THE FAKMER, THE INVESTOR AND THE RAILWAY. 43 



Possibly $30,000 per mile is less than it would cost to duplicate the railways east of 

 the Ohio, but the most of the mileage being west of that region, where the cost, outside 

 of H few mountain roads, is at :i minimum, the estimate, if erroneous, certainly errs in 

 pUu'ing the cost too high. Moreover, we have a factor of safety in the fact that the n.Tlion, 

 to aiil in building railways, has granted 197,000,000 acres of land, a large part of wh.ch 

 Las passed into the possession of the railway companies, and from which they have 

 realized vast sums, probably more than 5^."00.000.000, to which should be added Slate and 

 municipal aid and individual donations to the amount of $1.50,000,000 to $2)0,000,000. 



Taking no account of the sums loaned the Pacific railways, the people have con- 

 tributed at least $2,000 per mile towards the cost of existing railways, hence we are war- 

 ranted in assuming that $.'>0,000 per mile is I lie maximum sum on which the user should 

 furnish revenue, less such revenue as the corporations derive from rents, interests and 

 dividends, from lands, buildings, railways, slocks or bonds bought or brought into ex- 

 istence by ati expenditure of any part of such 630,000 per mile or the earnings therefrom, 

 such revenue, aside fnim traffic earnings, being now about .f90,000,000 per annum. 



It is claimed that in determining the amount of capital on which the rates of toll 

 shall be based, the people are en til led to no voice, but as the compensation is to be reason- 

 able and the measure of such compensation being the cost of maintaining and operating 

 the railway plus a fair return for the ciipital actually employed, the people are unques- 

 tionably entitled to a voice in determining what such compensation shall be and how it 

 shall be arrived at. and their representatives will find the railways havecost nottoexceed 

 an average of $30,000 per mile, and could be duplicated forenough less to more than ofl'set 

 the enhancement in the value of right of way, depot grounds and terminals. 



Railways well located and mortgaged for 80 per cent, or less of actual cost can dis- 

 pose of three and one-half to four and one-half per cent, bonds at par, but badly located 

 or poorly managed roads often failing to pay interest, we may call live per cent, a fair 

 rate, and on this basis the annual net revenue of roads existing at the close of 1888, from 

 traffic, rents, interest, dividends and all other sources, should not exceed $234,123,000, 

 being $67,408,000 less than the net traffic earnings reported by Poor, and taking the net 

 ■earnings ($405,220,000) as shown by the Inter-State Commission, the excess is $171,097,000 

 wrongfully extorted from the agricultural and other industries in one year. 



This difference in the amount of net earnings arises from the fact that, in Poor's 

 Manual, only traffic earnings are tabulated,* no account being taken of the immense 

 sums railway companies derive from rents of lands, buildings, track and terminals, as 

 well as in the form of dividends on stocks and bonds owned, and the profits from the 

 sale of such securities, all amounting to vast sums and yearly increasing as the railways 

 become consolidated and absorb more and more of existing property; hence Mr. Poor's 

 figures are incomplete and misleading, inasmuch as they fail to convey a correct idea of 

 the total of railway earnings or the amount annually extorted from the user. 



Of the $234,123,000 resulting from a five per cent, revenue on $30, 000 per mile, a very 

 l;irge part, as will hereafter be shown, belongs to the user rather than the investor, while 

 many parallel roads, built for construction profits, are needless, and others so badly 

 located that the traffic will be wholly insufficient to provide revenue, and the owners 

 must, like the owners of badly located buildings, sutler the loss entailed by lack of busi- 

 ness sagacity. Favorably located roads can collect more than five percent.; should they 

 be permitted to do so? Each railway company is a distinct organization, each road a 

 separate instrument and specially conditioned, and it is questionable if the compensation 

 for the capital employed should, in any case, be permitted to exceed the rates fixed upon, 

 from time lo time, us a just return. As interest rates fall, so should returns from railway 

 investments. 



Justice and reason appear to have little part in determining railway rates, the en- 

 vironments being all potent, as in the States where efficient granger lawsf have been re" 

 inforced by a strong and active commission rates are much the lowest, and highest where 



•Pase 4 of the l,nti-oduction of Manual for IS8'J. 



fGranger laws" are the laws enacted in the agricultural .States of the Mississippi Valley for the 

 •r,*>«-oi of railway rates and metliods. 



