RAILROAD PROBLEM IX THE UNITED STATES. 291 



the early railroad charters those of New York State, for instance 

 whereby the profits divisible annually were limited to ten per cent ; 

 but this provision, intended to secure shippers against unduly high 

 rates, has been evaded by the process known as stock-watering. To 

 illustrate : The contract for the consolidation of the lines forming the 

 New York Central Railroad was made in 1853, and the ten amounts 

 of capital then fused formed a total of $23,000,000, on which premiums 

 were granted aggregating $8,900,000. In 1868 and 1869 the New 

 York Central and Hudson River Railroad Companies were consoli- 

 dated as a single company, which named its capital at nearly $15,000,- 

 000 more than the capitals of the two lines before union. Of course, 

 more than ten per cent would have to be earned on the inflated figures 

 before the State law would apply, and by that time doubtless a new 

 company would appear to buy the road at a handsome advance on its 

 nominal capital. The critics of stock-watering or of the capitalizing 

 of surplus earnings say that it is in substance exacting money from the 

 people, creating an indebtedness representing the same, and making 

 this the basis for forever asking the public to pay interest upon their 

 money so exacted. These critics would limit the profits of the lucra- 

 tive roads, but, unjustly it would seem, would leave the struggling 

 lines to their fate. 



The railroad companies are told, " You may earn as little as you can, 

 but, if by good fortune and good management you earn more than ten 

 per cent, the State will seize the surplus." Practically, however, the 

 law can not be enforced, as the common rights of sale and purchase 

 can be exercised to evade it. 



In response to the conrplaints against the New York roads, the 

 Assembly in February, 1879, appointed a special committee, with Mr. 

 A. B. Hepburn as chairman, to investigate alleged abuses, propose 

 remedies, and report. The testimony before this committee fully 

 established the truth of the alleged abuses in discrimination. Mr. 

 Goodman, Assistant General Freight Agent of the New York Central 

 Railroad Company, testified that special rates were given to all points 

 almost invariably when asked. About ninety per cent of the business 

 between New York and Syracuse was done at reductions from tariff 

 terms, and about one half the business between New York and other 

 points was done at special rates. Other witnesses proved that flour 

 had been carried from Milwaukee to New York while the tariff rate 

 was thirty-six cents, at the specially reduced price of twenty cents, 

 the maintained rate at the time from Rochester being thirty cents. 

 Rochester is 350 miles from New York, and Milwaukee 1,030 miles. 

 So marked and inconsistent a difference did there exist between local 

 and through freight charges, that Mr. W. W. Mack, of Rochester, 

 could ship edge-tools to New York and thence to Cincinnati via 

 Rochester, and save fourteen cents per hundred ; to St. Louis by the 

 same route, eighteen cents per hundred in each case the goods being 



