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ests, some of which are closely allied to the ownership of the control of railways. A striking instance of this is to be found in the history of the rates on the border line between the Gulf trade basin, and the territory of the railways running to Chicago and the Atlantic ports. From Kansas and Oklahoma points the distance to tidewater on the Gulf is only from a quarter to a half the distance to the Atlantic. The farmers of that region, and of a great part of Nebraska, Colorado, and much other territory, are entitled to an outlet by way of the Gulf. It is nearer. It is over cheaper track. It is on easier grades. It should be in every way more economical. But when the battle between the old lines and the new began with the building of the roads to the Gulf, it was fought out, not along lines of what was best for the Nation, not along lines of what was best for the farmers whose stake in the controversy was the right to a fair price for their grain, but with sole reference to the interests of the railways themselves, and of the grain trade with which the railways have always maintained so intimate a friendship. Such agreements were made that grain would be as likely to go from Kansas City to the Atlantic as to the Gulf. In other words, the building of the Gulf lines was robbed of its benefits to the farmer. Rates were so adjusted, and still are, as to make the Gulf lines as bad for the farmer as the Atlantic lines, instead of making the old lines as good as the new should be. This is equivalent, as an economic futility, to the plan of handicapping the binder so as to restrict its work to the amount done by the same force in the old days of hand binding. Financially it may be wise—for the elevator trade, and the railway community of interest—but it is an economic crime as much as the breaking of the power looms by the old weavers. The present railway situation is full of such anomalies. One could spend days in their discussion. They are familiar to the shippers of the nation. They are apologized for by the wise men who write great tomes on transportation. But they must sometime be so corrected that trade will go on the railroad which can perform the transportation task most economically, without regard to the historic channels of traffic and the private interests concerned in the use thereof.
I have spoken of the difficulties which confront the people of the deep interior of the continent in working out their complete industrial development. By complete industrial development, I mean that full growth in industry which has come to such seaboard locations as Great Britain, the Netherlands, our Eastern seaboard, our lake regions and the like. One can scarcely conceive such complete development in Iowa, Nebraska, the Dakotas, or Oklahoma. And yet it is merely a question of transportation. The problem of the future relates to the question of the ability of land carriage of any kind to furnish it. If it cannot be accomplished by land carriage, the Nation will have recourse to waterways. New Rockford and her sister hamlets will reach the sea, either by the way of the railroads, or by the Missouri river. If the railways are to give New Rockford—and in her I typify all the interior—what it must have if it is to develope completely, they must find some way to compensate the place by means of rates for its remoteness from the Sea.
This may be done by what is called “tapering rates”—that is, by rates which increase not with the distance, but on some basis which gives the remote point a less tariff per ton a mile than the nearby point. The railroads have made such rates always when the demands of profit called for them; and their policy has resulted in great benefit to the interior; but the diverse ownership of the different lines and restrictive laws, as well as the lack of a national policy in rate-making, conspire to prevent the full application of the principle. Congressman D. J. Lewis of Maryland has laid down the principle that rates along a line should increase with the square root of the distance, instead of with the distance. Thus, if the proper rate per hundredweight for twentyfive miles is ten cents, for 0.25 miles the rate should be not $2.50, which would be the increase directly with the distance, but twenty-five cents, the increase over ten cents according to the square root of the distance. The value of this formula may lie principally in the emphasis of the economic justice, as well as the necessity, of tapering rates for long hauls. As it is, rates taper from New York to Chicago, not according to the square root formula, but in a manner not very much at odds with it; but then they are increased by the fresh start from Chicago as a basing point. Under a national policy in rate-making, these rates would continue to taper to the point at which it would be more economical to ship in some other direction—to the Pacific, or to the Gulf.
The influence of tapering rates on the industrial development of a people may be seen strikingly manifested in Texas, which has long had a rate system peculiar to itself. This system is said to be the fruit of the statesmanship of Judge Reagan, and was devised expressly in the interests of a population deemed to be permanently agricultural. It is exactly the opposite of the general policy which has built up a few great cities at the expense of the rest of the country, and the best or worst example of which is perhaps the case of Chicago. Chicago is fed by livestock shipments which sweep past the very doors of packing houses quite as well equipped to slaughter the stock as any in the Windy City, and the livestock rates are only a sample of the system of tariffs that keep in Chicago's hands the headship in commerce to which in the natural development of things she would not be entitled. Railroad rates keep the great centers great by decreeing that the primary products shall be sold there, and that the supplies of goods ready for consumption shall be bought there. This is done by depriving other trade centers of the natural advantages over Chicago, of their nearness to the farms, while leaving them handicapped by their remoteness from water transportation. And wherever a great city is found in the United States, the same sort of rate structure is found. The economic result is that long hauls are favored for the railroads, with greater profits to them perhaps; but the farmers are deprived of the benefits of the home markets which nearby large cities afford. The state of Iowa is Chicago's back field; and Iowa's population is shrinking. This fact alone is enough to condemn the rate system which permits it. And Iowa's case is glaring merely because she is an almost purely agricultural state. The farm populations of the other states on Chicago's back fields are shrinking, also. And while I do not think it fair to attribute all this to rate mal-adjustments, I feel sure that if the Texas system of rates had been in effect in the Chicago-St. Louis basin, the phenomenon of decreasing population would have been long postponed, and might never have appeared.
THE TEXAS SYSTEM OF RATES.
The Texas system, as perfected by the Texas State Railway Commission, is based on the theory that many medium sized towns and cities are to be preferred, for the agricultural welfare of the state, to one or two overgrown municipalities with rates made to stimulate their growths at the expense of the rest. This has been accomplished by the establishment of a maximum freight charge, above which there can be no increase, no matter what the distance—with the exception of certain remote points in the cases of which additions are made, not according to the entire length of haul, but according to their distance beyond the limits of the zone which is established about every shipping point. Thus merchandise taking the class rates pays a tariff from any shipping point according to distance, up to 245 miles, beyond which the rate for 245 miles is paid no matter what the distance. The maximum rate on cotton is reached at 160 miles from any station; on flour, grain and hay at 140 miles; on coal, 790 miles; on fruits, vegetables and melons, 180 miles, and thus for all shipments. The result is that the remote truck farmer is as close, so far as rates are concerned, to the city 500 miles away, as to the one 180 miles off—and the principle is applied to all producers, with variations as to distance. This gives him a wide choice in markets and rates, which equalizes conditions so far as rates can do so, between the interior and the coast. And it fosters the small and new city by enabling it to compete in jobbing and manufacturing with the large and old one. Thus, while such places as Galveston, Houston, Dallas, Fort Worth and Waco are among the most prosperous towns of their size in the country, they are constantly meeting the competition of that numerous class of smaller Texan cities the unsuspected presence of which in the interior is such a constant surprise to the traveler from the North. Business is decentralized to an extent nowhere else seen in the United States in an agricultural community. And decentralization, while opposed to the immediate interests of the rail