THE condition of transportation development in the United States in 1840 is peculiarly instructive in connection with the projects then seriously discussed, and controversies that have agitated the country since that time, relating to the comparative cost on land and water routes of lengthy freight movements, and the sort of discrimination which fixes the charges for them at a much lower rate per ton per mile than the rate imposed on short freight movements.

In 1840 the power to make such distinctions on a scale of considerable national significance was vested chiefly in state governments. The only two lines over which they could be made effectually were the New York canals and the main line of the state of Pennsylvania, both of which were under the management of political officials, controlled, directly or indirectly, by legislatures; and every other railroad or canal then existing that was of sufficient length to engage extensively in through interstate-commerce movements had been assisted by state loans or state stock subscriptions to an extent that would justify absolute control of the general subject of the relations between through and local rates.

It was, therefore, the right and duty of the people and their direct agents to decide what those relations should be. If rates were adjusted on erroneous principles they suffered as taxpayers, because they were the chief financial supporters of all the railways and canals then existing, either by direct outlays, such as those made by New York and Pennsylvania for constructing their state works, or by indirect outlays, such as those made in various other states through subscriptions to stock, or loans of state bonds.

The practical decision generally reached on this question, in 1840 and for some years later, both by the state governments in imposing tolls, and most of the private companies in their combined charges for the equivalent of tolls and freight, was to impose a given rate per ton per mile, without regard to distance. This system had a thorough trial. The idea which found enthusiastic advocates at a later period, that no distinctions of the kind indicated should be made, or more especially none in favor of long movements, was extensively tested, and the results are known. Indeed a number of the prevailing practices and prejudices were in favor of discriminations in behalf of local trade and travel, and if decisions of the United States courts had not severely checked such tendencies it would be difficult to say how far they might have been carried.

A principal effect of this restrictive or discriminating policy was a failure of lengthy lines to serve a leading end of their existence. In other words, there were no extensive through or interstate-freight movements of bulky articles over artificial land or water routes in 1840. The most important channels for such movements were the New York canals, and official reports of their operations in 1840 show that in that year, out of a total movement of 1,417,046 tons, in both directions, the proportion received from other states was 214,456 tons, a little more than one-seventh of the entire movement, and the value of all such receipts, via Buffalo and Oswego, was only $7,877,358. The Pennsylvania main line had failed, most disastrously, to serve as a favorite channel for east-bound through movements of bulky western products. In 1835 the entire movement over the Portage Railroad was only about fifty thousand tons, and although this may have been subsequently increased, the eastbound through-freight movement over that road never reached considerable magnitude. This was partly because the composite character of the Pennsylvania main line, with its changes from canals to railroads, rendered it unable to compete in cost with the cheaper water channels of New York, and partly because the lakes furnished better feeders of traffic than the Ohio river; but there was a comparatively small amount of eastbound through movements on both these lines combined, and the principal advantage, in a national commercial point of view, resulting from the construction of the main line of the Pennsylvania state works, hinged on the fact that it enabled Philadelphia merchants to retain western trade which they would have lost without such aid. On account of the lower latitude in which the Pennsylvania canals were located, they could be opened earlier in the spring, and kept open later in the fall, than the New York canals, and they, therefore, furnished available channels of trade to Philadelphia and other portions of Pennsylvania during some weeks of every season at periods when Now York did not possess similar advantages.

The following instructive and interesting account of the method of conducting the emigration movement to the Mississippi valley during the fourth decade is furnished in Flint's History of the Mississippi Valley, published in 1832:—
"On account of the universality and cheapness of steamboat and canal passage and transport, more than half the whole number of immigrants now arrive in the west by water. This remark applies to nine-tenths of those that come from Europe and the northern states. They thus escape much of the expense, slowness, inconvenience, and danger of the ancient, cumbrous, and tiresome journey in wagons. They no longer experience the former vexations of incessant altercations with landlords, mutual charges of dishonesty, discomfort from new modes of speech and reckoning money, from breaking down carriages, and wearing out horses. . . . Immigrants from Virginia, the two Carolinas, and Georgia still immigrate, after the ancient fashion, in the southern wagon. This is a vehicle almost unknown at the north, strong, comfortable, commodious, containing not only a movable kitchen, but provisions and beds. Drawn by four or six horses, it subserves all the various intentions of house, shelter, and transport, and is, in fact, the southern ship of the forests and prairies. The horses that convey the wagon are large and powerful animals, followed by servants, cattle, sheep, swine, dogs, the whole forming a primitive caravan, not unworthy of ancient days, and the plains of Mamre. The procession moves on with power in its dust, putting to shame and uncomfortable feelings of comparison the northern family with their slight wagon, jaded horses, and subdued though jealous countenances. Their vehicle stops; and they scan the staunch strong southern hulk, with its chimes of bells, its fat black drivers, and its long train of concomitants, until they have swept by.

