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very profitable going concerns hold their tongues about their profits till they are ready to sell out to a joint-stock company. It is not the morality of stock watering to which our observer will address himself, but rather the numerous disguises to which it gives occasion, and the disastrous mistakes which it invites and promotes. Millions of dollars have been invested on foreign account in American railroads under conditions which excited the amazement and mirth of the native investor. During one period of great "inflation," it seemed as if a liberal infusion of water rather increased than diminished the value of shares which were unloaded on Europe.

To determine with any thing like precision what relation nominal capital bears to capital actually, honestly, and economically invested in a concern is perhaps too seri ous an undertaking for the ordinary investor. Life is not long enough, nor opportunities for searching investigation sufficiently accessible, to render such exhaustive research feasible. But, in a superficial survey of American railroads, many instances occur of so striking and unmistakable significance, that very cursory observation may suffice to prevent the more serious class of mistakes. If a railroad company, which has honestly expended (say) $25,000,000 and has a road worth (say) $30,000,000 to-day, expects to provide for an indebtedness of (say) $50,000,000 or $60,000,000, paying a fair rate of interest, (say) 41%, it can only do so on the assumption that it does now earn, and will continue hereafter to earn, some 9% on capital really invested. The signs of the times distinctly tend to show that such a result is improbable in the last degree. Great as have been the benefits conferred on the public by the constructors of railroads, the public, which they have served well and in the face of immense risks, will not

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pay them at any thing like the rate of 9% or 10% for the capital which they have invested and the services which they perform. If the public will not permanently pay interest on "water," the investor will do wisely to take this circumstance into account. As it may properly be asked, what indications in this direction are afforded by the railroad situation of to-day, the answer is not far to seek. Amongst other leading facts, may be mentioned the drift of State legislation; the institution and expressed views of Railroad Commissioners; the tendency of the people to regard railroad charters as benefits conferred on constructing companies, rather than as unfortunate bargains on the part of the grantees; and the tendency of the courts to push beyond its legitimate limits the regulative power of State Legislatures and of Congress.

CHAPTER VII.

PARALLEL LINES.

THE Occasional practice of building new lines roughly parallel and in unduly close proximity to existing and successful old lines will possibly attract our enquirer's notice, if only because it throws light on the value and incidents of American State charters. The language of a great number of subsisting State charters is satisfactory, and there is no doubt about the validity either of the compulsory powers conferred thereby, or of the rights acquired thereunder by contracting parties. But it is possible to read and interpret them in the light rather of English parliamentary practice than of the procedure and environment of American State Legislatures, and such a course would certainly lead to misconception.

As everybody knows, a company applying to Parlia ment for an act to construct its railway must prove the preamble of its bill; or, in short, make out a case sufficient, in the opinion of the Committees, to justify the grant of compulsory powers. Parliament distinctly objects to permit interference with the rights of private property, unless the existence of a public need be proved to its satisfaction; not merely or mainly because certain forms of competition may be unnecessary or superfluous, but on the reasonable grounds that the rights of private owners of property ought not to be lightly interfered with, in default of a public need, and for the mere purpose of

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helping a knot of speculators to make money. It follows that, if an act be obtained authorizing the construction of a railway through any given district in England, and the enterprise is usefully and successfully conducted, it would be futile, in the last degree, for a new combination to apply to Parliament for power to build a railway alongside of it. Such new combination could not prove the existence of a real public need; it would break down in proving the preamble of its bill. But, in the case of American enterprises, we have to deal with a different set of local conditions and, as a corollary, with a different mode of legislative procedure. In America, outside of the members of an old and successful railroad corporation, there is scarcely such a thing as an opponent to the construction of a new railroad. Property-owners of every description welcome its advent. The trader, because it gives additional facilities for the transportation of the produce which he handles. The land-owner, because it multiplies indefinitely the value of the balance of his land. The professional man or casual resident, because it economizes his wear and tear in covering the long distances incident to his life. The right of way can often be obtained for the asking, without compensation, or at the most a very trifling compensation in cases where disturbance amounts to positive inconvenience. In thinly populated districts the location of a station near particular hamlets or large farms is so eagerly desired that the free grant of a substantial number of acres is frequently offered. Townships or even hamlets on the line of a projected railroad are generally willing to subscribe something towards its construction. Members of Legislatures have no inducement to oppose the wishes of their constituents. Practical shrewdness convinces all the natives

that they have every thing to gain, and nothing to lose by the construction in their State of a new railroad. Money will be freely spent during the period of construction, and will be absorbed by local circles. If the enterprise is successful, the whole neighbourhood will be benefitted, and the taxable property of the State will be increased. If it fails or is abandoned in a half-finished condition, the unfortunate constructing company cannot carry away bridges or tunnels in its pocket. The wreck will hereafter be bought up cheaply, and utilized by some local combination. It follows that a State Legislature has no inducement to insist that a company applying for a charter shall prove the preamble of its bill in the technical English sense of the term. If, therefore, a new combination at any time desires to "parallel" an old and subsisting railroad, there has heretofore existed no serious obstacle to the execution of its project, except such as may be found to exist in the financial risks and difficulties inherent in every such enterprise. It is unnecessary here to particularize the results of recent experiments in this direction. It is plain however that, to justify so bold a a game, a new combination must hold a very strong hand; and it needs a good deal of judgment to appraise relative strength to a nicety. The new combination may possess large means; but it may also turn out that the old and successful road against which the effort is directed is stronger still. If, for instance, the old company's profits are so large and unvarying as to justify a large expenditure in order to compete for a slice of its income, it is very possibly strong enough to starve the new undertaking. Even granting, for argument's sake, that the rivalry of the new organization is very formidable, and it feels sure of eventually compelling the absorption of its new

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