EDITORIAL 



Competitive Methods 



DISCUSSING Senator Burton's 

 views on water transportation, the 

 Nezv York Commercial says : 



He goes on record in published interviews 

 as declaring it to be absolutely necessary to 

 secure national legislation for preventing the 

 railroad interests of the country from con- 

 spiring to suppress water traffic; he says that 

 it is useless to attempt any development of 

 the freight-carrying possibilities of our Amer- 

 ican waterways until such a conspiracy has 

 been impossible ; and his proposal is that a 

 law should be enacted by Congress forbidding 

 the owners of railroads that parallel water- 

 ways to cut the rates of carriage below a 

 certain minimum. Commissioner Smith, in 

 his recently submitted report on transporta- 

 tion by water in the United States part one, 

 "general conditions of transportation by 

 water" records substantially the same opin- 



ions. 



* * * 



It may be that freight rates are too high 

 nowadays in some instances it is indisput- 

 able but when it comes to forbidding rail- 

 road companies to makes rates below a legally 

 established minimum, the proposal does not 

 appear to be in the public interest. If a 

 railroad paralleling a natural or an artificial 

 waterway can haul freight at a profit at rates 

 below those that the waterway can maintain 

 profitably, it most certainly ought to be per- 

 mitted to do it ; otherwise, a burden is placed 

 on the public that is essentially unjust and 

 unreasonable. 



Does the New York Commercial un- 

 derstand the situation ? 



More than twenty years ago the coun- 

 try was made acquainted with "the long 

 haul" and "the short haul." In fact, 

 abuses growing out of the long and 

 short haul were potent factors in caus- 

 ing the establishment of the Interstate 

 Commerce Commission. 



The point was simply this : Two im- 

 portant shipping points, as Chicago and 

 Omaha, were connected by several com- 

 peting railway lines. To get business, 

 these lines underbid each other on rates. 



This process continued until profits 

 in cases disappeared. Did this mean 

 that the railways lost money? Not 

 at all. What they lost on the long haul 

 between the competing points they made 



up on short hauls between points on 

 their individual lines which did not en- 

 joy the advantages of competition. 

 Thus was explained the marvel that 

 goods might be hauled from Chicago to 

 Omaha and thence back to some in- 

 tervening point at less cost than they 

 might be hauled direct from Chicago to 

 the intervening point. 



The same principle has been applied 

 by the packing houses. When the 

 trust's meat-shop moved into town, it 

 proceeded to drive out all the other 

 shops. This it did by cutting rates be- 

 low the point at which the other shops 

 could live. If necessary, it sold meat 

 for a time at cost or even at a loss. 



Then, when the other shops were 

 gone, and the trust shop was secure in 

 its monopoly, it simply raised prices 

 and recovered what it had lost during 

 the competitive \var, with as much in 

 addition as the market would bear. 



This principle, according to the testi- 

 mony of waterways experts, is exactly 

 that which the railroads have employed 

 in the destruction of river traffic. 



A railroad has paralleled a river, cut 

 the rates on the traffic for which the 

 river competed, made itself whole on 

 other traffic for which the river did not 

 compete, and so put the river out of 

 business. 



Now, Senator Burton proposes that 

 this little game on the part of the rail- 

 road shall be blocked by the enactment, 

 by Congress, of a minimum rate law. 



To this, the New York Commercial 

 objects, saying further: 



There is no sense in, no justification for, a 

 law that compels the public to pay extra high 

 freight rates merely for the purpose of keep- 

 ing alive waterwavs-traffic enterprises that 

 otherwise would die. 



From such comments one might 

 infer that the New York Commercial 

 was not familiar with competitive 

 methods. 



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