Perhaps more than half the northern immigrants arrive at present by way of the New York canal and lake Erie. If their destination be the upper waters of the Wabash, they debark at Sandusky, and continue their route without approaching the Ohio. The greater number make their way from the lake to the Ohio, either by the Erie and Ohio or the Dayton canal. From all points, except those west of the Guyandot route and the national road, when they arrive at the Ohio, or its navigable waters, the greater number of the families 'take water.' Emigrants from Pennsylvania will henceforth reach the Ohio on the great Pennsylvania canal, and will 'take water' at Pittsburgh. If bound to Indiana, Illinois, or Missouri, they build or purchase a family boat. Many of these boats are comfortably fitted up, and are neither inconvenient nor unpleasant floating houses. Two or three families sometimes fit up a large boat in partnership, purchase an 'Ohio Pilot,' a book that professes to instruct them on the mysteries of navigating the Ohio; and if the Ohio be moderately high, and the weather pleasant, this voyage, unattended with either difficulty or danger, is ordinarily a trip of pleasure. A number of the wealthier emigrant families take passage in a steamboat."

Recurring to the main topic, of the deplorable lack of extensive through interstate-freight movements over all artificial channels, which was largely due to the fact that no material distinctions were made in toll or freight charges to favor or encourage lengthy movements, it is a notable circumstance that forty-four years before the period under discussion, long before a single mile of railway had been constructed, and when canal improvements were only beginning to attract serious consideration, Robert Fulton, the pioneer of successful steamboat operations, had clearly pointed out the necessity of such distinctions or discriminations.

In a letter be addressed to Thomas Mifflin, Governor of Pennsylvania, in 1796, advocating the construction of a canal between Pittsburgh and Philadelphia, he very forcibly depicted the necessity of lowering the charges per ton per mile on distant movements, and practically constructed for this projected line a freight tariff analogous to those in force during late years on many railway lines, but which few or none of the railway or canal lines existing in 1840 had the wisdom to adopt. In this remarkable letter Mr. Fulton, in describing the system that should be adopted in connection with the management of a canal extending from Philadelphia to Pittsburgh, said:—
"If I proceed with this progressive and creative system till a canal reached Fort Pitt, which, with some bends, I will call 360 miles, the country which the canal would accommodate would widen as it was more remote from Philadelphia. For instance, the man who lived 20 miles from Philadelphia might convey his goods 7 to the canal; the man at 40 miles distance might go 14 or 15 to the canal; at 60 miles, 20 to the canal, and so on, till at the extremity of 360 miles they would probably go 50 on each side to the canal; hence, if I average the whole, such a canal may be said to accommodate a country 360 miles long and 50 miles wide, on which the tonnage (or tolls) must now be regulated.

The man who resides 20 miles from Philadelphia, and 7 from the canal, should he convey a ton of goods by land, it would be worth at least fifteen shillings, as it would employ a man and two horses two days.

Thus the saving would be six shillings, and the tonnage (tolls) should increase to a certain sum on the first hundred miles of canal, keeping much within the limits of land carriage, then decrease as the boating increased, in order to draw the trade of the back country into the canal.

The expense of boating a ton 20 miles will be as follows:—A man, boy, and horse will convey forty tons 20 miles for ten shillings, which is three pence per ton for 20 miles; but to allow for contingencies, say four pence per ton for boating 20 miles, the tonnage and boating on the 360 miles should then be regulated, perhaps, in the following order:—

* This being within the limits of land carriage, the tonnage (tons) must now begin to decrease as the boating is increased.

