Government regulation of railway rates; a study of the experience of the United States, Germany, France, Austria-Hungary, Russia, and Australia

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Preface

Tms book presents the conclusions forced upon the author by a painstaking study of the railway question extending over some twelve years. That study began with an inquiry into the results of State industrial ventures in Australasia, which he took up with a strong bias in favor of State intervention in industry. As many of the most impressive lessons to be learned from the industrial experiments of the Australasian States are connected with their management of railways, the author was naturally led to make comparisons with the railways of other countries, over which the various governments have exercised some measure of control. The net result has been the disclosure of such overwhelming proofs of the evils of State direction of industry, or interference with its natural course, that he has become firmly convinced of the unwisdom of government regulation of railways or their rates.

The book appears at the present time because of the possibility that Congress, influenced by the disconteijt that exists in some sections of the country because of the friction necessarily incident to the transaction of the complicated business of transporta-

vu viii PREFACE

tion, may be led to enact ill-considered laws granting dangerously enlarged power to the Interstate Commerce Commission. In the discussion of this radical departure from the regime of individualism and industrial freedom under which the United States has attained its crowning position in manufacture and commerce, too little attention has been paid to the lessons that might be learned from the experience of nations which have adopted, in greater or less degree, a policy of government control of transportation.

It seems imperative, therefore, that attention be called to the effect of such government control abroad, to the part which the railroads have played in the industrial development of this country, and particularly to the attitude of the Commission upon questions of railroad practice which are of fundamental importance in the shaping of our industrial future. A fair consideration of these facts and of the conditions under which the railroads must operate to secure their greatest efficiency compels the conclusion that, whatever evils now exist, none of them are at all commensurate with the harm which must result from bestowing the power to fix railway rates upon the Interstate Commerce Commission.

Under these conditions this book is published before the author has been able to carry out his plans for securing additional information, for bringing all statistics down to date and for a more careful ar-

PREFACE ix

rangement of the materials already at hand. Further delay in publication might have made the book more complete in detail and more readable, but would not have modified the conclusions. The usefulness of the book must, however, depend far less upon form than substance ; and the author hopes that the facts here presented may be of service in the present controversy.

The author desires to make acknowledgment of indebtedness to The Railway Age for permission to republish the chapters dealing with the experience of Austria-Hungary, Russia and Australia, which appeared originally as part of a series of articles in that journal between July lo and October 9, 1903, and to The Railroad Gazette for permission to include, in much extended form, an article on ** Rate Making by Government," which was published in its issue of May 12, 1905.

Contents

PAGE

Introduction xvii

Police measures are required — not government-made rates. The railways our greatest promoters of trade. Why the Supreme Court has overruled the Commission.

Part I

GERMANY, FRANCE, AUSTRIA-HUNGARY, THE DAN- UBIAN PRINCIPALITIES, RUSSIA AND VICTORIA AND NEW SOUTH WALES, AUSTRALIA

Chapter I

The Conflict of Local Interests . . . . . 3 The inherent defect of distance tariffs. Sectional interests and grain rates. The conflict over sugar rates. The arrested development of the iron and steel industry. Localization of trade and industry.

Chapter II

Local and Personal Discrimination .... 34 The Rhine supplants the railway. The Elbe conquers the railway. Stettin versus Hamburg. The Oder relieves Silesia. Waterways gain upon the railways. Industrial Germany dependent on the waterways. Discrimination against points not on waterways. Bremen loses the petroleum trade. Mannheim becomes a great trade centre. Government control concentrates trade and population. Discrimi;iation in fevor of large shippers. Water traflic means personal discrimination.

xi xii CONTENTS

Chapter III Pack

RAiLWi^Y Revenue and Technical Efficiency . . 69 Politics and railway revenue. The government versus the people. The inefficiency of the railways. The railway* as mere feeders to waterways. Political versus commercial rate-making. Cost of transportation not reduced. Government control means distance tariff.

CHAPTER IV TiiK Recent Canal Hills 93

Railways contribute little to industrial growth. Demand for cheaper transportation to be met by new canals. Reappearance of sectional conflicts. Transportation questions and party politics. The canal question and customs duties. Legislative rate-making politically disastrous. Berlin to remain more remote from the Rhine than from New York. River and canal transportation not cheaper than rail.

CHAPTER V Khance 123

(government control results in inelastic rates. Waterways gain on railways. River and canal traffic burden the taxpayer.

