106 TRANSPORTATION 



prosperity of two or three years. They established an unprecedented 

 level of gross earnings from operation in 1900, of $1,500,000,000, as 

 compared with an average of less than $1,200,000,000 for the ten 

 years to 1899, an increase of more than 25 per cent. 



It was frequently asserted in 1900 that this new high level of invest- 

 ment returns was henceforth to be maintained with net earnings and 

 dividend rates commensurate with the increased gross receipts. 

 Even this might be conceded could such results have followed at 

 existing rates. No one denies their right to share in the general sun- 

 shine of good times. But the crux of the question is met when a 

 decline in general business and prosperity gives rise to a claim, not 

 only to all that they have already received, but also to a continuance 

 of these high returns indefinitely. The means to this end lay close 

 at hand. Having demonstrated their power to turn back the long- 

 continued decline of rates upon itself, they now proceeded to hold this 

 high level of net earnings in the face of declining business by again 

 raising the price of their product. That the enactment of the Elkins 

 Amendment helped to make this possible, by prohibiting individual 

 discrimination and departure from established rates, cannot be 

 doubted. To be sure, the great coal-strike, with its largely enhanced 

 cost of operation, followed by demands for high wages on the part of 

 employees, would, without such increases in freight rates, have made 

 a considerable cut in net earnings. This, together with a cessation of 

 the increase, if not a positive decline in gross earnings, would un- 

 doubtedly have brought returns down with the general stagnation and 

 fall of profits in other lines of business. 



On the other hand, something was surely to be expected from the 

 enormous outlays made during the fat years for permanent improve- 

 ments. These ought to have helped to maintain net returns, even 

 in time of stress. In this case both public and investors have been 

 somewhat disappointed. Yet the character of many of these im- 

 provements, rightly considered, was not aimed primarily at a reduc- 

 tion of operation cost at all. This point seems to have been largely 

 lost sight of. Many of them, improvement of terminals especially, 

 will never have as much effect upon earnings as upon the monopoly 

 control of the field. Every new station, every freight yard in large 

 cities, every grade-crossing abolished, every tunnel completed, makes 

 the possibility of effective competition more remote. The fact that 

 railway returns have not yielded save inconsiderably until January, 

 1904, means the establishment of a new ratio for the country at large 

 between transportation charges and the price of commodities, or at 

 any rate it denotes an elasticity between the two which inures 

 greatly to the advantage of the carriers at this time. 



Who is to determine this question? At this present time more 

 millions of dollars would be involved and more people affected than 



