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`But in the first place the real effect of freight rates on price sniaking is a. debatable point. this is proven The R ILW AY Furthermore, the railways while joining with everyone else in the gen- eral agitation for deation of prices and wages---found themselvesv recently 263 ST. JAMES STREET, In this connection the railway companies have been specially interest- ed. Fgeight Rates touch everyone, and, because they touch everyone, are always close to the public consciousness and more conveniently attacked " _an the true causes of depression which are less easily discerned and more ifcult, if not indeed impossible to control. . A The indicator of true prosperity is Employment. The presence of un- employed men, unemployed machinery, unemployed railway equipment, and unemployed capital in Canada is reason enough, therefore, for every large Canadian business interest to study its relation to the general prob1em--to see whether anything in its power remains to be done to advance the gen- eral prosperity of the country. i I 1. Freight "Rates ords, in international competition -on her chief Canada is helped by her railway rates. So far trade is concerned, they are u.11eviat`mg unem- than aggravating it! and Unemployment : . a 10 per cent. reduction on western coal stimulate coal movement in the stlmmer r a drop in the coal tonnage offering in- In the second place. assuming for the purposes of argument they did have serious effect. Canadian export rates are lower and not higher than the rates in countries with which Canada may be compared. Mile for mile the haul from Western Canadian points to the head of navigation is cheaper than in the United States. The export rate on grain is lower than it was last August. Now while all-even the rztilw.a5,'s-see the desalralbilifty for low freight rates, there are certain limits beyond which no one urges reductions. Of course there are theorists such as Mr. -Bernard Shaw, who believed that all milway service should be free. But 'leav.'in'g aside views so far in advance, as/'yet, of public opinion, it is assumed by most people the. :2 railway will give best service at least cost-because. of courf wen free ra.ilwa.ys must be paid for by the tzt.\-payer---wlieu thipmanagements are aa,11ow- ed to show their mettle `by meeting the obligations of their properties out of their eamnings. It is usually recognized that these obligations fall into two groups: Group ll.--'I`o pay such a wage or hire for the use of the capital which built these ra.ilways as will make Ozmadian railway securities alwu_vs 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--3. safety margin 9!` nincome over expendi~tm'e. which will a.ssuIre`inVestors of complete safety. This principle of a surplus was denitely established by the judgment of the Board of Railway Commissioners in 1914, under the cha.irm`an's'hi`p of Sir Henry Drayton--a.nd upheld by its judgment of 1920, when the matter was again considered ex- lmustively. On this principle rests Canada's ability to enter the money markets whereyjer she may need and feel condent of bringing back funds for extending her naihways as she may require in the future. So much for the day to day reductions arranged on thousands of anticles by the T-rafc Depa.`nt.1nents of the t'-oa.ds. In 1907 a. substantial reduction in Eastern rates was made. In 1914 a very ma.teria`l cut was applied in the West-. So that the transcontin- ental lines entered the war period with a depressed earning power. War conditions, following the Western /and Eastern rate adjustments, brought the railway managements sharply up against these fundamental problems. Comparing the Government s gures for 1907 against 1919-the last year for which the Rail- way Blue Book is avai-lable---the wage bill of the railways rose- 306 per ceut.! Coal 345 per cent.! Ties 320 per cent.! But neither the volume of traffic nor the scale of freight rates in- creased in ooimparable degree during t-ha-t period! The actual revenue per ton per mile (which is the real proof or disproof oi` the matter) advanced only 20 per cent. over 1907. The year 1920 enlarged the discrepancy, although an increase of 35 per cent- on Western lines and 40 per cent. in the East was supposed to yield enough additional revenue to meet the incnealsed wages. The in- creased wages were effective from May 1st--the increased rates; not until Septenrber 1st. The effectiveness of that increase de- pended on the volume of traic remaiming at a fairly high level. lit did so for a_ time. then began to drop. To-day it is very low. 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 `be- tween giving a reduction to a key industry" rather than spread- ing over all kinds of goods is illustmated in the of a certain small ilway which by concentrating r ueductwns on lumiber enaibl . the mills of that regiog: . >. _.-ain open and the people to remain at work, whereas if t-5.-'e"effect of the reductions had been scattered over all the goods carried by that road each. family would have been able to save a small handful of silver in a year (-provided the decreased rates had been passed on as decreased prices by storekeepers)-~but there would have been almost no yegngloyrxient I `Group I.~'1`o pay their employees: to pay for current. sup- plies or mate1'ia.Ls such as coal. etc.; to pay for repairs and re- placements. THE NORTHERN ADVANCE The following statement is offered, therefore, with a view to exhibiting what the railways believe to be the true relation of railway freight rates to .the question of unemployment, outlining the history of Canadian rates, ex- plaining something of the groundwork of ratemaking and clearing up the seeming a.nomalies referred to, so that none may remain as possible causes for future weakening of condence between the public and the carriers. in the seemingly anomalous position of demurring when it was proposed to lower railway rates. They were made to appear as though they were en- deavoring with one hand to put Wages down and with the other hand to keep rates up, thereby securing for their own treasuries instead of passing on to the Canadian public, any 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. In May the mztnagements approached the task of reducing their wage `bills. For the first time in many years it was the nmnagexnent and not the men who were taking the initiwtive. They had been forced to adopt the wu.r-time increases granted .in the United Srlata-s--where 92 per cent. 