Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
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Editor/Trans.
First Pub. Date
1881
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New York: Maynard, Merrill, and Co.
Pub. Date
1899
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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TRANSPORTATION

III.264.1

TRANSPORTATION, Means of. 1. History. The Romans had an admirable system of roads, and a highway legislation not unlike that now prevailing in France. But in the middle ages both the roads and the law were suffered to decay. Such ways as there were formed part of the property through which they ran; and when the ownership passed into the hands of a feudal lord, he obtained property rights over the road. But as the central government grew in power in various states of Europe, from the sixteenth to the eighteenth century, it also laid claims to rights over the roads; first in the form of a right to levy tolls; much later in undertaking to build roads, and maintain them under its own control. Throughout the continent the road taxes were oppressive and the highways extremely bad; in this last respect there was some slight improvement in the eighteenth century. A thorough reform was instituted in France by the revolutionary legislation, culminating in the decree of 1811, and further systematized in 1836, providing for public roads free from tolls, and supported by the nation, department or commune, according to the sphere of their importance. Similar legislation was carried out during the same period in other parts of the continent. In England the course of events had been different. The roads had always been recognized as the king's highways. They were maintained by the parishes under parliamentary legislation. (For details see "Edinburgh Review," April, 1864.) The experiment of tolls was cautiously tried; turnpike trusts were introduced at the beginning of the last century with tolerable success. The important acts of parliament in the present century have been those of 1835 and 1862; by the latter the care of roads has been in many cases taken out of the hands of individual parishes and made the subject of the united action of much larger districts. The early American system was modeled upon that of England—especially so in New England; in other parts of the country the county controlled the roads, even when they were maintained by separate communities. Turnpikes were first organized about the end of the last century. They had much more the character of private enterprises than in England, although public bodies often subscribed to the stock. This system was developed throughout the north; south of the Potomac it took no root. (For a variety of details see American State Papers, xx., 866-915.) National appropriations for roads date from the beginning of the century. The chief work of this kind was the Cumberland road; for the expenditures on this and other projects see Am. State Papers, xxi., and House Committee Report, 1835-6, III., 850. The crisis of 1837 put a stop to most of this work; and the subsequent development of railways caused it to be forgotten.

III.264.2

—For a detailed history of canals and railways, see the articles under those headings. In a system of internal navigation—canals, combined with river improvements—France took the lead. The development of the canal system in England and America was almost simultaneous with that of turnpike roads. In England the most important canals were built toward the close of the last century; they were the result of private enterprise far more than were the turnpikes. The period of canal building in America was a generation later, the first third of the present century. In railroad building England, of course, took the lead, followed by Belgium and Germany. Most of the continental governments would have preferred to develop their railways as state concerns, after the analogy of their roads; but from the financial burdens which this would involve they shrank either at the outset (Prussia), or before the system was carried through (Austria and many others). Only in France was the analogy tolerably well maintained, at least as regards the matter of railroad construction. England and America were of course hampered by no such precedents.

III.264.3

—We have thus far spoken of means of transportation only in the narrower sense of ways or roads over which the goods must pass. The transportation agencies yet remain to be considered. As long as these were but the individual cart and ship, their consideration might be neglected; but in their modern organization as express company, steamship company, postoffice, telegraph company, or, above all, railroad company in its relation as carrier, they form the all-important part of our subject. Most of these have been treated under separate headings, so that we need not enter into their origin and history. The railway appears under a double aspect as road and as agency. Many mistakes of public policy were at first made by treating it after the analogy of a highway pure and simple. It may be considered either as a road operated solely by a particular company, or as a company having sole right to operate a particular road. The same distinction may be made with the telegraph; but it is in that case obviously of less importance.

III.264.4

—2. Economic Results of Improvement in means of Transportation. The direct results have been at once increase in rapidity and decrease in expense. In the history of each separate means of transportation these two changes have gone hand in-hand. Take, in the matter of roads, the French statistics, which are in more available form than those of other countries. If we compare the returns of the swiftest public means of conveyance on the main French roads in 1782, 1832 and 1848, respectively, we find that the average speed had more than doubled in the first interval, and had increased by one-third in the second interval; while the prices per kilometre were, at the respective dates, 4 cts., 3¾ cts., 3½ cts. of our money. And this reduction is the more remarkable because of the increase of general prices going on at the same time. Even where the tolls seemed to increase, as with the English turnpike system, the amount saved by diminished wear and tear, increased loads, etc., really produced the same result of lowering the cost of carriage. So in the canal system of different countries; as the facilities were improved, not merely was there a diminution of the traction expenses on that ground, but there was also usually a gradual abandonment of the attempt to make the tolls pay interest on what the canals had originally cost. In the case of the transportation agencies, the facts are still more striking. To take an instance from the history of shipping: By the study of the prevailing winds, systematized by Maury about the middle of this century, the speed of sailing vessels on many frequented routes was nearly doubled, and the expense of carriage thereby greatly diminished. Fifty years of constant improvement in postal facilities have been marked by a reduction of postal charges to less than one-fifth what they were at the beginning. There has been the same kind of improvement and reduction in the steamship and railway service.

