Chapter IX: Section VIII: The Interest of Consumers in Rates

Of the causes which have prevented progress in the public discussion of rates, chief has been the fact that the subject has been regarded too exclusively from the point of view of a limited number of traders or producers. The general interests of the country have been overlooked, or it has been assumed that they are identical with those of particular traders. Once the question is looked at from several sides--as it appears to those who buy as well as to those who sell, and to producers in different places--many of the complaints made against the companies as to the existing system of fixing rates are seen to be unfounded.

Those who buy commodities are interested in getting them to the various markets cheaply and in abundance. They wish the charge for transport to be small--they wish it to be small even if the distance from which the goods are conveyed be great, because their sources of supply are thereby increased. To the consumer the ideally perfect state of things would be a tariff for the conveyance of merchandise based on the same principle as the Penny Post; commodities would be conveyed at a low price, and producers over an immense area would be able to send them to market. To the consumer it would be in every way desirable that all disadvantages of distance or “geographical advantages” should disappear. Accordingly, as has been before stated, plans have been brought forward for making uniform rates for the same class of goods within a large area, or within certain regions or zones. The attainment of this is impracticable--the distance between various parts of the same country cannot be ignored, as in the case of carrying letters or transmitting telegrams. Consumers may fairly desire that the cost of transporting articles from a great distance may be lowered so as to permit of the influx of goods from remote parts. But unfortunately they cannot altogether efface distance. The next best thing is that the cost of transport shall not increase _pro rata_ with the distance. This reasonable desire railway companies have sought to satisfy, and with what results is well known.

London, for instance, formerly drew its chief supplies of food from its immediate neighbourhoods. The extensive market gardens which existed, especially in the eastern and western suburbs, sent their produce to town by heavy road wagons, and to this day they continue to do so. But as population increased, and the demand for food became greater, the facilities, both in regard to conveyance and charges, afforded by the railway companies, enabled farmers, graziers, and market gardeners in distant parts of the kingdom to compete with those in the immediate neighbourhood of London, to the obvious advantage of the consumer. In this way fat cattle from Norfolk, meat from Scotland and Devonshire, fish from Scotland, Ireland, and the East and West Coast of England, broccoli and new potatoes from the Scilly Islands, Penzance and the Channel Islands, store potatoes from Lincolnshire and Scotland, and other articles of food are conveyed by the railway companies at rates which, although not proportionate to those charged for shorter distances, are beneficial to traders and their customers. Meat is carried from Yorkshire, about 189 miles, at 55s. per ton; from Aberdeen, 516 miles, at 67s. 6d.; and from Stromness, in Orkney, 776 miles, at 90s. per ton. Potatoes from Yorkshire are carried at 15s.; from Sunderland, 269 miles, 18s. 4d.; and from Aberdeen, 30s. per ton. The effect is to open fresh markets to producers throughout the country, and to supply the wants of an ever increasing population at such reasonable prices as would not otherwise be possible.

“To move is practically to produce,” at least it often is so. The consumer desires that commodities and materials should be conveyed from places where they are produced cheaply or are abundant, to places where they are more in demand; that coal, for instance, should go to districts where there is ore without fuel available for smelting; that timber, or excellent building stone, should be conveyed to great cities; and that the small value of many raw materials, rendering it impossible for them to bear more than the lowest rate of carriage, should not prevent their being conveyed. This demand, also, the railway companies have satisfied by charging rates not always exactly varying with the distance. Writing of the marvellous effects of railways, the late Mr. Newmarch, in his edition of “Tooke’s History of Prices,” says: “Among their greatest achievements are the opening up of new fields of supply, and the deepening of old channels of consumption. They have brought into profitable use mines, forests, quarries, arable and grazing districts, fisheries, harbours, and rivers, previously inaccessible. The produce arising from these various and numerous sources is so much additional wealth placed at the command of the community.”[28] Had equal mileage rates been universally enforced many of those new sources of supply would still be useless; the articles would not bear the cost of transport.