Chapter VI

AUHTRIA-HUNGARV AND THE DANUBIAN PROVINCES . . I33

Prussia refuses to promote transcontinental traffic. Austrian practice liberalized by competition of private companies. Hungary makes railway rates a tariff barrier. Vain efforts of Germany to reach eastern markets by rail. National jealousies prevent railway traffic with the East. Cost to the Rumanian farmer of deficient railway service. Failure to develop the Carpathian oil trade. Hungarian waterways vainly compete with American railways. Farm-

CONTENTS xiii

PAGB

ers and consumers suffer from lack of progressive railways. Traffic which invites cooperation of European states in railway development.

Chapter VII

Sectional issues appear in Russian railway management. Development of agriculture in eastern Russia prevented. Prohibitive rates on Siberian wheat. Need of American railway rate practices. Proof that Siberia would respond to the stimulus of low railway rates. Rapid adjustment to new conditions in the United States. Government regulation drives traffic to the waterways. The producer's interest demands that the railways supersede the waterways.

Chapter VIII

Trade rivalries among the colonies. Competition of the ports threatened to defeat federation. Tapering rates concentrate trade and population on the coast. Decentralization encouraged by the basing-point system in the United States. The economy of the basing-point system.

Part II The United States Chapter I

Rise of the western farmer. Industrial readjustment aided by the railways. Western farm products conquer European markets. The industrial East dependent on the agricultural West.

xiv CONTENTS

CHAPTER II

PACK

The Protest against the Growing Pains of Progress 216 Eastern farmers demand the distance tariff on western farm produce. New York City protests against the rise of Philadelphia and Baltimore. New York City protests against the rise of interior jobbing centres. New York State demands the distance tariiT against the West. Competition of Atlantic ports reduces railway rates. State commissions regulate railways to protect state industries. Railways regulate rates to promote freedom in trade.

CHAPTER III

Thb Workings op Competition 242

Protests against the development of Duluth. The Chicago railways fight for Chicago. The rise of the Gulf ports. The competition for the markets promotes railway cfBciency. Factors controlling the farm price of grain. The Interstate Commerce Commission versus the western farmers. Unsound economic reasoning of the Commission. New Orleans demands the distance tariiT on cotton. Texas seeks indirectly to regulate interstate commerce. The United States contrasted with Germany. The United States escapes Germany^s unhappy experience. American politics not unlike German.

CHAPTER IV

The Adjustment of Railway Rates . . . .280 Nice adjustment of American farm prices to Liverpool prices. Competition of markets in the cattle business. Traffic associations regulate competition. The basing-point system at the South. The Interstate Commerce Commission versus the interior jobbing points. The economy of the basing-point system. The interdependence of railway rates. Charging what the traffic will bear. Struggle of the Atlantic seaboard and the central West for trade with southeastern states. The West illustrates

CONTENTS XV

PAGB

the complexity of the problem. Chicago and St. Louis versus the Pacific coast. " Natural rights " to trade.

CHAPTER V

The Decisions of the Interstate Commerce Commission— Export and Import Rates . . . .319

New York City versus the western former. Characteristic attitude of the Commission. The Commission and the Russian bureaucracy on common ground. The Commission versus Philadelphia, Baltimore and New Orleans. The Supreme Court overrules the Commission. Congress did not intend to throttle trade. The Commission's order in effect a law of wide import. How the Gulf ports are being built up. The Commission versus the western farmer. "Theories of social progress" versus conditions and facts.

CHAPTER VI

The Decisions of the Interstate Commerce Commission (continued) — The Long-and-short-haul Clause 359

The Commission ignores the spirit of the law, to follow

the letter. The "folly" of making perplexing problems

for the Commission. The doctrine that distance must

not be annihilated. The carriers are the best judges of

rates. When competition justifies a lower rate on the

longer haul.

CHAPTER VII

The Decisions of the Interstate Commerce Commission (continued) — The Doctrine that no Place may be deprived of the Advantages accruing to IT BY Virtue of its Geographical Position . . 380

The Commission tries to preserve monopolies due to location. Group rates build up the largest creamery in the world. Group rates extended to southern truck farmers. Group rates in the Northwest condemned by the Commission. The Commission discriminates against trans-Mississippi grain.

xtI contents

chapter viii

TttK Dia^monn of tiik Interstate Commerce Commisumn (r;o«cM/»)Kf)) — Pandora's Box .... 397

K«ktive prosperity regulated by a distance tariff. The UiUrnent^ of local Joalounies. Opposition to the westward ir«ml of Industry. "Reasons "for discrimination by the Commission against Michigan salt. The menace to trade implied in riigulatlon of competition. The distance tariff v0rMt4M the basing-point system in transcontinental traffic. The ceritral West demands distance tariff for southern trade. Assumption of dispensing power by the Commission. Regulation by men, not by law.

