rates, that they made their rates as much lower than the railroad as they needed to get the traffic. Senator PERKINS. Before doing so they made contracts with the sugar producers of the Hawaiian Islands? Prof. JOHNSON. Of that I have no definite knowledge. Senator PERKINS. That is an open secret. Prof. JOHNSON. The other chain in the line of reasoning is that the Panama rates are practically the same as the Hawaiian rates, and the inference is that the Panama rates followed the Tehuantepec rates. Senator BRISTOW. The President of the American-Hawaiian Line testified so, you say, but they fixed their rates low enough to get the business-that is, that much lower than the transcontinental railroad rates. Prof. JOHNSON. Yes. Senator BRISTOW. Why do you think, Prof. Johnson, the transcontinental railway pool, which consisted of five railroads when it was in existence, paid the Panama Railroad Co. approximately a million dollars a year in order that it might have the privilege of fixing its rates by way of Panama ? Prof. JOHNSON. I think you have answered it, Senator, in your last statement, that the railroad controlled that line in order to control the rates by Panama. Senator BRISTOW. Why did they think it was worth approximately a million dollars a year in order to control the rates by way of Panama? Prof. JOHNSON. Competition at that time would probably have interfered seriously with the schedule of rail rates. Senator BRISTOW. You think that competition now would not affect the rates? Prof. JOHNSON. I think the present situation is different from what it was at that time. Senator BRISTOW. You think that all rates are based on what the traffic will bear, and that the cost of the traffic has nothing to do with the fixing of the rates? Prof. JOHNSON. You might infer that from my very brief statement now, but your statement goes a little further than I went, Senator. May I read a short paragraph from this statement? The CHAIRMAN. Yes. Prof. JOHNSON (reading): Transportation charges are fixed primarily with reference to what the shipper can afford to pay what the traffic will bear-and only secondarily with regard to the cost of the service. Carriers, whether by rail or by water, can not disregard the costs of the service, but they make their rates such as they think shippers can afford to pay. That, I think, states exactly the way I view it. Senator BRISTOW. Then, if I follow your reasoning, you do not believe that anything that increases the cost of transportation is likely to increase the rate? Prof. JOHNSON. Not unless the increased cost compels an increase in the existing rates. It may be that the existing rates fixed upon what the traffic will bear will not be sufficient to cover the past costs plus the additional cost which is imposed on the traffic. In that case rates will have to be raised, and some traffic might cease to move, but unless the increased cost brought the cost up to the actual rate that was being charged on the basis of what the shipper can afford to pay the increase in cost will not bring about an increase in rates. Senator BRISTOW. A railroad man told me that the cost of moving a ton of freight from Kansas City to San Francisco-that is, by Panama after the canal was opened-would be less than 60 per cent of the cost of moving that ton of freight to San Francisco by rail; that the moving of the tonnage over the mountains and across the plainsI am speaking of the cost of moving, and not the rate at all-would be from 40 to 50 per cent more than by water to San Francisco. If your theory is correct that reduced cost of handling the traffic of the country will be of no benefit to the general public. Prof. JOHNSON. It can be made of benefit to the general public. Prof. JOHNSON. By regulating the water rate. Senator BRISTOw. You think that regulation of the water rates is necessary because combinations have destroyed water competition? That is your theory? Prof. JOHNSON. For that reason, and also the reason that discriminations are just as iniquitous when the transportation is done by water as when the transportation is done by rail. For the purpose of keeping discriminations within desirable limits, as well as keeping the rates, per se, reasonable, I believe we are going to be forced to apply to the carriers by water the same principles of regulation that we are applying with success to the carriers by rail. Senator BRISTOW. Do you think that this provision in the canal act which forbids these trusts and combinations from using the canal will be effective? Prof. JOHNSON. That is a big question, Senator. Senator BRISTOW. If that was effective, it would free it from combinations outside of the railroads as well as the railway combinations, would it not-railway ships? Prof. JOHNSON. I can not see how the steamship business can be conducted except by conferences of the steamship lines. My reasoning is somewhat