to enforce a cost of service theory of rates. And yet they could not possibly say how much of the joint expense of the railway should be assigned to passenger as against freight traffic, nor how much to shoes as against cotton cloth. Indeed, classification contains in itself a theory of rates.

As a consequence, we find the treatment of railway rates, difficult in itself, rendered more difficult by the psychological conditions of the public mind. Are the shippers to be allowed the chief consideration? Why not hear also those districts that need railway transportation, those that need more and swifter service on present lines, and for which new capital is imperatively needed? Why not hear also the 28,000,000 policyholders whose life insurance is dependent largely on the stability of railway earnings? Obviously, railway matters should be taken out of politics, and if politicians begin to use them for selfish ends, then-as in the last election-let us get rid of the politicians. It is high time that the investor, as well as the shipper, had his innings. Looked at from the point of view of social service, food is as necessary as transportation. If expenses. of production in agriculture go up, why should not the products of the farm go up in price? But if we deny to railways the right to raise rates when expenses increase, then we should legislate against the high prices of farm products. Why not regulate the prices of food as well as of transportation? If it be answered that the latter is under monopoly, then the same may be said of farm lands. But the public mind, which insists on competitive rates where cost concepts are impossible, demands a system of rates for a complicated situation which is only applicable to a primitive stage of industry. As investors, we have a right to demand equal treatment and the right to earnings on our savings. If we do not now get it, then we will throw our votes to the policy which will give it to us. Since government supervision of railways has been granted, we demand that it shall protect the investor through reasonable earnings as well as the shipper through reasonable rates. The two cannot be disassociated. And the supervising body must be one capable of understanding the real nature of railway organization, the impossibility of competitive conditions (or cost of service), and the necessity of not frightening away capital when needed for a legitimate improvement of the country's system of transportation. To policyholders it is not a light matter that of the $9,118,101,813

bonds issued by steam railways in the United States, 35 companies own $1,225,576,728 of them.

The ability to make earnings and pay dividends is a function of several variables. Higher wages may not go with greater efficiency; if not, and if more is paid for the same service, then net profits are directly lowered by the increase of wages. Higher wages may possibly bring more efficient service, greater accuracy, a better quality of man, greater freedom from accident and damage, and thus more than recoup the company for the increased outlay. The outcome hinges upon whether this efficiency can be brought out by the act of the employer, or not. Generally, when increased wages are given, the increased efficiency depends upon the will of the receivers of wages. If we had an ideal laboring force, greater efficiency would usually go with higher wages, or shorter hours. As a matter of fact, the managers of labor unions seem to hold that strict discipline by the company, and discharge on account of neglect of duty, is contrary to the rights of workmen. Under the conduct of most unions-not all-increased efficiency will not be the consequence of higher wages. If such are the facts, then the railways should be allowed to increase the price of traffic to compensate for the increased expenses of operation. If general social causes have increased the cost of living for workmen, then they may legitimately ask for higher money wages, and society could have no excuse for refusing the companies as compensation a higher rate for transportation.

If it be put that the increased cost due to higher wages could be compensated for by devising other forms of efficiency and economy, that plan would require the skilled management (by which the savings were devised) to forego the returns assignable to itself, and make a gift of those sums either to workmen who received the higher wages (without increased efficiency) or to the shippers in the rate of traffic. On what grounds of justice could this be asked? Obviously, only on the theory that the skill of one agent in production (managerial capacity) should make up for the increased demands of a different agent.

Moreover, railways differ in conditions and ability to haul at a low cost. Those roads which have earned a surplus, turned it into the property, reduced grades, and lowered the cost of carrying a

ton a mile, could now stand fairly well-at least for a time-the increased expense of higher wages, and continue present dividends. But it would not be true of all roads. Some are not earning any dividends; some are earning only fixed charges. If wages are increased on one road, they must be on all. A horizontal increase of expenses, therefore, would affect roads unequally, injuring the poorly conditioned roads the most. In that case, higher rates must be allowed to prevent bankruptcy; and higher rates must be allowed to all roads. A long-headed management cannot be punished for its prudence, and refused what is allowed to an inferior. Therefore, if no increase of rates is granted, we may look for an increase of defaulting roads among the weaker roads of the country. The best roads will undoubtedly hold their own, possibly with retrenchment, and reduction of service to the community.

V.

The stability of our corporation securities (stocks and bonds of water, gas, telephone, ferry and dock, electric light and street railroad companies, banks and trust companies) are affected by much the same psychological conditions as those of railways. The corporation has come to stay, and has a right to live; although that does not mean that unprincipled men should find refuge for dishonorable business methods behind corporation law. But large industrial organizations only reflect the progress of the age; they are too numerous and too important to be made the target of political attacks; and business in general must wait in suspense until a plain and direct way is open for the legitimate operations of large organizations. No one objects to reasonable and non-political supervision by the government; but all must object to legislation which no one can understand, and which cannot possibly be enforced.

VI.

The responsibility of the companies for the vast accumulations of a people's savings cannot be too seriously stated. In the very nature of things, these great sums must be invested by those who are most familiar with the important industries of the country, and especially with those of the greater magnitude. There must inevitably be constant business dealings between these companies and those in control of the great banking, industrial and railway cor

porations. Under our present psychological conditions, it is easy to buy cheap popularity by raising the cry of "Wall Street." It makes no difference whether it is X Street or Y Street; there must be a market for securities. There are tricks and dishonesty whereever imperfect men gather; but the men in charge of our companies can be, like President Cleveland, above all suspicion, and must get securities from the markets where they are bought and sold. Individual officers and directors may sporadically go wrong; but the whole body must be sound to the core, or the very fabric of our business organization must go to pieces. If men did not keep their word, business would not go on twenty-four hours. As investors, we are banking on the integrity and good judgment of the men in charge of these companies. They are not likely to fail us. Without doubt life insurance is safer than it ever has been. Now it remains to be seen if the people will, by its treatment of railways and corporations, consciously undermine its own investments.

RAILWAY ACCOUNTS AND STATISTICS

IN THE UNITED STATES

By A. J. COUNTY,

Assistant to First Vice-President Pennsylvania Railroad Company.

AT THE EIGHTH SESSION OF THE INTERNATIONAL RAILWAY CONGRESS, BERNE, SWITZERLAND.

The great development of the United States and the continued prosperity and progress of that country is more largely due to, and more dependent upon, its railways than any other single factor. The expanse of territory occupying 3,000 miles from the Atlantic ocean to the Pacific ocean and 2,000 miles from the Great Lakes to the Gulf of Mexico, containing unrivaled agricultural and mineral wealth, was touched only in a few places, and to a limited extent, by the ocean, inland water and canal transportation routes and but sparsely inhabited before the advent of the railway. The railways were therefore welcomed as the true pioneers and the country devoted its energies to their construction as the quickest, most direct and economical method of bridging the great distances and overcoming the adverse physical and climatic obstacles within its borders.

Prior to 1870 grants of lands, or money and franchises were made, without any important limitations, by the National government to encourage transcontinental lines across the western territories, and by various states and municipalities, with the object of attracting population to their borders and securing the great commercial rewards and trade routes. The railways quickly spread throughout the country, preceding, instead of, as in other new countries, following the settler, and, while the varying tides of prosperity and depression have left great marks on these commercial arteries on which the country is so dependent, as well as on the fortunes of those who invested their money therein and those who directed their operation, they have evolved well rounded and prosperous railway systems and serve a population of between 90,000,000 and 100,000,000 people.