III.264.5

—When it comes to the substitution of one means of transportation for another—steam instead of sail, railways instead of waterways—the progress is less direct. We generally find in the first instance increased rapidity secured at an advanced price; then the price begins to diminish, and ultimately may fall below that of the more primitive means of conveyance. When ocean steamships were first introduced, it was not supposed that they could ever compete with sail for the carriage of ordinary freight, even on the most frequented routes. The first indications of real competition being felt in this respect were the unsuccessful efforts to employ sailing vessels with the auxiliary screw. Then came the gradual withdrawal of sail from the business on shorter routes with the most regular communication, to ply on the longer and less frequented ones. But each improvement in ocean steamers gives an additional advantage in competition and diminution in the cost of carriage. The substitution of the screw for the side-wheel, the use of compound engines, are sources of unmixed saving; the enormous increase in the size of the steamers, even when they are run in a manner that seems to involve extravagant waste of coal, increases the net carrying capacity yet more; so that the amount of coal burned per ton carried is under favorable circumstances least on the new boats. The excess of freight rates by steamers, as compared with those by sail, varies from 100 per cent. down to almost nothing: essentially the same relation as subsists between railroads and directly competing canals.

III.264.6

—Railroads, soon after their first introduction, proved themselves more than a match for any competition from wagon roads; and things have now gone on so far, that, according to the census returns of 1880, the five to ten mills which it generally costs the farmer to haul a bushel of wheat a mile by wagon, is a higher rate than he has to pay per ton per mile by railroad. Or, to put the same results in another way: in most of the wheat regions it would not pay to grow grain which had to be hauled twenty miles by wagon; in some regions the limit of wagon hauling is as low as ten miles. But the competition between railroads and canals has taken shape more slowly. It was at first thought to be impossible on any terms; and great was the indignation of the New York legislature when the Central railroad first attempted it as against the Erie canal. Then came the gradual abandonment of the attempt to make canals pay interest on their construction expense; and this seemed constantly to keep them beyond the reach of railway competition on those terms. But the successive railroad improvements, both in engineering and in management, culminating in the wonderful substitution of steel rails for iron, and the enormously increased loads thus rendered possible, have produced such astonishing results in the past fifteen years, that no one would venture to predict what might come in fifteen years more. Since 1870, along with the great improvements in efficiency of service, freight rates have fallen as much as 50 per cent., and the end of the movement does not seem to be yet reached.

III.264.7

—The indirect results of these changes are so far-reaching that we can do little more than enumerate them. The most immediate effect of cheapened transportation is to increase the distance at which it is possible for producer and consumer to deal with one another. To the producer it offers a wider market, and to the consumer more varied sources of supply. Which party obtains the chief benefit of the change is determined by the special conditions of each particular case. On the whole, its operation is more uniformly beneficial to the consumers, as a class, because its temporary advantage for the producers so often leads to over-production. But, in any event, it results in doing away with a large part of the variations in price between different localities. The price is made, not in a local market, but in the world's markets. In the case of less bulky manufactured products, these differences almost disappear, except as they are due to artificial obstructions. In agricultural products, they are on a vastly smaller scale than ever before. And not the least important point where this leveling effect is felt, is in the rent of agricultural land in England, and similarly organized countries. Nearness to market was not long ago a main advantage of high-priced land; now it has to contend on tolerably equal terms with competing land five thousand miles away.

