Freight Rates and Regionalism

Abstract

The freight rate structure is the price list at which railways sell their services. It is distinguished from the pricing systems of businesses other than public utilities by the degree of its differentiation or discrimination. Freight tolls are not based on cost except in a general way but on value of service. The carriers charge low rates on raw materials and basic commodities, the products of farm, forest, mine, and sea which will not stand higher rates and still move in volume, and they collect relatively heavier tolls on manufactured articles and general merchandise which are better able to bear such tolls. This differentiated pricing arrangement was devised to enlarge railway revenue by encouraging the movement of freight, the widening of market opportunities, and the settlement of the country. Though calculated chiefly to meet the financial requirements of the railways, the system aided business and advanced national interests. During the last twenty years, however, the conditions of transportation have so altered that a complete re-examination of the entire pricing system of railways is now required.The need for this re-examination can be seen most clearly in terms of the historical development of the Canadian freight rate structure. During the period 1885 to 1915 railways benefited from improved technological efficiency, rapid growth in the volume of their traffic, and increasing density per mile of line. The gains from these changes went chiefly toward generous dividends on Canadian Pacific stock and capital re-investment in railway property. In addition, some important reductions in rates were granted. For the most part, these did not take the form of scaling down substantially all rates but of cutting the tolls on basic commodities and the rates to various sections of the Dominion.