Concept Protested

It is Franklin Roosevelt's "conviction that the South presents right now the nation's No. 1 economic problem--the nation's problem, not merely the South's." It is the conviction of eight Southern Governors that the chief barrier to the South's economic improvement is a system of freight-rate disparities which favor the North. Last week, before an Interstate Commerce Commission examiner in Buffalo, N. Y., the second battle in their campaign to remove these disparities came to an end. In Birmingham, Ala., three months ago, the South presented its side of the complex controversy; in Buffalo, the North had the floor. ICC will now ponder whose victory would be best for the U. S. as a whole.

Concept. As railroads twined themselves across the U. S. during the last century, they engaged in a series of costly freight-rate wars. There was no Interstate Commerce Commission to settle the wrangle, so the roads set up three territories and arranged rate schedules in each. Western territory was everywhere west of the Mississippi; Southern, everywhere east of the Mississippi and south of the Ohio and Potomac Rivers; Official, everywhere east of the Mississippi and north of the Ohio and Potomac. In each territory the rates were fixed on the time-honored basis of traffic density. As an agricultural area the Southern territory had less freight density than the North, hence the roads set higher freight rates for the South.*

Then industrialization began to snowball in the South. In 1914, eight leading Southern cities had an estimated industrial production of $418,017,000; last year this figure had more than tripled under the influx of such industries as textiles and wood pulp, moving from the North to the South to take advantage of lower costs and nearness to raw materials.

To spur this industrialization, Governors of nine southeastern States (Mississippi, Louisiana, Kentucky, Florida, Tennessee, North Carolina, South Carolina, Georgia and Alabama) year ago formed a "conference." At the top of their program they put equalization of the freight disparities.

Protest. Under the chairmanship of Governor Bibb Graves of Alabama, the Conference (minus Kentucky, which withdrew because it suffers least from the disparities by its location, has a competitive advantage over the "deep South") visited President Roosevelt, carried on an extensive advertising campaign, developed a mass of data which they laid before ICC at Birmingham to prove that Southern industries suffer from the disparities in rates. At the Buffalo hearings, which began fortnight ago, Bibb Graves was on hand to publicize the South's position but not to testify. That privilege was reserved for the North, and Governor Herbert Lehman of New York promptly took advantage of it to claim that the South has gained substantially more than it has suffered. Said he:

"This movement to the South from the North has been a matter of serious concern to New York. Our Department of Labor reports that from 1919 to 1933 the number of textile establishments in this State fell from 12,834 to 7,806 and the number of wage earners from 343,000 to 222,000. New York's proportion of the total production of the country fell in this period, while that of North Carolina, South Carolina and Georgia increased materially. . . . The citizens of New York cannot remain purchasers of the products of industry, either in the South or in the North, unless their earning power is continued."

This was too tactful to suit shrewd Parker McCollester, counsel for the North. So he had Governor M. Clifford Townsend of Indiana put his finger on the one point the South is most anxious to avoid publicizing--its low wage scales. Every time a Northerner approached this subject in the hearings, dignified Judge Edgar Watkins of Atlanta, counsel for the South, jumped up to protest, each time being sustained by ICC Examiner G. Heard Mattingly. When Governor Townsend thundered that Indiana manufacturers were being undersold by Southern competitors as the "result of lower wage scales paid by Southern manufacturers, " Examiner Mattingly warned him not to pursue the point. Undaunted, Governor Townsend adroitly switched to talk of "more adequately paid Indiana workers." This drew a radio retort from Bibb Graves: "The actual facts are that responsible businesses of the South are paying comparable wages to those paid in the North."*

Unimpressed by Governor Graves's assertion, the parade of Northern Governors continued to hammer home the wage point. Governor Robert E. Quinn of Rhode Island claimed that lower wages and taxes largely explained his State's loss of "70% of its active cotton spindles in the ten years preceding 1936." Governor George D. Aiken of Vermont complained that low-cost Southern quarries already were selling in the New England market, grumbled that his State's quarries would be unable to exist with "any additional economic handicaps." Connecticut's benign old Wilbur Cross told Examiner Mattingly: "The South has God-given aids which even the ICC cannot match."

The railroads themselves have been keeping mum. If the South gets lower freight rates, its competitive advantage over the North will be so great that Northern industry (and thus freight volume) may dwindle drastically; on the other hand, the rise in Southern volume should compensate. Trying to figure out this one presents a technical problem of giddy proportions. Last week the Southern roads finally made up their minds. In the first statement of their position, Chairman Joseph G. Kerr of the Southern Carriers' Association announced that in the case of some Southern products, but by no means all, "We are convinced that Southern shippers . . . have made a showing which justifies and requires the establishment of rates from the South to Official territory on a level either the same or approximately the same as the level within Official territory."

*Present rates for carrying cotton goods: 1) from Gadsden, Ala. to Chicago (670 miles) $1 per 100 lb., from Utica, N. Y. to Chicago (694 miles) 89-c-; 2) from Hattiesburg, Miss, to Chicago (814 miles) $1.06, from Lewiston, Me. to Detroit (813 miles) 96-c-; 3) from Knoxville, Tenn. to Indianapolis (377 miles) 78-c-, from Syracuse, N. Y. to Detroit (378 miles) 67-c-. *In a study of eight industries published four months ago, the National Industrial Conference Board found that wage scales in the South are substantially below the East and West even with lower living costs taken into consideration. According to the study, the average Southern cotton mill worker gets a weekly wage of $15.52, compared to $20.34 in the East. Living costs in the East were found to be only 5.8% higher than the South, while average weekly earnings ranged from 15.7% higher in the printing industry to 45.3% higher in the gas industry.

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