SOCIAL AND INDUSTRIAL EFFECTS OF 

 RAILROAD RATE-MAKING' 



By John Burton Phillips 



Any intelligent study of the railroad-rate question involves a considera- 

 tion of the social and industrial eflFects of freight rates. The rates at 

 which freight is carried to and from various places in the United States 

 are great factors in determining their prosperity. Unless this effect of 

 freight rates is understood, no intelligent discussion of the proposal to take 

 the rate-making power out of the hands of the railroads will be possible. 

 In this paper some attention will be given to the effects of the freight rate 

 on Atlantic ports, building parallel railroads, concentrating population in 

 cities, and distributing industries. 



At the present time the railroads are maintaining what is called a 

 differential in the rates that prevail for the shipment of freight from the 

 West to the ports on the Atlantic seaboard. It seems that the most accessi- 

 ble outlet for the grain that is grown in the Northwest was for many 

 years the port of New York City. The New York Central and Hudson 

 River Railroad secured the larger amount of freight if the grain was car- 

 ied to the seaboard by the most inexpensive route. Other men had in- 

 vested their capital in railroads, and these men wished that their capital 

 so invested should yield a good profit. It was found that the Baltimore 

 and Ohio, Chesapeake and Ohio, and the Pennsylvania could not compete 

 at the usual freight rate for grain with the New York Central, and were 

 being worsted in the competition that was then on. They therefore de- 

 cided to engage in a rate war for the purpose of compeUing the New York 

 Central to come to terms with them and maintain a rate that would give 

 to them a larger share of the grain destined for the seaboard. The war 

 was begun and waged with remarkable fierceness, until finally in 1877 ^^ 

 agreement was reached by which the New York Central pledged itself to 

 raise the rate on grain destined for export through the port of New 

 York, so that that city would not be a serious competitor with the cities 



■ Vide The Iron Trail, March, 1905. 



187 