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 per cent.-conresponding [O the some movement. in the United State-.s-Vwas put in effect, t-en-tatively, as from July 15th. This reduction has not been accepted by the United States menrbrsltip of the unions, where a vote is being taken on the question--nor my 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 modrate reduc- tion of their wage bills--which account for 60 `per cent. of the cost of opera.ti0n-t'ney cane compelled to regard the matter as still unsettled and therefore not to be considered as 11 basis for the reduction of railwa_v1`n.tes---3 View which at majority of the Board 0-2' Railway CommissivJn~er.s has just expressed in its judgment. (2) by the fact that : Tates, offered in order to 5 months. was followed by stead of an increase. The railway managements welcome deatzion of mil-way rates and are working steady toward that end. On two grounds, how-. ever, they asked that any general decrease be deferred : First.--`Because `the so-called wage decreases are not yet as- ~surz~ed and caxmmt `me tmtil `the pat-aiiel decreases in the United States. where 92 per cent. of the union memenship lies (and where no 'g,'ene1-3. : freight rate reductions have`been ordered), are :9et,tl.9(l. Setomi.--Be.c:.-us~:- the volume of future. is prdalematinai and any serious :1 d-ecraase in rates, would have very g must `f:av-.:)ral)"ly mum:-,d managements. ...... -.......~. uyvvu um uanua auu ncuuucu uauuulilu iuuustrla.-1 efficiency can rs_u1't if these savings have to be long continued. Failing tr.1`1c stiii further aggravates the condition. Maiinvtenance cannot continue to be sacriced to protect the credit of our rail- wa.y securities! Neither can be uegleawd! III. In -Conclusion : The asaii-ways have spoken against blanket decreases on the grounds that i.L ~:so1Ix'm. be in the interests of the cou.n.1'~y as a whole ta cuneentrabe am._I,' be9J.ecia, 1 -effect. to be expected, on key com- n1odi r.ie.s" 1*athvt-.5: T11-'-).'l.`l distribute them over all classes of goods, t.hemb_v beneltring only the distributors. The net result of these changes has been a state of emergency in the offices of even the most fontunat.elysituated of all Canadian roads. Wages could be paid and bills met on time. Even the usual dividend was paid and a. very slight surp1us-one of the factors in maintaining the reputation of Canadian railway secur- ities. was earned! But this was only done, by dei`e1'rin,_; work that mu:-it ultima.tie.l__v be done on cun-ent account. Such economies. cannot long be continued without eating too far into the broad safety margin which the Canadian roads maintain! Nothing but slackened speed of trains and reduced Canadian industrial aafninnnv nnn .-.-..-..1- H? n...,... ..`..:._.... a_-_.,. L, L, .,,. Th-ey have been mcmated throughowt by the desire to assist in the process ` dea!.inn--objecting only when that process might seem to Ihr-\:a.ten sub-Pit solvency and injure them~-and tlwougll .(rhe.rn--(he ulrimpmp inierests of the Canadian public. Nevertheless a 5 per cent. decrease was applied in January. For the first 6 months of 1921 as compared to the first 6 months of .1920 the volume of tramc on the most fort1uw.tely situated (.`-a.n- _ adian road fell 26.72.1181` cent. ! And its revenue on this business, in spite of the higher rates. fell 11.14 per cent. ! MONTREAL, P.Q. In other words, items of export. i as international `ployment rather aggz T traic in the immediate : decline, if coupled with grave effect on even the 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 industries multiply and the density of tratce 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, there- fore. a smaller `fraction of these costs than before. For twenty years prior ' the war. traic was on the increase. I-`or twenty years, therclore. the railways have been adjusting rates downward -quite apart from special` decreases put in effect by the Board of Railway Commissioners. These revisions have been skillfully applied by experienced. practical 'economists---that is. by the Freight Traic experts or` the railways, whosesbusiness it is to know all branches of industry intiiuiately, so that the benefit, oi` these The condigon is interxmtional, not local to Canada. If Can- adian railway rites were a determining factor in making the sale `prices of our export goods, in other words if Canadian prices were higher in international marlaets than the goods of our com- petitors. then railway rates would be contributing to unemploy- ment in Canada, by depressing our sales abroad`. lowering the number of our customers. and the orders coming to our producers. Inside Canada the same is true. Although It is a. very difficult point to prove or disprove. the railways at Canada are sincere -in claiming that, by and large. goods are carried more cheaply in Canada than in the United States. Canada had one blanket reduction of 5 per cent. last January, whereas there is still no decrease, nor immedia;te prospect of a blanket decrease in the United States"! With a large part of the world's population idle, or only partially eicient, owing to wars or disturbed political conditions- with ixwenitors in many parts of the world almost afraid to expose their inventions, organizers afraid to organize, capital hesitating to inv'est--a. corresponding proportion of world production is missing. The total of goods available for the world is less than -nonmal. Those who do not produce-speaking genera11y--cannot buy! Few purchasers-~few sale:=.; few sales~-1ittle emplwoyment. This is the great. world-wide fundamental -oi.` the unemployment situation. (1) by the fact that prices fell last fall after th_e rates were increased instead of rising as the retail trades had prophesied ;