† If the boats return without back carriage, the expense of boating, which on the 360 miles is six shillings, must be deducted from the tolls, and in proportion on the various parts of the canal.

By this system the country, at the extremity of 360 miles, would deliver goods at Philadelphia for twenty-one shillings and eight pence, which is the same as paid at the distance of one hundred miles, to which the land carriage to the canal must be added. But as such a system would open a market to the remote country, every acre of ground within reach of the canal would be more valuable, and the carriage to the canal must be borne for some years. But as population increased, and the tonnage on the main line became productive, lateral branches would be cut from the canal, and thus further improve the country, the tonnage (or tolls) on such branches being proportioned, as before stated, according to the distance from the city."

Other significant references to this subject were contained in a pamphlet devoted to it, entitled Laws of Trade, and a popular explanation of its contents, published by Charles Ellet, jr., in 1840. He was one of the most distinguished civil engineers of that era. The detailed explanations are so abstruse that it is almost impossible for unprofessional readers to fully comprehend them, or to recognize the force of the statements and arguments presented. One of the leading ideas advanced was that the tax-payers of the states which had made large investments in public works were then suffering pecuniarily, through avoidable diminutions of the revenue of those lines, and that the country at large was not benefited to the extent that was desirable and, possible, on account of a failure to construct toll sheets in accordance with principles which, in some of their most vital features, substantially accord with those enunciated by Fulton in 1796. Mr. Ellet, in defining the most judicious charge on articles of heavy burden and small value, contended that the charge at each point should be "proportional to the ability of the article to sustain." This is only a paraphrase of the expression "what the traffic will bear," and Mr. Ellet approached still nearer to that famous expression by speaking of "the greatest tax for carriage which the commodity will bear." His pamphlet probably had considerable influence in directing the attention of railway managers to the importance of remodeling their tariffs in a way that would encourage and greatly increase lengthy through movements of cheap and bulky freight. He was, perhaps, the first person in the United States to lay down precise rules for the framing of toll sheets and freight charges on internal improvements, and some of his views might be advantageously adopted by those who have since carried the principle of cheapening lengthy movements to excessive and injurious limits.

To promote ease of explanation he adopted a distinction between freight and toll, which makes his remarks applicable to railway lines owned and operated by a given company, as well to state canals or railways, on which boats or cars were furnished by individuals. He said: "I shall designate by freight every expense actually incurred in the carriage of the community, and by toll the clear profit on its transportation; so that if the carrier, or transporting company, charge seven mills per mile for the carriage of one ton of any article, and the cost of repairs and superintendence of the line due to the passage of that ton is three mills per mile, I call the freight on the article one cent per ton per mile, and any charge, exceeding this three mills, which is assessed by the state or company, is what I denominate their toll."

He contended that this toll was improperly and unjustly levied on all American lines in 1840, and gave a number of illustrations of the losses of trade arising from the system of uniform charges per mile. The list of conclusions he reached embraced the following:—

"At the distance of one hundred miles from the mart, in the usual tariffs, a commodity is charged one dollar where it might bear a charge of three, and at three hundred miles it is charged three dollars where it could bear but one."

"The greater the distance the commodity is carried the less should be the toll levied upon it."

"However we depart from the charge which will yield the greatest revenue, there will be an increase or diminution of tonnage, and, of course, always a decrease of revenue. If the departure be an overcharge, the tonnage will be reduced a quantity directly proportional to the value of the overcharge, and the revenue proportional to the square of that departure."

"Where the object is to obtain the greatest possible revenue, it is a general law, susceptible of satisfactory proof, that the charge for toll should not exceed half that charge which would exclude the trade from the line."

"Where the most judicious charge is levied, the tonnage of the line will be one-half of the tonnage which would be obtained if no toll at all were exacted."

"Whatever unnecessary tax is levied on the trade is at least so much deducted from the revenue of the improvement."

In discussing the methods that should be pursued to derive the greatest profit from a given trade in articles of heavy burden and small value, he laid down the following rule:—
"To attain the greatest possible revenue from the trade, under a uniform charge, the profit received from each ton must be equal to the expense of its carriage."

