HomeMy WebLinkAboutThe Clinton New Era, 1921-9-22, Page 2PAGE Two,
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New. Era
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Thursday, September, 22, 1921.
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The indicator of true, prosperity is Employment. The presence of un-
employed men, unemployed machinery, unemployed railway equipment,
and unemployed capital in Canadais reason enough therefore, for every
large Canadian business interest to study its relation to the general `pro-
blem to see whether anything in its power remains to be done to ad-
vance the general prosperity of the country.
In this connection the railway companies have been specially interest-
ed. Freight Rates touch everyone, and, because they touch everyone, are
always close to the public consciousness and more conveniently attacked
than the true causes of depression which are less easily discerned and
more difficult, if not indeed impossible, to control.
Furthermore, the railways while j oining with everyone in the general
agitation for deflation of prices and wages—found nthemselves recently
in the seemingly anomalous position of demurring when it was proposed
L Freight Rates and Unemployment
With a large part of the world's population idle, or only par-
tially efficient owing to wars or disturbed political conditions—with
inventors n many parts of the world almost afraid to expose their
inventions, organizers afraid to organize, capital hesitating to invest—
a corresponding proportion of world is less than missing. The total
a corresponding proportion of world production is missing. The total
not produce—speaking generally—cannot buy! Few purchasers—
few sales; few sales—little employment This is the great world-wide
fundamental of the unemployment situation.
The condition is international, not local to Canada. • If Can-
adian railway rates were a determining factor in making the sale, prices
of our export goods, in other words if Canadian prices were higher in
(international markets than the goods of our competitors, then railway
rates would be contributing to unemployment in Canada by depress-
ing our sales abroad, lowering the number of our customers, and the
orders coining to our producers.
But in the first place the real effect of fight rates on price
snaking is a debatable point This is proven
(1) by the fact that prices fell last fall after the rates were in-
creased instead of rising as theNretail trades had prophesied;
(2) by the fact that a 10% reduction on western coal rates,
offered in order to stimulate coal movement in the summer
months, was followed by a drop in the coal tonnage offering instead
of an increase.
In the second place, assuming for the purpose of argument
they did have serous effect, Canadian export rates are lower and not
higher than the rates in countries with which Canada may be com-
pared. Mile for' anile the haul from western Canadian points to the
head of navigation is cheaper than' in the United States. The ex-
port rate en grain is lower than it was last August.
•
In other words, in international competition on her chief items
of export, Canada is helped by her railway rates. So far as inter-
national trade is concerned, they are alleviating unemployment rather
than aggravating it I
Inside Canada the same is true. Although it is a very
difficult point to prove or disprove, the railways of Canada are sin-
cere in claiming that, by and large, goods are carried more cheaply
in Canada than in the United States. Canada had one blanket re-
duction 9f 5% laist January, whereas there is still no decreasd, nor
immediate prospect of a blanket decrease in the United States I
II. The Trend of Freight Rates
With the exception of war and post-war conditions — the
whole tendency of freight rates in this country, as in any other
progressive country of its kind, is downward. As Canada's
population rises, as our intustries multiply and the density of
traffic becomes more nearly like that of older 'countries, some of
the principal costs of railway service can be subdivided among a
greater number of shippers and travellers, levying on each, therefore,
a smaller fraction of these costs than before. For twenty years
prior to the war, traffic was on the increase. For twenty years, there-
fore, the railways have been adjusting' rates downward—quite apart
from special decreases put in effect by the Board of Railway Coin-
missioners. These revisons have been skillfully applied by experi-
enced, practical economists—that is, by the. Freight Traffic experts
263
ailways
tolower railway rates. They were made to appear as though they were
endeavoring with one hand to put wages down and with the other hand to
keep rates up, thereby securing for their own treasuries instead of pass-
ing on to the Canadian public' and saving effected on the wage rolls. They
were placed in the equivocal position of having urged blanket increases
of rates when wages went up—and of opposing blanket decreases when
wages were seemingly decreased.
The following statement is offered, therefore, with a view to exhibit-
ing what the railways believe to be the true relation of railway freight
rates to the question of unemployment, outlying the history -of Canadian
rates' explaining of the groundwork of ratemaking and clearing up the
seemingly anomalies referred to, so that none may remain as possible
causes for future weakening of confidence between the public and the
carriers
• 1,
•
of the railways, whose ousiness it is to know all branches of industry
intimately, so that the benefit of these voluntary rate adjustments
would go to "key commodities," thus stimulating further growth of
the country, increase in traffic, and in the end, further reductions of
rates. The difference between giving a reduction to a "key industry"
rather than spreading over all kinds of goods is illustrated in the
case of a certain small railway which by concentrating rate reductions
on lumber enabled the mills of that region to remain open and the
people to remain at work, whereas if the effect of the reductons had
been scattered over all the goods carried by the road each family
would have been able to save a small handful of silver in a year (pro-
vided the decreased rates had been passed on as decreased prices by
storekeepers)—but there would have been almost no employment.
So much for the day to day reductions arranged on thousands
of articles by the Traffic Departments of the roads. In 1907 a
. substantial reduction in Eastern rates .was made. In 1914 a very
material cut was applied in the West. So that the transcontinental
lines entered the war period with a depressed earning power.
