means of bonds placed in Europe. The securities issued by many of these railroads are not sufficiently sound or attractive to be absorbed by American investors. That is a point of some importance, and very pertinent to the matter in hand, because the money invested in these securities must, as between Europe and America, be considered to be finally sunk. It is scarcely necessary to point out that investments, which are permanently located on American soil but which America will not re-purchase from Europe, are beyond all others the most susceptible to the influences of rash legislation. It is true that many railroad loans negotiated in Europe on the security of faith rather than of works have, by reason of the rapid settlement and the extraordinary internal resources of particular districts, grown steadily in value. But it must not be forgotten that conditions of a specially favourable character attended this growth. The increment of value-which the constructors of a railroad must be taken to have relied on as an equivalent for extraordinary risks-was allowed to enure in its integrity to the benefit of the constructing companies. No legislation was proposed tending to reduce the earning power of a railroad, or to limit its possible dividends. On the contrary, the elements of growth and of recuperative power were fostered by an almost absolute freedom from government interference.

It is assumed then by the present writer that European investors have a large stake in America to protect; and that, owing to political and social complications in the European outlook, a good deal of capital, which is timid and sensitive to the action of violent influences, will probably seek investment in this Country in the course of the next ten years. If there be truth in this view, there would seem to be some show of reason in selecting the

present time for a brief reconsideration of some salient points in the railroad situation. To invest such brief reconsideration with a modest value, it is by no means necessary that the points to which attention is directed should be new or original. It is exactly because wellworn maxims have become too familiar that they are so often forgotten or overlooked. Familiarity has bred contempt, and thus useful indications are very often dismissed as hopelessly stale. But a truism does not cease

to be true because it is trite.

In making any forecast about the future, it is wise—if not indispensable-to remember ancient landmarks, and from time to time to make a comparative survey of the ground, taking note of changed conditions and new elements in the situation. The environment of many railroads is materially changed since the European investor first put his money into them. There are available to-day data relating to the settlement and resources of many districts, which some years ago were obscure or unascertained. To-day there has grown up a rank crop of legislation affecting railroad property, which formerly was never dreamed of. State and Federal courts have made decisions on various branches of the subject which were not anticipated. Popular sentiment has undergone great change; and the drift of feeling, in comparatively prosperous days, is less cordial to the investor than in days of extreme adversity, when ready money was scarce and its possession was regarded as a considerable merit in the possessor. There is, in short, abundant room for vigilance and a large sphere for judgment and discretion. If that be so, the lessons of the past may perhaps to some extent, be utilized for the guidance of the future; and it does not follow that nothing is valuable which is not fresh.

The investor wants rather what is true than what is new. A substantially correct statement of data, which are today available for his purposes, is likely to be more useful to him than original theories or ingenious prophecy. Accordingly, for the sake of convenience, it is proposed to jot down, under separate headings, a few notes on several points in the railroad situation, which appear to have been forgotten or overlooked, and which, under the rapidly changing conditions of the present age, may possibly give an uninitiated enquirer some useful hints.

Let us suppose that we have to deal with an intending investor of moderate means, who has very slight acquaintance with the conditions of the American market. Knowledge of details and inferences derivable therefrom, which are ancient history to the expert, may be to him obscure or unknown. It is proposed to make some notes on the following subjects in their order:

1. Spheres of Investment.

2. Fair and Free Trade.

3. Control.

4. Combination. 5. Pools.

6. Water.

7. Parallel Lines.

8. Reorganization.

9. Proxies.

10. Funding.

II. Receivers' Certificates.

12. Corners.

13. Publicity.

14. Railroad Commissions.

15. Vested Interests.

16. State Control.

17. Geographical Direction of Railroads.

18. Some Important Decisions.

19. Short Appendix. Report of Railroad Commissions,

etc.

In any intelligent endeavour to appraise at its true value the merits of any particular sphere of investment, the institutions of any given country are at least as important as its intrinsic resources. If the habits of the people, its social machinery, legislative procedure and jurisprudence be unsettled or unsatisfactory, the value of its internal resources is, from the investor's point of view, indefinitely depreciated and discounted. If there is much that is defective in American institutions, there is also much that is re-assuring. Of course, divergences of opinion on so large a subject must, of necessity, be broad and frequent. But there are data easily accessible to everybody which may be profitably used in the formation of an approximately correct judgment. The following observations are addressed to this view of the subject.

CHAPTER II.

FAIR AND FREE TRADE.

A GOOD deal has of late years been said by the uncompromising champions of free trade about the gross absurdity of the rejection of their doctrines by the American people. No doubt, on both sides of this question, many good arguments might be urged, which it is not the purpose of the present notes to set forth. It may however be said shortly that, in the writer's opinion, it has been a substantial advantage to England that America has not entered into commercial competition with her on the basis of free trade. As a matter of course, every nation which competes in the great commercial race is handicapped by a variety of conditions, which the political economist can formulate with some approach to correctness. Notable among these conditions are internal resources, area, soil and climate, the energy of the people, their law-abiding instincts, and their willingness to give to superior skill and energy the compensation to which it is entitled. Whatever superiority England may have possessed in past times, in respect of the character and habits of its working population, it can scarcely be stated-with any semblance of confidence that this superiority will be permanent. In past times the classes in England who excelled in skill and endurance produced a larger and more valuable output in their respective spheres of industry than any other people in the world.