This rule has been disregarded or violated in many modern railway operations, in the direction of undercharges, as persistently as the rules relating to overcharges were violated by managers of the early lines. An immense amount of freight has been carried on railways at rates that yielded no profit whatever over absolute cost of movement. Many causes contributed to such practices, some of the most prominent of which are active rivalries and aggressive railway wars. If Mr. Ellet's rule is even approximately correct, it may suggest advantageous changes in some freight tariffs wherever the desire to secure the greatest possible revenue, which is always strong, is not counteracted by antagonistic requirements.

The systems pertaining to freight charges briefly discussed above, and plans for reducing the cost of railway freight movements, have an important bearing on the railway systems fairly commenced and projected in 1840. There were few problems then more earnestly discussed in engineering, commercial, and speculative circles, than the extent to which railways would probably be able to compete with canals and rivers as freight carriers. The groundwork of extensive practical tests of this question had already been established, by the rapidly advancing chain of railway connections running parallel with the Erie Canal; the commencement of the construction of the New York and Erie Railroad; the earnest advocacy of the completion of lines which would furnish railway connections between the city of New York and Albany, and thus parallel the North river; the near approach of the Reading railroad to the Schuylkill anthracite regions for the purpose of competing with the Schuylkill Canal as a coal carrier; the completion of the Philadelphia, Wilmington and Baltimore which furnished a railway link between Philadelphia and Baltimore and thus presented a choice of routes to shippers who had previously depended exclusively on the natural and artificial water routes connecting the two cities; the completion of a new railway and a now canal by the New Jersey companies connecting Philadelphia and New York; and various other enterprises.

Aside from these works, on which the merits and demerits of each of the respective land-and water-route methods have been tested in thousands of competitive struggles, extending through many years, and characterized by every variety of incident that the ingenuity, inventive genius, and adventurous spirit of a progressive people could suggest, a large proportion of all the railways projected in 1840 and built for some years after that period were vitally affected by the varying aspects of the irrepressible conflict between land and water routes as freight carriers.

The topography of the country created an immense basis of such struggles, in the oceanic boundary of the Atlantic seaboard on the east, the gulf of Mexico on the south, the lakes, St. Lawrence, and New York canals on the north, the Mississippi and its tributaries on the west, and the Appalachian chain which separated the seaboard states from those lying west of its mountain barriers.

Under old systems there were only two great natural outlets—the Mississippi and the St. Lawrence—for the bulk of the products of the interior portions of the United States lying west of the Appalachian chain. All modern American improvements, whether railways or canals, intended to affect the trade of this vast and productive region, have aimed at diverting portions of it to the districts or states which contained the principal part of such improvements.

The entire trade of the country of national significance had tended towards one of the four water systems which in 1840 were the practical boundaries of American development. The trade all went to and from either the Atlantic coast on the east, the gulf on the south, the lakes and the St. Lawrence on the north, or the Mississippi and its tributaries on the west. Therefore, every railway intended to serve anything more than local purposes aimed at a connection with one of these water channels, and the projectors of nearly all lines or combinations of lines which were expected to become parts of a through route of considerable consequence endeavored to establish a link between two or more of the four great water systems.

After such connections were formed, it still remained a question whether extensive links would prove profitable, and a leading factor in this problem was the relative cost of the through-rail movements contemplated and the rival movements that could be made over water routes, or combinations of rail and water routes. There has probably never been in the trade history of the world a contest so complicated as that which has arisen from the protracted struggle between these rival systems. It has not merely been a fight between an elephant and a whale, or between land routes ranged on one side and water routes on the other, but between the two rival routes of the lakes and the Mississippi, or the two whales; between various land routes leading eastward, which might be compared to gigantic elephants, and between combinations of elephants with little whales on one side and combinations of big whales and little elephants on the other. Two of the general tendencies that have prevailed amid many mutations are a steady cheapening of the cost of freight movements and an increase of the relative magnitude of the movement made eastward, parallel with the natural water route of the lakes and the St. Lawrence, as compared with the movement made southward, via the Mississippi.

If methods had not been devised for cheapening rail movements to a marvelous extent, their share in this great struggle would have been comparatively insignificant, but the fact that they were thus cheapened forms one of the most momentous changes in modern industrial history, and one of the cheapening agencies to which attention was first directed was the application of the Fulton and Ellet principles to extensive through-rail movements. Others were furnished by a long line of engineering and mechanical improvements.