CHAPTER X HUMMAHV AHt) CONCLUSION 449

The problem. Prussia paralyzes the railways. The governments of Europe refuse to promote interstate commerce. Russia paralyzes the Siberian Railway. Australians lesson. Government-made rates concentrate trade and promote discrimination. Government-made rates must be machine-made. Discrimination the secret of efficiency of American railways. The Supreme Courtis doctrine of railway rates. The carriers best qualified to adjust railway rates. Unjust rates not numerous. Existing unjust rates not made in bad faith. Power to condemn a rate is sufficient. Prompt relief attainable under present law. Real nature of the demand for power. The demand for amendment of long-and-short-haul clause. The power to fix a minimum rate. Government-made rates would restrict competition and trade. The significance of Boston and Albany versus Boston and Lowell.

Index 473

Introduction

The problem of the public regulation of railway rates is threefold. It involves: first, the question of personal discriminations by means of secret departures from the published rates; secondly, the question of the reasonableness of rates per se; and, lastly, the question of the relative reasonableness of rates. Lack of space compels the dismissal of the first and second questions with a few brief statements.

As to personal discrimination, it is clear that to have the Federal Government, or its agent, the Interstate Commerce Commission, exercise the power to make railway rates, would in no way prevent secret rebates. The railways would find it no more difficult to depart secretly from rates made by the Government, or its agent, than they have found it to depart secretly from rates made by themselves. On the other hand, the railway companies would often be under much greater pressure to depart from the rates made by the Government than they would be to depart from those made by themselves ; for it is the verdict of all experience that Governments will not, and cannot, make railway rates that will meet the needs of expanding trade and industry. Some

XVll xviii RAILWAY RATES

astounding chapters from that experience will be found in the following pages.

The second problem, that of the reasonableness of rates per se, has all but disappeared in the United States. The Annual Report for 1898 of the Interstate Commerce Commission contains the statement : ^*It is true, as often asserted, that comparatively few of our railway rates are unreasonable in and of themselves— that is, without reference to other charges made by the same carrier, or to those of other carriers. . . . The cases are exceedingly rare in which unreasonableness has been found merely from the amount of the rate itself as laid upon the particular traffic and the distance it was carried." In March, 1898, the Chairman of the Interstate Commerce Commission testified before the Senate Committee on Interstate Commerce that the question of excessive railroad charges — "that is to say, railroad charges which in and of themselves are extortionate — is pretty much an obsolete question." It is true that a great deal has been made of the increases in railway freight charges made by the railway companies in 1900 and the subsequent years; and it has been alleged that the increase in the average receipts per ton-mile of freight carried, from 0.724 cent in 1899 to 0.757 c^^t ^ 1902, and to 0.763 cent in 1903, compels the conclusion that there is danger lest the recent consolidations of railways result in extortionate charges. President Hadley, of Yale University,

INTRODUCTION xix

after considering the evidence, expressed himself upon this point as follows:* "It is, I think, clear that the tendency for creating artificial monopolies in railroad business (as distinct from that inevitable monopoly which is due to the needs of concentrated service) has not been so great as in many other lines of industry during the last decade ; and that railroad monopoly should, under these circumstances, not be treated as a thing repugnant to general business usage, but as a part of the industrial system of the country. ... I believe also that there has been far less of extortionate profit in connection with railroad monopoly than has been incident to most other kinds of industrial combination. While a figure of $560,000,000 of net earnings for 1902 or of $590,000,000 for 1903 looks large when taken by itself, it must be remembered that these earnings represent an income on an mvestment of more than $io,ooo,cxx),ooo of capital.f And it must be remembered that, as against these two good years,

* Boston Evening Transcript^ April I, 1905; reprinted in /^^an'^j^ before the Committee on Interstate Commerce^ United States Senate, May 9, 1905.

t In a footnote Mr. Hadley adds : ** The nominal figure of capital stock and bonded debt for the 206,000 miles of railroad in the United States is about jj( 1 3,000,000,000. Very considerable parts of these stocks and bonds are, however, represented by unissued securities held in the treasuries of companies, which would probably reduce the figure of outstanding capitalization to a point between ^^ 11,000,000,000 and ^^ 12,000,000,000. How much of this last-named amount is 'water' is a mi^tter of opinion, on which it will be impossible to arrive at a definite result. But taking the railroads of the United States as we see them, I am confident that it would be quite out of the question to duplicate them for an average of ^50,000 a mile ; and this figure applied to the whole system would represent a legitimate cost of at least ^^10,300,000,000."