this way: Most of the traffic between the two seaboards will be handled by the steamship lines. It is desirable that it should be line traffic, because the lines provide a better service than the individual ship. When there are several steamship lines operating between common termini the rates must be the same for the reason that the rates by the several rail lines between common termini, not only in the interest of the carrier, but in the interest of the manufacturers, must be the same. Otherwise producers are not put upon a common footing, and business can only be carried on under serious difficulties. It is essential in the public interest that the rates between common termini should be common. Those common rates will be worked out by conferences of steamship lines, all of which points to the inevitable conclusion that we must make those rates a matter of public knowledge and public scrutiny. Senator BRISTOW. What per cent of the water-borne traffic is carried by the line vessels, and what per cent by the individual vessels and the tramp? Prof. JOHNSON. I presented that fully for the six years ending in 1911 in the report to the President. Senator BRISTOW. I have forgotten it. Do you remember the figures? Prof. JOHNSON. While you were out of the room, Senator, I read a brief statement to the effect that in 1911 about one-eighth of the total freight carried by water between the two seaboards of the United States was transported by individual vessels, chartered or owned by the shippers, and by the regular lines seven-eighths of the tonnage. Senator BRISTOW. But you must remember that is very misleading, Professor, because the tramp has had no facilities for its traffic, either at Tehuantepec or Panama. The tramp could not get its vessel at the wharves at either place. The only fair comparison is to take the commerce of the open seas. Prof. JOHNSON. Dr. Huebner's statement, I believe, leads to the same general conclusion as regards the traffic of the world generally, namely, as traffic becomes larger in volume, and the interchange of commodities more regular, the individual or chartered vessel gives way to established steamship lines, and the trend of traffic is from the so-called tramp vessel to the line. The CHAIRMAN. To the regular service? Prof. JOHNSON. To the regular service. I think that is a general law of commerce. Senator BRISTOW. What I wanted to get at if I could was the fact as to what per cent of the tonnage of water-borne traffic is moved by the line vessel and what per cent is moved by the vessel that does not run on schedule. Prof. JOHNSON. You mean the two seaboards at the present time? Senator BRISTOw. No; not between the two seaboards, because that would be absolutely useless, because the tramp can not operate between the two seaboards except through the Straits of Magellan. They have no facilities whatever for crossing either the Isthmus at Tehuantepec or Panama, I mean the general world commerce. Prof. JOHNSON. Any definite figures that I could quote you would have reference to the figures between the two seaboards. Senator BRISTOW. You can readily see, can you not, with this handicap in both instances that the tramp would have no show in competing? Prof. JOHNSON. I think it may have accounted in part for the very rapid decrease in the tramp business between the two seaboards. Senator BRISTOW. Of course. Prof. JOHNSON. As I pointed out, they actually decreased 50 per cent in the six years ending in 1911. Senator BRISTOW. Of course it is accounted for absolutely that way. Do you know where that information could be obtained? I am anxious to secure it. Prof. JOHNSON. That would not be easy to obtain, Senator. You Would have to investigate the traffic probably by going to the large shippers and large shipping centers, and by making the compilation of the figures from manifests or from records of ship move ments. Senator BRISTOW. I was told by a shipper at Portland, Oreg., that the tramp was the friend of commerce. Prof. JOHNSON. Well, I agree with him-a very good friend, too. Senator BRISTOW. And that the tramp was a regulator of water rates. Senator THOMAS. You mean tramp ships? Senator BRISTOW. Tramp ships, of course. Prof. JOHNSON. Unfortunately I think the second generalization is not correct. Senator BRISTOW. That was his statement, and there ought to be some data, I think. That has been my general information, but I wanted some specific information. Prof. JOHNSON. The investigation of the Committee on Merchant Marine throws some light on that question. Senator BRISTOW. But this comparison has been given out here as to the tramp traffic, and the line traffic between the coasts destroys my confidence in any comparison that might come from that report. Prof. JOHNSON. I regret that very much. Senator BRISTOW. Because it is so manifestly unfair. Prof. JOHNSON. It may be in error, but I do not think