excessive floating debt, an intending investor is put on his enquiry. It may well happen that these new acquisitions represent money which under a sound administration should have been appropriated to repairs.

No more wasteful or dangerous method, from the investor's point of view, can be adopted than to allow the track and equipment of a going concern to run down, and to excuse or disguise such a result by a showy statement of new acquisitions or collateral assets. It is a method which points to receivership and insolvency as truly as the needle points to the pole.

Our enquirer will probably come to the conclusion that the drift of the age is in favour of exclusive attention to the particular matter in hand, and he will be inclined to prefer those forms of administration which do not go, to any large extent, outside of their proper business.

CHAPTER XIV.

RAILROAD COMMISSIONS.

By far the most important change in the status of railroad property which has taken place in recent years turns on the adoption of the Railroad Commission. The bearing on railroad property of this institution must be sought, not so much in the principle of a Railroad Commission— which is probably right,-as in the remarkable variation in point of degree, which in different States characterizes the powers conferred on the Commissioners. For instance, between the advisory method successfully adopted by Massachusetts and the somewhat peremptory exercise of power which prevails in Georgia there is a great gulf fixed. Whichever form may be preferred by the intending investor, it is plainly worth his while to bear in mind that the jurisdiction of a Railroad Commission is a very elastic thing; and it will be prudent for him to give some attention to its principles, its incidents and its possibilities. The issues raised by it are important in principle and far-reaching in practical result; e. g., Is a railroad corporation which has built a road at its own expense simply a purveyor of transportation whose status is defined by formal legislation, or is it an agent of the State and a trustee for the people? To whom does the increment of value properly belong? Does the admitted power of the State to assume ownership of railroads on payment of compensation involve the right to assume

their virtual management without giving either compensation or indemnity against losses resulting from defective or unfortunate State intervention? If the State undertakes to reduce the earning power of a railroad and to annex a portion of the increment of value, can it fairly prescribe the expenditure by corporations of additional capital and the improvement of existing accommodations, outside the requirements of public safety? Is "“regulation" substantially a corrective process, or is it broad enough in its application to railroads to supersede a charter?

The mode in which these questions are practically answered by State legislation is a matter of grave importance to foreign stockholders. If they are held to be traders or purveyors of transportation protected by valid contracts, they can take care of themselves by reasonable vigilance. But, if the earning power of their railroads and the amount of their dividends are liable to be indefinitely reduced or restricted by the State, while the entire responsibility for losses is left on their shoulders, then their position is not without serious difficulties.

The assertion by a State of a right to fix rates and limit dividends by ex post facto legislation, without regard to existing charters and without compensation or indemnity, is, in fact, the barely disguised assertion of a right to confiscate* to a greater or less extent the increment of value legitimately accruing to a going concern. In connection with a railroad the increment of value cannot with any semblance of propriety be described as an "unearned" increment. In a vast number of instances an American railroad may be said to create the settlement of population which is destined to furnish passenBinghampton Bridge Case, 3 Wal. 51.

*

gers and to produce freight. Reflex activities are of course stimulated, and contribute in their turn to the development of traffic; but in many instances the railroad itself primarily constitutes the determining condition of settlement in a particular place, and of the transportation of passengers and merchandise through a particular channel. Subject to the restraints of equitable regulation, the right of a constructing company to the increasing benefit of the business, which it builds up by its outlay and its skill, is no less real than that of the founder of a purely commercial or professional business to the increasing benefit of his capital or ability. If it has undertaken extraordinary risks in consideration of the special protection of a charter, statutory rights are added to its natural equities.

To transfer in whole or in part the increment of value of a railroad by ex post facto legislation, without regard to existing charters and without giving equivalent of any kind, while decrement is allowed to take care of itself, is to say the least of it a strong measure. It constitutes a new departure in respect of the rights and incidents of ownership. It involves pecuniary incidents of great immediate value, and suggests remoter political inferences in respect of the definition and rights of property, which it is impossible to regard lightly.

The return of comparative prosperity in railroad enterprise, which ensued after the severe depression incident to the great panic of 1873, brought with it conditions calculated to excite possibly not alarm, but certainly vigilance.

A formidable indictment, including counts in respect of discrimination and extortion, was brought against transportation companies at the instance of the people; and

very drastic treatment was recommended, with an emphasis too cordial to admit of misapprehension. So long as this movement was confined to occasional complaints conveyed through the press or to isolated action taken in the courts, railroad managers regarded it lightly. But as soon as it was seriously taken in hand by several State Legislatures, the subject assumed a graver aspect.

The agitation of a popular grievance in a State Legislature has, ere now, been known to result in legislation altogether more sweeping than the champions of the grievance originally desired or deserved. Excited feeling is often an indispensable agent in accelerating the correction of abuses; but it is a dangerous basis for hasty legislation touching rights of property. It is too often unrestrained by accurate knowledge and unchastened by fair discussion; and is therefore frequently uncritical and sometimes unjust. Searching criticism and a calm review of relative rights are conditions essential to sound and permanent legislation. In the absence of these elements, it sometimes happens that, by the hasty adoption of unsound principles, mischief is done in a single Session which it needs the labour of many years to repair. No doubt the "heroic" mode of treatment has its merits, when applied by a master-mind under very special conditions. But experience shows that, in cases involving the nice adjustment of complex and conflicting interests in property, it is apt to be somewhat heavy-handed. The laws of trade and the traditions of commercial good faith recognize a close relation between burthens and privileges, risks and profits. Special legislation, which purports to modify this relation to an appreciable extent, should at least be deliberate and well-considered. Again, the laws of supply and demand require special care and insight for their correct interpre