XX RAILWAY RATES

where the roads have earned 5.5 per cent, there was a whole series of bad years from 1893 ^ 1898, when they were earning only 3.5 per cent; and that these profits represent only the apparent net earnings — not the sum actually paid out in interest and dividends, which is considerably smaller."

"It seems also clear that the increase in average rates is apparent only and not real. If the price of goods carried and wages of railroad laborers and the cost of materials of railroad construction and operation have increased from 10 to 40 per cent, an increase of apparent charge of 5 per cent on the part of the railroads is virtually a tremendous and gratifying decrease. ..." In other words, Mr. Hadley found that, as a whole, the increases made in 1900 and the subsequent years come clearly within the statement made in the Annual Report, for 1903, of the Interstate Commerce Commission: "When reductions in railway rates have been made on account of commercial depression, it is difficult to see why corresponding advances may not properly be made with the return of business prosperity."

This preliminary discussion, then, may be summarized in the statements that the evil of personal Police Measures discriminations by means of secret reare required-^ bates calls for such police regulations not Government' ^g are Contained in the so-called Elkins

made Rates i i r i • t i

law, and not for the exercise by the Government of the power to make rates; and that

INTRODUCTION xxi

there neither has been, nor is now, any such charging of extortionate rates as would warrant the Government in assuming the power to prescribe rates.

Let us turn, then, to our subject proper — the question whether the Government should exercise the power to prescribe railway rates, for the purpose of guaranteeing the relative reasonableness of the rates made by the railways leading from rival producing and distributing centres to common markets and to rival markets. To this question the answer of all experience is : Every effective effort to regulate railway rates in general will arrest the decline of rates, by producing a dead-lock of conflicting sectional interests, will prevent the railways from developing a volume of traffic sufficiently large to justify the maintenance or the building of railways of the highest attainable efficiency, will check the development of the resources of the country and will demoralize the politics of the country.

It may be objected that we have had in this country much regulation of railway rates, by State Commissions as well as by a Federal Commission, and that none of these evil results have appeared. The reply is that the Constitution of the United States and the Supreme Court of the United States have thus far protected us from what would have become disastrous regulation by State legislatures. State railroad commissions and the Interstate Commerce Commission. Very nearly every State legislature xxii RAILWAY RATES

and State railroad commission that has pursued an aggressive poKcy has proceeded all but exclusively on these two considerations : that rates must be adjusted on the basis of the distance tariflf, and that the trade and industry of its State must be protected against competition from the trade and industry of other States. That the results have not been so disastrous as to become apparent to all, is due to the fact that the Federal Constitution limits the activity of State legislatures and State commissions to intra-State traffic. The Interstate Commerce Commission has condenmed nearly every one of the rate practices by which the railways have knit our vast territory into the most compact trading body in the world and have forced the development of our resources, until our country has become to Europe a source of wonder and despair.

In Continental Europe the regulation of railway rates by public authority has reduced the rail- The Railways way manager largely to a man who our Greatest Pro- sits in his office and orders his meters of Trade subordinates to run trains back and forth. In America the absence of restriction upon the railway manager — beyond that imposed by the common law — has allowed the American railway manager to become the most powerful single factor in our national life for the discovery and the development of the resources of our coimtry, and the pro-

INTRODUCTION xxiii

motion of trade and industry. To promote the settlement of vast stretches of unoccupied lands, and to find ever new resources to develop within the territory already occupied, has for half a century been the main business of the American railway manager. The imagination displayed by the American railway manager in discovering potentialities of industry and trade, and in converting those potentialities into actualities, has been equal to the highest flights of imagination of the great inventors and scientists ; while the boldness with which he has sought to realize his "visions" has rivalled that of the great soldiers and statesmen. And this American railway manager, who, though holding no public office, has been a builder of empires, the Interstate Commerce Commission would confine to the mechanical task of running trains back and forth for the purpose of carrying such freight as can be moved under a system of railway rates that takes no cognizance of "commercial considerations." For his guidance it would set up the monstrous doctrine that to every producer and trader must be conserved the advantages "accruing to him by virtue of his geographical position"— in other words, the doctrine that no producer or trader may be relieved of the disability under which he labored by virtue of his geographical position in the days before the railroad had annihilated distance.