it is unfair. Senator BRISTOW. It would certainly be an unfair comparison, would it not? Prof. JOHNSON. If it were in error, it would. Senator BRISTOWw. I just wanted to make another inquiry in regard to your theory that the canal is a commercial proposition. I do not look at it that way myself. The CHAIRMAN. Prof. Johnson has laid stress in your absence upon its advantages and needs for military defense. Did I so understand you, Professor? Prof. JOHNSON. Yes; I think you understood me correctly, I am sure. Senator BRISTOW. I think the canal is worth all it cost as a military proposition. Prof. JOHNSON. I think it is worth much more than it cost. Senator THOMAS. Inasmuch as these long interrogatories have broken into the general force and progress of your statement, I will ask you one or two questions here, and then I will not have to do it at the end of your statement. Suppose we had ships owned by the Government of the United States and used in traffic. Could the public save the whole or any part of the amount of the tolls, if the canal was made free? Prof. JOHNSON. If that were accomplished, it would be as the result of the effective regulation of the rates and services by the establishment of a competing Government line. Senator THOMAS. Would not the establishment of a Government line of vessels engaged in the coastwise traffic very materially affect by way of reduction the rates of transcontinental land traffic, and could we not by that means obtain commercial benefits from building the canal which was the purpose to be subserved in its construction? Prof. JOHNSON. I would not favor a Government line Senator THOMAS. I did not ask you that. Prof. JOHNSON (continuing). For two reasons Senator THOMAS. I would prefer that you answer my question. Prof. JOHNSON. I will answer it in the negative, and then I will give my reasons. Senator THOMAS. Now, you can give your reasons. view about it. I wanted your Prof. JOHNSON. I think experience has already shown that in industrial enterprises generally Government management is more expensive than management under private initiative. I dubt whether the Government could without facing an annual deficit per form the service at rates enough lower than private companies would charge really to force private companies to the lower rates. I am speaking now of the competition between the Government water line. and the private water line. But assuming, Senator, that that could be accomplished, that the Government could by economical management wage a successful warfare against private capital in railroad lines and steamship lines, the question still has to be answered, Is that a wise policy to follow? Are we not in danger of discouraging the investment of capital in transportation lines? Would it not be wiser for the Government to make it attractive for capital to enter the steamship business and the railroad business, subjecting the capital thus entering those businesses to that measure of public regulation that is required to prevent unreasonable discriminations as between places and persons and to prevent the charging of extortionate rates? Senator THOMAS. Do you think that our parcel post is economically wrong? Prof. JOHNSON. No; I have long been in favor of it. Senator THOMAS. If the Government can by the institution of that serve a public purpose, notwithstanding its effect upon capital invested in express companies, would not the larger benefit thus obtained justify instead of condemning the application of the same system to marine coast to coast commerce? Prof. JOHNSON. The establishment of the parcel post was the logical expansion of the mail service, and justified on that basis. I should think that the analogy between the parcels post and the transportation by steamships between the two seaboards would not be close. Senator BRISTOW. How much have the rates been reduced at the Isthmus since the Panama Railroad & Steamship Co. came into the possession of the Government? Prof. JOHNSON. I am sorry to say, Senator, that I have not the rates in mind. Senator BRISTOW. They have been very materially reduced, have they not? Prof. JOHNSON. Of course I could very readily compile those rates from Mr. Drake's office in New York. The CHAIRMAN. Whose office? Prof. JOHNSON. Mr. Drake, the vice president of the Panama Railroad Co. Senator BRISTOW. You know, as a matter of fact, that the rates have been very much reduced, do you not? Prof. JOHNSON. I think they have been reduced. They were repoint where, as you remember, it was thought advisable to raise them in order to discourage traffic. The CHAIRMAN. Professor, you have concluded your narrative, have you? Prof. JOHNSON. I have not quite concluded, unless the committee has finished with me. The CHAIRMAN. We will now take a recess until half-past 2. (Thereupon, at 1.15 o'clock p. m., the committee took a recess until 2.30 o'clock p. m.) |