have exacted millions and millions of dollars annually from the people of Oklahoma and other Southwestern States in excess of a reasonable compensatory return. The rates have never been revised or readjusted, although there has been a constant and incessant demand for such relief.
Plow long is the country going to stand this interminable delay in such proceedings? If it has taken the commission five years to revise and readjust rates in the classified service in the Southwest, how long is it going to take it to revise and readjust rates of all classes throughout the entire country?
The commission has been engaged In the performance of too many other duties imposed upon it by the Congress. It in attempting to administer unJer 28 different acts of Congress. From time to time it cheerfully accepts enlarged jurisdiction and additional responsibilities and then in their exercise and performance is compelled to redelegate its power. Such redelegation for the performance of the duties purely ministerial in their character is, of course, necessary and expected, but the redelegation of power for the performance of legislative duties is a dangerous procedure and unnecessarily jeopardizes the public interest.
The power to initiate rates for revision and readjustment is the commission's greatest responsibility. There is no other power the commission can exercise which would result in greater benefit direct to all the people. In his December message in 1923 President Coolidge, recognizing this fact, insisted upon the entire reorganization of the rate structure for freight for the relief of agriculture. The commission undoubtedly read the message. Since that time every farm organization in the country and many representative civic organizations, including the Chamber of Commerce of the I'nited States and all of its submembers, urged a revision and readjustment of rates for the relief of agriculture. The commission knows this. It knows that the horizontal increases should not be permitted to stand 24 hours. It knows that the President, the Congress, and the country have been expecting revision and readjustment, and yet during these five years of coma for agriculture, what has it done?
The very fact that after five years the commission has been unable to effect substantial results in revision nnd readjustment for agriculture when every other line of industry has been abounding with prosperity ought to convince the most skeptical of the inadequacy of our present machinery to administer our regulatory power in rate making satisfactorily to the people.
We have overloaded our machinery of administration. The magnitude of the responsibilities and the multitude of the enormous tasks imposed upon the commission are not adequately appreciated. Visualize for a moment the national railway system of this country.
THK MAGNITUDE OF THB SYSTEM
On December 31, 1920, we had a total owned main-track railway mileage of 249,138.40 miles, including 176.901.80 miles of Class I owned roads: 11.004.80 miles of Class II owned roads; 5.555 miles of Class III; 9,805.27 miles owned by proprietary companies—that is, companies whose entire capital stock and funded debt is owned by some other road: 3,572.40 miles of circular mileage—that is, mileage reported by companies not interstate carriers but which may become so; 38.832.15 miles owned by lessor companies; and an additional main-track mileage of about 406.98 miles—unofficial figure, companies not reporting.
In addition to this main-track mileage there are second, third, and fourth side, passing, terminal, and switching tracks, bringing the aggregate mileage to 421.268 miles. Then there are the roadbeds, culverts, bridges, stations, elevators, warehouses, and office buildings in which the business is carried on. There are 66,8-17 locomotives, 56,855 passenger-train cars, excluding privately owned cars, and 2,403.907 freight cars, excluding caboose and cars owned by private interests.
These properties in 1919 were tentatively valued by the commission at $18,900,000.000. owned and operated by about 1.728 separate and independent railroad corporations.
For the fiscal year ended June 30. 1927, Class I railways, Including switching and terminal companies, reported an average of 1,821,490 employees receiving a total compensation of $3.000.000.000. nearly double the aggregate compensation of 1916, and representing an increase in compensation per employee per annum in the decade of about 80 per cent.
With these facilities and over these tracks are carried each year more than one-half of all the rail traffic of the world.
REGULATION IMPOSES UPON THE COMMISSION MOST CHJANTIC TASK OP ADMINISTRATION
To regulate these properties so ns to equitably apportion the tax on commerce to each section of the country is one of the most gigantic problems of administration of modern times. This undertaking alone would be sufficient to test the highest administrative capacity of«aiiy commission in the service of the Government. It is a continuing duty requiring the constant, personal attention of the commission and the exercise of its legislative functions, but the duties of the commission are not limited to the intricate, complex problems growing out of such regulation. They extend to a far wider Held. It has organized 14 bureaus within its department to gather in the re