III.264.8

—To comprehend the full meaning of this change, we have only to look at books on industrial organization, published in the early part of this century. The limits from which a large city could draw its various supplies were closely defined by distance. Fresh vegetables and fruits could only be produced for it within the narrowest circle; and successive circles of ground were almost necessarily devoted to different products, according to their different availability for transportation. Now, any improvement by which products could be profitably transported to a greater distance, led to a redistribution. It was no longer location which determined the business to be carried on in a particular spot, but natural advantages more or less independent of location. The market garden might be placed at a greater distance from the city, if by so doing a more fertile spot was secured. The factory might be located far away from the raw material, if other business inducements made it desirable. In short, the whole system of division of labor advanced to a new stage. Not only was each man employed for what he could do best, but he was given a chance to work in the place where he could do it best. And this change made itself strongly felt in international relations. Even the barriers raised by high protective tariffs hardly avail to counteract the effect of reduced freights. It is perfectly possible that a country with a high tariff to-day should be less isolated by this than it would have been a few years ago by the mere cost of transportation with no tariff at all. It is the railroad and the steamship that determine where a new business shall be developed, quite as often as the government policy. The grant of special rates and privileges to shippers is nowadays the most efficient kind of protection. It is this quickening and cheapening of transportation that have given such stimulus in the present day to the growth of large cities. It enables them to draw cheap food from a far larger territory, and it causes business to locate where the widest business connection is to be had, rather than where the goods or raw materials are most easily procured. And the perfection of the means of communication, the postoffice and the telegraph, intensifies the same result. With this growth of city life, and partly in consequence of it, comes the increased gain of large producers at the expense of small producers. With it comes organized speculation, and its attendant results, good and evil; with it comes the development of enormous wealth in the hands of a few individuals, not to speak of the less distinctively economic results which attend the life of a great city.

III.264.9

—3. State Control. It is just because these indirect results are so far-reaching that the question of government control of transportation agencies has attained its present importance. In the earlier systems, all this settled itself. The parishes, towns or counties took up the matter of roads, because it had become a pressing want, and there was no other power to supply it. If a private company was ready to build a turnpike, its help was welcome, and there was no fear of its becoming too great a power in the community. Again, in the very different case of the postoffice, the matter was taken up by the state, partly as a source of revenue, partly as a means of making its presence and authority felt; not on broader grounds of public policy, as a protection to the citizen against the imposition of less responsible agencies. The navigation act of 1651, whatever its defects, has the merit of being the first systematic attempt to control a branch of transportation on grounds of public policy, looking toward its indirect economic and social effects. For some time it remained almost the only one; the systems of roads and canals formed but local or partial exceptions. But, about the year 1840, the simultaneous development of the postal service, the telegraph and the railroad, made it necessary for the state to assume some definite attitude upon the question of management or control of these agencies. The postoffice presented the fewest difficulties. The machinery was in the hands of the government, the people were accustomed to its working; it was only in a subordinate section of the business, the parcels post, that there was really any doubt, and there it was settled on grounds of convenience, or left to settle itself for the time being with the liability of change afterward. The matter was not so clear in the case of the telegraph; state management would require new expenditure, and a new organization, involving many officials. But it was decided affirmatively throughout the continent of Europe; and England, after trying private telegraphy for a long time, changed to a system of government ownership in 1869; so that the United States has for fifteen years stood almost alone in this matter. It was the question of state railroads that involved the most doubt; and it is the harder to trace its exact history from the fact that so many states had no thoroughly fixed policy on the subject. The general course of events in continental Europe may be summarized as follows: In the first instance, the governments were in favor of state railroads, and proposed to develop such a system; afterward they felt the financial difficulties of the undertaking, and turned their attention to the encouragement of private enterprise in this field by various forms of subsidy; then, thirdly, as the railroad power became established, they found it no longer a question of supporting, but of controlling, it; and, finally, they came to look upon state railroads as a source of financial strength, rather than weakness, and to return to their original plan of state ownership. In the United States we have felt only the second and third of these periods; and in neither case has our general policy been so fixed as in Europe. We had a time of indiscriminate encouragement of railroads by land grants and municipal subscription; we are having a time of indiscriminate attempts at control by special legislation in various states. England alone has been free from these strong changes of public policy; whatever encouragement or control there has been was confined within the narrowest limits.

III.264.10

—Any attempt to do justice to the arguments on either side is quite beyond the scope of an article like this; and we conclude this part of the subject by quoting from two writers, representing quite different views, their opinions as to when state ownership of transportation agencies is desirable.

III.264.11

—The first is from Ad. Wagner, of Berlin, a decided advocate of state management; he considers that there are strong reasons for it, 1, when the efficiency of the service requires wide and uniform extension over the whole country and international communications (postoffice, telegraph; somewhat less so in the case of railroads); 2, when the service involves anything like a monopoly, legal or actual (railroads, telegraphs); 3, when it requires constant repetition of the same services, according to fixed schedules, in such numbers as to involve the existence of a large body of officials; 4, when the cost may be lessened by combining a variety of services at small stations (letter and parcels post, railroad stations and telegraph offices); 5, when the service in private management can only be secured by subsidies on a large scale; 6, when it is necessary on grounds of public policy that the service should inure uniformly to the benefit of the whole people. These principles, he concludes, enable us to speak decisively in favor of state management in the case of letter post and telegraph, more reservedly in the case of parcels post and railways; in the matter of navigation they justify it only in exceptional cases. On the other hand, W. Stanley Jevons, writing an impartial opinion, but as an Englishman, averse to great extension of government activity, states the conditions favorable to state management as follows ("Meth. of Soc. Reform," p. 279): "1, when numberless wide-spread operations can only be efficiently connected, united and coordinated in a single, all-extensive government system; 2, when the operations possess an invariable routine-like character; 3, when they are performed under the public eye or for the service of individuals who will immediately detect or expose any failure or laxity; 4, where there is but little capital expenditure, so that each year's revenue and expense account shall represent, with sufficient accuracy, the real commercial conditions of the department." Of these principles the fourth is one of the highest practical importance, which must be considered in discussing any schemes of state management; and one which under a government like that of the United States at present, must generally be decisive.