[28] Vol. 5, p. 376.

At any given time in a particular market there is a certain price which an article such as milk, wheat, or iron will fetch. Assuming that price to be 30s., the cost of production 20s., the rate of conveyance 3d. a mile, A, B, C, D, to be four places, each 10 miles distant from each other on the same railway, and each capable of producing an “output” of 500 tons. The article can be economically conveyed no further than (10 x 12) / 3 = 40 miles, that is from D. In such circumstances consumers will have an available supply of 2,000 tons. Producers at A, 10 miles distant, will pay for transport 2s. 6d.; those at B, 5s., and so on. Those at A, B, and C, 10, 20, 30 miles distant, will possess a considerable advantage over producers at D, the place 40 miles distant. This superiority would be retained by those who have long leases; but in course of time, by the action of competition, rents would rise, and the advantage would tend to pass to the owners of the land at A, B and C. What would be the result, if a railway company, desirous of enlarging its traffic, established lower rates (say 2d. a mile) to E and F, places on the same line, also 10 miles apart, and equally capable of producing an “output” of 500 tons? The particular article might now be conveyed from F, 60 miles distant. The consumer would benefit; his available supply would now be 3,000 tons. In practice this might be an understatement of the gain to him, for the result might be to give access to districts in which the conditions of production were altogether easier and cheaper. Producers at A, B and C, might temporarily--the landowners at these points might permanently--suffer; but the public and other landowners would gain. They would gain indirectly and directly--directly in the increased volume of supply, indirectly by the increase of traffic enabling the company to keep down its general scale of charges; and manufacturers and landowners at points E and F would benefit. Such an illustration may serve to show how the interests of some landowners and certain traders may sometimes be on one side, and those of consumers, other landowners, the bulk of traders, and the railway companies on the other.[29]

[29] NOTE.--The evidence of Sir Thomas Farrer, given in 1881, is very deserving of consideration. In answer to the question, “Now turning to the question of inequality of charges, of which the Committee have had many complaints--in fact, the bulk of the complaints have been with regard to the inequality of charges from one place to another--in your opinion, is this inequality productive of injury to the trade of the country?” He replies, “As far as I can judge, it is not.” He is asked:--“I suppose you would say that while on the one hand one portion of the country may be a loser, another portion of the country is a gainer, and that the one may be set against the other?”--He answers:--“I am not quite certain that I should say that one portion of the country is a loser, but I am quite certain that another portion is a gainer.”

Again, in reply to question: “Then looking at the question also from the point of view of the public, the inland towns which are charged higher than towns on the sea-coast are merely paying the natural penalty of being inland towns, and not having an equally good geographical position?”--He states, “Quite so; on the whole I should think the inland towns were proportionately better off than before the railways existed, because, before the railways existed, sea-side towns had the water traffic to themselves, but now the railways afford a kind of competition with that traffic, and bring a great many places into communication with one another which could not have been brought into communication before.”

In reply to the question, “On the whole, do you think the country gains by these rival routes to the outports?” He says, “I do distinctly.” And again, in answer to the question, “According to your view, then, as far as the public is concerned, it is of no consequence that a railway company should so destroy the natural advantages of one place?” He replies:--“I think it is one purpose of the railway companies to annihilate distance as far as they can; I would certainly encourage the railway companies in bringing Shetland fish to the London market, even although the effect of it were to lower the price of the Grimsby fish.” Further, in reply to the question, “As far as that is concerned, you would allow the Railway Companies to make any differential charges they may please for or against other localities?” He replies:--“I would certainly not compel them to charge upon fish from Thurso and fish from Grimsby in proportion to the distances of those two places. I have been accustomed, as a free trader, to consider the interest of the consumer very largely; but it seems to me that this claim for regular mileage has proceeded upon the interest of one special class of producers; but it is very much to the interest of the consumer as well as to one class of producers, that the people at a distance should be able to send to the consuming market.”