FARMERS' INSTITUTES. 317 



will bo the next surprise in their development, or in fact -what will be 

 their future if left unmolested by the law. The fact is that until within 

 a few years the project of railroad economy attracted no attention whatever. 

 Railroads were built, dividends were })aid on the stock, wliicli were received by 

 the stockholders and no questions asked. If railroads were studied, it was 

 purely from a constructive stand-point. The question tliat was raised was, 

 how to build them, and not how to make them pay. With the public in gen- 

 eral, railroads were regarded as a great necessity, and the question with them 

 was, "How can we get a railroad and how much can we afford to pay for 

 one?" The builders of the railroad mainly looked to the probabilities of get- 

 ting their pay. If they were paid, the railroad was a small matter. These 

 considerations were the principle ones raised during what will ever be known 

 as the construction period of railroads in this country. This period began in 

 1830 and practically ended in 1873 (though present appearances seem to 

 indicate that a new era of construction is about to commence). During 

 this whole time (1830-73), the question regarding the future payment of 

 the obligations incurred seems hardly to have been raised. The public 

 had implicit trust in railroads, and bought at some price all the stocks 

 and bonds thrown into the market. So long as stocks and bonds sold, 

 railroad building continued. The panic of 1873 affected railroads the samt) 

 as any enterprise : their stocks and bonds could not be sold. They could not 

 pay their usual dividends or even the interest on their bonds. The affairs 

 of railroad companies were investigated, and dishonesty and irregularity to a 

 surprising extent were discovered. On many of tlie roads that had paid the 

 highest dividends it was found that their income did not actually pay their op- 

 erating expenses. Their dividends were paid by throwing into the market 

 additional stock or bonds and consequently were not in any sense legitimate. 

 Many of the roads were declared bankrupt and either placed into the hands of 

 a receiver or sold in order to meet the obligation incurred by their bonds. The 

 bankrupt roads were still run, and soon the phenomena was presented of ac- 

 tive competition between bankrupt and solvent lines. The bankrupt lines, 

 with reputation gone, with no desire even to earn money, offered rates often 

 below the actual cost of transportation. In order to secure for themselves busi- 

 ness, the solvent lines were obliged to carry at the same rates. The cutting of 

 rates once begun might have been continued indefinitely but for the desire of 

 the solvent roads to keep out of bankruptcy. This excessive competition led 

 to a combination of the different roads. Tliis combination has been repeatedly 

 broken, and as often re-formed on a stronger basis. 



As an illustration of these general statements, it will be interesting to note 

 the growth of competition for the transportation of produce from the west to 

 the east. As it will be impossible to consider the relations between all the 

 various roads from the west to the seaboard, we will notice simply the 

 competing lines from the city of Chicago to the sea. This system of competing 

 lines is perhaps the most important of any on the continent, but it must not 

 be supposed that there are no other similar systems. Nearly every city of 

 importance has two or more roads by means of which produce may be sent to 

 the more important cities. 



The trunk lines composing the Chicago system, with one or two exceptions, 

 do not represent a series of simple railroad lines built, owned and run the 

 entire distance from Chicago to the sea by one company, but on the other 

 hand, each trunk line in this system with one exception is composed of several 