III.264.12

—4. Principles of Management; Rates. Transportation agencies in private hands will of course be managed on business principles, that is, they will charge all the traffic will bear. It seems at first sight as if non-competitive points were thus left entirely at the mercy of railroad managers. Practically, however, this danger is checked by two important limitations. In the first place, the competition of different localities in the same market is such that if one railroad charges rates arbitrarily higher than its competitors, it renders it impossible for the localities along its route to ship goods at a profit, and will quickly destroy its own traffic; secondly, exorbitant rates may induce the building of a parallel railroad; and however ineffective such roads generally prove after they are built, the prospect of one in the future has the tendency to keep rates down. Moreover—though this is but an indirect consideration—such local rates are almost entirely paid out of rent, and show their chief effect in the value of real estate. The dangerous kind of discrimination, and one which can not be too strongly reprehended, is that which makes special rates for different individuals, doing the same kind of business in nearly the same place. Such discrimination furnishes the most effective argument in favor of some kind of state control. At points where a railroad competes with a water route or with another railroad, through rates may fall as low as the actual cost of hauling, apart from any fixed charges, or, in the case of a war with rates, may temporarily go even lower. But wars of rates do not give shippers the advantage which might seem likely to accrue. They lead to what has been described as the worst form of discrimination, that between different individuals in the same place. They cripple the efficiency of the service, and the possibility of healthy competition. Take as an extreme case of a similar effect, the routes from California to Nevada, where the railways came in competition with wagon roads. They lowered their rates until the teams were driven out of the service, and then raised them to a monopoly figure. The ordinary railroad war does not go so far as this, but it works in the same direction. The history of the different attempts to control this matter by enforced publicity of management, direct provisions concerning, or limitations of dividends, with their varying success, does not come within the scope of this article. The principles here applied to railroads of course hold good of other transportation agencies.

III.264.13

—But in the case of state management, the rates need not be thus arranged on purely business principles. The state has the choice of four systems: 1, gratuitous service; 2, payment of expenses, partial or complete; 3, business profits; 4, monopoly rates as a source of special revenue. The fourth of these was the prevailing view up to the end of the last century; it has since been abandoned. The first is now mainly exemplified in the case of roads, and some few waterways, where the want and use are so general, and the expense comparatively so slight, that there is no injustice in taxing the community to defray the cost of the service. Cases may also arise where the collection of tolls produces so slight a revenue that the advantage of free service to the community quite outweighs it. Most of the free canal arguments come under this head. But for the great majority of instances the choice is between the second and third principles; it is a question of tolls vs. profits. Canals and letter post have been managed under the former principle; the telegraph stands on the border line; while parcels post, railroads and shipping, in so far as they have been owned by the state, have been mainly managed as business enterprises. The theoretical principle would seem to be, that such agencies under state management should just pay expenses. If they do more than this, it may constitute an especially undesirable tax. But the whole question is so complicated with the problem of remunerating invested capital on the one hand, and of freeing the community from the exactions of individuals on the other, that we can make little use of this principle. Practically it may be said that the state undertakes certain services, in transportation as well as elsewhere, in which it would be impossible to obtain a business profit at any rates (thus postal service on unfrequented routes); and it undertakes others where the main charges are so fixed that additional use of the facilities is all but unattended with additional cost (canals; letter carriage). In both of these cases the principle of tolls has great advantages. On the other hand, there are certain services which the government performs in more or less direct competition with private individuals, as the parcels post or the railways of Belgium and Germany; there are yet others whose acquisition has loaded the state with a special bonded debt, or other fixed obligations. It is doubtful policy for the state to assume ownership on these conditions, especially the latter. But if matters are in this condition the attempt to obtain profits from the business seems to be generally the wisest course, and often the only admissible one.

III.264.14

—E. Sax, Verkehrsmittel; Wagner, Finanzwissenschaft; Foville, La Transformation des Moyens de Transport.

ARTHUR T. HADLEY.

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