Evening star., 1934-07-22
EFFECTS Of HIGHER
FREIGHT CHARGES
ON TRADE FEARED
Hamilton Institute Warns
Approval Would Prove
Recovery Setback.
Special Dispatch to The Star.

NEW YORK, July 21.-If the Inter-
state Commerce Commission grants
the recent request of the Association
of Railway Executives for a 10 per
cent increase In freight rates much of
the progress made during the last
year toward the proper adjustment of
freight rates will be nullified says the
Alexander Hamilton Institute.
Such an increase" says the insti-
tute, will not only retard business
recovery, but will be a powerful factor
in causing setback, especially in
view of other unfavorable factors,
such as the drought, heavy taxation
and high building costs, which fea-
ture the present situation.
Despite the readjustment which
has lately been taking place, present
freight rates are still too high to per-
NIT the full recovery of business. This
may be seen by comparing freight
rates with the general level Of COM
modify prices.
Compared With 1926.
"In making this comparison, the
year 1926 provides a reasonably salts
factory base because active business
and good showing by the railroads
in that year afford proof that a
proper relationship then existed be-
tween freight rates and commodity
prices. Freight rates at the present
time are 9.4 per cent lower than in
1926. The commodity price average,
on the other hand, is 26.7 per cent
lower than in 1926. In other words,
current freight rates are 23.6 per cent
too high to permit the volume of
business needed to represent full re-
covery.
IF freight rates are increased 10
per cent they will be 36 per cent too
high from the standpoint of the COM
modify price level. While the dis
parity will not be as great as early
in 1888, the period before freight rates
had shown all of the downward ad-
iustment and before commodity prices
had staged the recent recovery, the
disparity will be much greater than
it is at the present time, when busi-
ness conditions are still far from
favorable.
Lower Volume Forecast.
"If the 10 per cent increase in
freight rates is approved the prospect
is that the volume of freight traffic
will decline to such an extent that
the railroads will not improve their
present condition, which is an ex-
tremely serious one because of the rise
in the cost of operation. which was
already beyond their means. The
only result of higher freight rates will
thus be the depressing Of business
activity The only solution of the
railroad problem is sufficient re-
duction in operating costs to permit
the railroads to charge rates which
business can afford to pay.
The Government, however, in ap-
proving the restoration of predepreS-
sion wage rates, in enacting the PEN
sion law and in backing a fantastic
increase in coal miners wage rates,
has prevented for the time being this
solution of the railroad problem. The
curious part of it is that the Govern
ment, in taking this action to in
crease costs, has apparently done it
on the assumption that there would
be no consequent increase in freight
rates. In fact. the Government ap-
parently assumed that, despite in
creased costs, freight rates could be
reduced. This is indicated by the
fact that the Government has re-
Gently let it be known that it recog-
nizes the need for lower freight rates
in order to stimulate business ac-
tivity."