Railroads

3917

Railroads

a separate officer, responsible only to the
head of his particular department, being in
charge of the work on a division. The de-
partmental plan of organization is in com-
mon use in England. The New York Central
is one of the few roads using it in America.

The traffic department may be in charge
of a vice-president in charge of traffic or of
a general traffic manager. Its work is divided
into two parts—passenger and freight. These
respective departments may be in charge of
freight and passenger traffic managers or of
general freight and passenger agents. Most
roads have also a general purchasing depart-
ment. There may also be found a real estate
department, relief department and as an ad-
junct to the engineering department, a valu-
ation department.

Railroad Consolidation.—The consolida-
tion ot railroads has frequently been a sub-
ject of governmental or public concern. The
Sherman Act, passed in 1890, intended to
prevent the formation of 'trusts' operating
in restraint of trade, was early made to
apply to railroads. Indeed, one of the most
famous cases fought under the Act was the
Northern Securities case of 1902 in which a
United States Supreme Court decision re-
quired the severance of common control of
tie Northern Pacific by the Great Northern
and the Union Pacific. This decision, par-
ticularly as amplified by the Clayton Act of
1914, which has elaborate provisions relating
to railroads, proved an effective damper on
railroad consolidations. The Transportation
Act of 1920, however, gave voice to a more
liberal viewpoint. Provisions were included
in it intended to encourage the voluntary
consolidation of railroads. The effect desired
was a limited number of systems of approxi-
mately equal earning power so arranged as
to assure, insofar as possible the maintenance
of former routes of traffic and competition
of service. Under the terms of the Act, dif-
ferentiation was made between consolida-
tions effected by merger of corporate iden-
tity on the one hand, and acquisition by
lease, by purchase of stock, or by operating
agreement, on the other. In December, 1929,
the Commission published its final plan call-
ing for the creation of 19 systems, or 12,
including the United States mileage of the
Canadian lines. For later history, see UNITED
STATES HISTORY.

Railroad Rates.—Under the terms of the
Interstate Commerce Act, as amended by the
Transportation Act of 1920, the fixing of
the general level of freight rates and passen-

ger fares is in th? hands of the Interstate
Commerce Commission rather than of the
traffic departments of the railroads. The
Interstate Commerce Commission is required
to establish a level of rates which will yield
a fair return upon the aggregate value of the
railway property held for and used in the
service of transportation. The Commission, *
besides having jurisdiction over the general
level of rates, also has the power of review-
ing or prescribing rate relationships and even
individual rates.

Freight Traffic and Rates.—The transpor-
tation of freight is much the most important
function of American railroads. On only a
very few roads of any importance, such as
the New York, New Haven & Hartford, and
the Long Island, do the receipts from pas-
senger traffic even approximate the receipts
from freight traffic. In 1939 operating rev-
enues totaled $3,095,004,000, of which $3,-
244445,000 was from freight. The adjust-
ment of freight rates is far more complicated
than that of passenger fares. Whether it
pays better to carry a small amount of
freight at a high rate or a larger amount at
a low rate can be determined only through
experimentation with each item of freight.
Each item must yield at least enough to cover
the additional expense to the company aris-
ing from the haulage of that particular
freight. At the same time the freight rate
must not be so high as to handicap the pro-
ducer in competition with producers served
by other means of transportation. With
freight of low value per unit of bulk, the
volume will usually expand markedly under
conditions of cheap transportation. A very
moderate rate per ton per mile will prevent
coal from being carried 500 m. from the pit;
an equal rate on silk goods represents a neg-
ligible increase in the value of such goods.
High-grade goods may bear a. far higher
rate than low-grade goods without appre-
ciable diminution in the amount offered for
carriage. In American policy, accordingly,
rates are graduated roughly in proportion
to the value of the goods carried, the lowest-
grade goods often barely paying the cost of
carriage, while the high-grade goods pay in
addition a part of the fixed charges, and pre-
sumably something toward net profits. The
policy of graduating rates according to the
value of the commodities, and making such
rates as will move any given traffic, has been
one of the chief causes of the extraordinary
development of the freight business of the
American railroads, and of the marked re-