The Supreme Court of the United States, however,

XXiv RAILWAY RATES

construing the Act to Regulate Commerce in ac- Why the Supreme cordance "with the genius of our in- Court has (n'er- stitutions," has held that that act was ruled the Com- enacted "to promote and facilitate

mission j. i. i^ ji j^

commerce, not to hamper or destroy it/' and therefore has overruled the Interstate Commerce Commission, time and again, on questions of law, as well as on questions of fact. The Interstate Commerce Commission has construed the Act to Regulate Commerce, and has weighed the evidence on which have turned questions of fact, not in accordance with the established law of this country, or with the spirit of its institutions, but in accordance with what, in its Annual Reports to the Senate and the House of Representatives, it has been pleased to call "theories of social progress." For these "theories of social progress** the Supreme Court could find no warrant either in the letter of the law or in the spirit of our institutions- Therefore it has overruled the Interstate Commerce Conmiission on questions of law. as well as on questions of fact : and therefore, also, it has not hesitated to add its emphatic disappro>^l of the public policy underh-ing ''the theories of social progress'* which the Interstate Commerce Commission had sought to make into the law of our countrw bv assuminsr that Consjess had conferred upon it the legislative pwwer to make railway rates — that is. the power not only to judge the facts in accordance with the estaUished law, but also to

INTRODUCTION XXV

make and to change that law in accordance with such "theories of social progress" as it has evolved from time to time.

The construction which the Supreme Court of the United States has put upon the Act to Regulate Commerce is that, " subject to the two leading prohibitions that their charges shall not be unjust or unreasonable, and that they shall not unjustly discriminate so as to give undue preference or disadvantage to persons or traffic similarly circumstanced, the act to regulate commerce leaves common carriers, as they were at the common law, free to make special rates looking to the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce and of their own situation and relation to it, and generally to manage their important interests upon the same principles which are regarded as sound, and are generally adopted, in other trades and pursuits. The carriers are better qualified to adjust such matters than any court or board of public administration; and, within the limitations suggested, it is safe and wise to leave to their traffic managers the adjusting of dissimilar circumstances and conditions to their business."

"The last sentence in this extract is objected to by the Commission's counsel, as declaring that the determination of the extent to which discrimination is justified by circumstances and conditions should be left to the carriers. If so read, we should not be xxvi RAILWAY RATES

ready to adopt or approve such a position. But -we understand the statement, read in the connection in which it occurs, to mean only that, when once a substantial dissimilarity of circumstances and conditions has been made to appear, the carriers are, from the nature of the question, better fitted to adjust their rates to suit such dissimilarity of circumstances and conditions than courts or commissions; and when we consider the difficulty, the practical impossibility of a court or a commission taking into view the various and continually changing facts that bear upon the question, and intelligently regulating rates and charges accordingly, the observation objected to is manifestly just. But it does not mean that the action of the carriers, in fixing and adjusting the rates, in such instances, is not subject to revision by the Commission and the courts, when it is charged that such action has resulted in rates unjust or unreasonable, or in unjust discriminations and preferences."*

It is the purpose of this book to set forth the facts that have led the author to the conclusion that the Government can regulate railway rates in such manner as to conserve and promote the public welfare only in so far as it shall regulate these rates in the spirit of the foregoing quotation from the decision of the Supreme Court of the United States, in

♦ United States Reports, Vol. i68, Interstate Commerce Commission v. Alabama Midland Railway,

INTRODUCTION xxvii

Interstate Commerce Commission v. Alabama Midland Railway Co. For the purpose of regulating the railway rates in that spirit, it is not necessary that the Government, either in its own person or in the person of its agent, the Interstate Commerce Commission, should exercise the power to fix a railway rate or railway rates.