Now while all—even the railways—see, the desirability for
low freight rates, there are certain limits beyond which no one urges
reductions. Of course there are tli.eorists such as Mr. Bernard Shaw,
who believed that all railway service should be free. But leaving
aside views so far in advance, as yet, of public opinion, it is assumed
by most people that a railway will give best service at least cost—
because, of course, even free railways must be paid for by the tax-
payer — when their managements are allowed to show their mettle
by meeting the obligations of their properties out of their earnings. It
is usually recognized that these obligations fall into two groups:
Group I.—To pay their employees; to pay for current supplies
of materials such as coal, etc.; to pay for repairs and replacements.
Group 11.—To pay such a wage or hire for the use of the capital
which built these railways as will make Canadian railway securities
always desirable, and easily marketed -whether as bonds or stocks.
This involves more than the mere payment of the established rate
of dividend in the case of privately owned roads. It involves the
earning also of some surplus—a safety margin of income over ex-
penditure, which will assure investors of complete safety. This
principle of a surplus was definitely established by the judgment of
the Board of Railway Commissioners in 1914, under the chairman-
ship of Sir Henry Drayton—and upheld by its judgment of 1920,
when the matter was again considered exhaustively. On this principle
rests Canada's ability to enter the money markets wherever she may
need and feel confident of bringing back funds for extending her rail-
ways as she may require in the future.
•
War conditions, following the Western and Eastern rate ad-
justments, brought the railway managements sharply up against these
fundamental problems. Comparing the Government's( figures for
1907 against 1919—the last year for which the Railway Blue Book
is available—the wage bill of the railways rose 306%! Coal 345%1
Ties 320%! But neither the volume. of traffic nor the scale of fieight
rates increased'in comparable degree during that period! The actual
revenue per ton per mile (which is the real proof or disproof of the
matter) advanced only 20% over 1907. The year 1920 enlarged
the discrepancy, although at increase of 35% on Western lines and
40% in the East was supposed to yield enough additional revenue to
meet the increased wages. The increased wages were effective from
May dst—the increased rates not until September 1. The effective-
ness of that increase depended on the volume of traffic remaining at
a fairly high level., It did so for a time, then began to drop. Today
it is very,low. Nevertheless a 5% decrease was applied in January.
For the first 6 months of 1921, as compared to the first 6 months of
AY1ASSOCL
James t ee t',
1920 the volume.of traffic on the most fortunately situated Canadian
road fell 26.72%! And its revenue on this business, in spite of the
higher rates, fell 11.14% !
The net result of these changes has been a state of emergency
in the offices of even the most fortunately situated of all Canadian
roads. Wages could be paid and bills stet on time. Even the usual
dividend was paid' and a very slight surplus—one of the factors in
maintaining the reputation of Canadian railway securities, was
earned ! But this was only done by deferring work that must ultimate-
ly be done on current account.. Such economies cannot long be con-
tinued without eating too far into the broad safety margin which the
Canadian roads maintain! Nothing but slackened speed of trains and
reduced Canadian industrial efficiency can result if these savings have
to be long continued. Falling traffic still further aggravates the con-
dition. Maintenance cannot continue to be sacrificed to protect the'\
credit of our railway securities! Neither can be neglected!
In May the managements approached the task of reducing
their wage bills. For the first time in many years it was the manage-
ments and not the men who were taking the initiative. They had
been forced to adopt the war -time increases granted in the United
States—where 92% of the membership of the railway unions lie.
Therefore when the reverse movement was undertaken in that
country the Canadian roads at once gave due notice and a provisional
and conditional decrease of roughly 10% — corresponding to the
same movement in the United States — was put in effect, tentatively,
as from July 15th. This reduction has not been accepted by the
United States membership of the unions, where a vote is being taken
on the question—nor by the Canadian membership, who have applied
for a Board of Conciliation. Every resource of the managements will
be used to sustain this imperatively necessary and only too moderate
reduction of their wage bills—which account for 60% of the cost of
operation—they are compelled to regard the matter as still unsettled
and therefore not to be considered as a basis for the reduction of
railway rates—a view which a majority of the Board of Railway Com-
missioners has just expressed in its judgment.
III. In Conclusion
The railway managements welcome deflation of railway rates
and are working steadily toward that end. On two grounds however,
they asked that any general decrease be deferred:
First.—Because the so-called wage decreases are not yet as-
sured and cannot be until the parallel decreases in the United States,
where 92% of the union membership lies (and where no general
freight rate reductions have been ordered), are settled.
Second.—Because the volume of traffic in the immediate future
is problematical and any serious decline, if coupled with a decrease in
rates would have very grave effect on even the most favorably sit-
uated managements.
The railways have spoken against blanket decreases on the
grounds that it would be in the interests of the country as a whole
to concentrate any beneficial effect to be expected, on "key com-
modities" rather than distribute then over all classes of goods; there-
by benefitting only the distributors.
They have been actuated throughout by the desire to assist in
the process of deflation — objecting only when that process might
seem to threaten their solvency and inure then—and through them
—the ultimate interests of the Canadian public.
Montr