Carlos Hudson Archive   |   Trotskyist Writers Index  |   ETOL Main Page

Jack Ranger

Railroad Freight Rates Reflect
Fight Between Capitalist Groups

(25 May 1947)

From Labor Action, Vol. 11 No. 21, 26 May 1947, p. 3.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Now that the U.S. Supreme Court has upheld the Class Rate decision of the Interstate Commerce Commission, lowering railroad class rates 10 per cent in the South and West, and raising them 10 per cent in the East, the governors of the eight southern states are voicing rebel yells of victory. Ex-Governor Ellis Arnall of Georgia, that liberal phony who initiated the fight for lower railroad rates in the South, has sprained his arm patting himself on the back.

It can’t do any harm to ventilate this situation with the truth, and here is the straight dope.

Owned by 60 Families

The U.S. is one of the few nations in the world whose railroads are owned by private capitalists instead of by the government. For the past 100 years, U.S. railroads have had one great basic principle of rate-making – to charge all that the traffic will bear. This principle has been disguised and overladen with all sorts of fine-spun theories of rate-making which we haven’t space to examine now. This principle has been modified by several factors. To meet or undermine the competition from water and highway transportation, the railroads will often set a freight rate that actually fails to cover the operating cost. Such are some transcontinental rail rates (aimed at intercoastal steamships) and less-carload rates with pickup and delivery service (aimed at the truckers).

That principle of charging all the traffic will bear is also modified by the fact that the great financiers among America’s 60 Families who own the railroads also often own the industries which ship their materials and products over the railroads.

Example: The Morgan-First National group controls 11 major railroads. But this group also controls Pullman, Inc., General Electric, U.S. Steel Corporation, Kennecott Copper, Phelps Dodge, American Radiator and Standard Sanitary Corporation, Continental Oil, Montgomery Ward, National Biscuit, Philadelphia & Reading Coal & Iron, Baldwin Locomotive, Glen Alden Coal, St. Regis Paper, A.T.&T., International Telephone & Telegraph, Consolidated Gas Co. of N.Y., etc.

Example: The Kuhn, Loeb investment banking house controls five major railroads – Pennsylvania, UP, SP, Milwaukee Road, and Chicago & North Western plus two minor roads, the Katy and the Delaware & Hudson? This firm also controls Western Union.

Example: The Mellon group controls the Virginian Railway, and also controls Gulf Oil, Koppers Co., Aluminum Co. of America, Pittsburgh Coal, Westinghouse Electric, Jones & Laughlin Steel, American Rolling Mill, Crucible Steel, Pittsburgh Plate Glass, United Light & Power, etc.

Back in the 1880’s the American farmers got fed up with being milked by the railroads, set up state railroad commissions to defend themselves, and elected Populists to office on anti-railroad platforms. The railroads, to defend their game, set up the Interstate Commerce Commission and had it granted the monopoly of policing inter-state freight rates. The ICC is essentially a stooge of the railroads. It also regulates domestic water transportation and the truck lines.

(You might ask: How come the truckers let themselves be regulated by a rail-minded body? Well, part of the answer lies in the fact that very many of the big trucklines – far more than ever imagined by even astute trade unionists – are secretly owned by the railroads.)

The railroads are constantly seeking to extend the authority of the ICC over ocean water transportation and air transportation, but the latter know the score too well. U.S. ocean transport is controlled by its own “front,”’ the Maritime Commission, air transportation by the Civil Aeronautics Board.

The Class Rate Case

Because most of the wealth in the country is concentrated in the eastern states, because there the population density is heaviest, there is the center of industry, and there is where other forms of transportation compete sharply with the railroads, freight rates have generally been lower in the East, higher in the South and West.

Ex-Governor Arnall and other southern politicians and industrialists several years ago began agitating for lower freight rates. The ICC held hearings on the matter and in 1945 issued its class rate decision? The railroads tied the decision up until a few days ago when the Supreme Court in its decision upheld the ICC.

Actually, the class rate decision is a hoax upon the South, and no victory at all, and here is why.

There are all sorts of rail freight rates – commodity rates, class rates, exceptions, etc. AND VERY LITTLE TRAFFIC MOVES ON CLASS RATES IN THE SOUTH. For instance, Within the eight southern states, only 1.8 per cent of the traffic moves on the class rates, now reduced by 10 per cent. From the South to the North, only 0.9 per cent of the traffic moves on the reduced class rates. BUT FROM THE NORTH TO THE SOUTH, 12.6 per cent OF THE TRAFFIC MOVES ON THE REDUCED CLASS RATES.

Thus, the class rate decision is a victory for the North, not for the South. As one southern rate expert commented, the class rate case is the biggest hoax on the South since Dr. Cook’s “Discovery” of the north pole.

How could it be otherwise? Northern capital still controls the government. Perhaps when northern capital decentralizes to the point where its holdings in the South and West are as important as its base in the East, rail freight rates will be more equalized.

These basic facts presented here refute Arnall’s claims, of course. But they do more, they. explain certain features of the class rate decision which have been puzzling some shippers for two years, such as why the decision handed out an UNSOLICITED 10 PER CENT INCREASE In class rates to the eastern railroads.

Now it is true that this question of rail freight rates is not a working class issue. It has to do strictly with the quarrel over surplus value between northern capitalists and industrialists, and their southern and western rivals. Nevertheless, I am sure many workers will find of some interest the points raised herein.

Carlos Hudson Archive   |   Trotskyist Writers’ Index  |   ETOL Main Page

Last updated: 19 October 2022