PART I

GERMANY, FRANCE, AUSTRIA-HUNGARY, THE DANUBIAN PRINCIPALITIES, RUS- SIA AND VICTORIA AND NEW SOUTH WALES, AUSTRALIA

PART I

GERMANY, FRANCE, AUSTRIA-HUNGARY, THE DANUBIAN PRINCIPALITIES, RUS- SIA AND VICTORIA AND NEW SOUTH WALES, AUSTRALIA

Chapter I

One of the principal reasons that led the Prussian Diet, in 1879, to accept the Government's proposal to enter upon the policy of acquiring by purchase or by lease the private railways situated in Prussian territory, was public dissatisfaction with the discriminations in rates which the railways made in favor of what were called competitive points. Very likely German public opinion underestimated the part played by water transportation in the development of competitive points and exaggerated the part played by the railways. However that may be, it was generally believed that the public ownership and management of the railways, supplemented by the uniform classification and the common scheme of charges adopted two years before by all German railways (both state and private), would afford a way out of the evil, as it was regarded, of local discrimination.

The scheme of charges adopted in 1877 imposed a terminal charge for loading and unloading, combined with a haulage charge of a fixed sum per ton-mile. For example, upon the Prussian State railways, articles in the "special tariff III" class, raw materials mainly, paid (and still pay) a terminal charge plus a haulage charge of 0.9 cent per ton-mile for distances up to 100 kilometres, or 62.5 miles, and 0.761 cent for every mile beyond that limit.

The difficulty with schemes of this kind is to adjust properly the unit for the haulage charge. If that unit is fixed high enough to make the short-distance The Inherent De- traffic profitable to the railway, it feci of Distance will in all likelihood be so high as '^"^^'ff^ to check the development of long-

distance traffic. If, on the other hand, the unit is made low enough to fit the requirements of the long-distance traffic, it will probably be so low as to render the short-distance traffic unremunerative. France and some other countries have met this difficulty with partial success by lowering the unit per ton-mile as the distance increases.* But these tapering rates were not adopted when the Prussian and other German railways established their common scheme of charges, and to-day in Prussia their introduction is opposed by two powerful forces. One of these is

* Tlius* on the French ^ai/msy dm X^rd, the duiiges per ton per kilometre we: —

KnxvMmtKs Ckntoos

I to 25 4 aoi to 250 2 the Prussian Government's fear of temporary or permanent loss of revenue; the other, the jealousy of the sectional interests and trade interests that are concerned about the preservation of the established course of trade and industry, and are anxious to prevent that increase of competition between rival producing and distributing centres which would inevitably come about with the development of long-distance traffic.

The nature and effect of this conflict of local interests is illustrated by the history of railway rates on grain, on beet sugar and on iron ores. In 1888

the agricultural interests of eastern

Sectional Interests ^^ . ^-a.- j ^.i^ /^ a.

and Grain Rates P^ussia petitioned the Government

to reduce by 66 per cent the haulage charges on grain, which had remained unchanged, since 1877, at 1.557 cents per ton-mile.* The petition was denied, on the ground that the reduction would constitute an inequitable departure from the scheme of uniform rates, since it would benefit the landholders of eastern Prussia at the expense of those of central and western Prussia, whose markets would thus be opened to eastern grain. t In 1891, nevertheless, extended crop failures induced the Prussian Government to lower the rates on grain, in the interest of the mining and

* The German pfennig-per-metric-ton-kilometre statistics are converted into cent -per-short- ton-mile statistics by multiplication by 0.346. t H. Braesicke : Die Reform der Eisenbahnguetertarife, factory population of the Rhine Provinces. The haulage charges were lowered to i .038 cents per ton-mile for that part of the haul comprised between 125 miles and 187 miles, and to 0.692 cent for that part of the haul which exceeded 187 miles. The amount of grain shipped upward of 125 miles thereupon rose in proportion to the total amount shipped, from 10 per cent in 1890-91 to 13.4 per cent in 1891-92, and to 20 per cent in 1892-93. For flour the corresponding figures were 17 per cent in 1890-91, 20 per cent in 1891-92 and 28 per cent in 1892-93.* The Government of Saxony (a state situated halfway between the grain-growing regions of eastern Prussia and the Rhine Provinces of Prussia) immediately protested that the farmers and millers of Saxony had a natural right to supply the Saxon demand for grain and flour, and that they, therefore, should not be exposed to competition from Prussian farmers and millers. The states of Bavaria, Wuertemberg and Baden also lodged similar complaints on behalf of their farmers and millers. The millers of Duisburg, Mannheim and other points on the Rhine said that at the risk of their capital they had built up a great business in importing grain from the United States, Argentina and Russia and converting it into flour for the mming and factory population of Rhenish Prussia; that they had a natural right to the trade of Rhenish