The Sun.
London, England, 1861-01-24 00:00:00

_RAILWAY CAPITAL:

Fifty millions of money or so are bespoken this
year for new railway lines, branches, extensions,
and other supplements to the existing system;
so that the aggregate of railway capital, already
about as large as that of Consols, will be increased
by an addition nearly twice as great as was made
to the National Debt in the last war. To be sure,
the cases are not exactly parallel. We may hope
that the forthcoming investments will, at any rate,
be more productive than war loans and military
estimates ; but if the new shareholders are ever to
get their due, theremust be a radical reform in the
conduct of railway enterprises from first to last.
We have thrown away,—as far,that is, aspecuniary
profits are concerned,—one of the finest opportuni-
ties ever placed within a people's reach. Now that
railways have been 20 years in operation, and we
can take a survey of their returns, we discover that
the most sanguine visions of the original projectors
have been exceeded by the realities of the experi-
ment. Nobody ever ventured to predict or antici-
pate such an incredible growth
_of traffic as has
actually occurred. No prospectus ever made an
approximation to the revenues actually realized.
Unhappily, the other side of the account proved
equally expansive. The traffic surpassed all cal-
culation, but so did the charges, and the end has
been that the income derived by the shareholders
is deplorably small. It was reckoned that railways,
with a given amount of traffic, would pay 10 per
cent. The assumed traffic has been quadrupled,
and the interest paid on capital is about 31.
They certainly manage these things better in
France—better everywhere, in fact, than in practi-
cal, business-like England. We publshed the other
day a few statistics of the leading French lines,
showing that three of them actually paid between
10 and 20 per cent. each; two others 71 ; and one,
the lowest on the list, between 5 and 6. As
a natural consequence, the shares were at a
high premium, some having doubled in value, and
the lowest quotation being at par. If we compare
these figures with those of our best English lines,
the contrast will be startling. Five per cent. with
us is a high dividend; 41 quite a respectable re-
turn, while the average percentage is about 3Z- or
as nearly as possible that of Consols for the last
eight years. Every country is ahead of us in
these statistics. The average receipts of original
shareholders in France, not merely on the lilies we
have quoted, but throughout the empire, were by
the last returns over 61. In Belgium they were
nearly 51; in the States of the Germanic Confe-
deration much about the same. Austria and Prussia
showed still better management, for the former
country produced 61 and the latter almost 71. A
good deal of this difference is attributable, of
course, to the different habits of the several coun-
tries. We quite understand that Englishmen
would not be content either with the speed or the
accommodation provided by Continental managers,
and when we read that the working expenses on
a German line average about £B9B a mile ; while
those of an English line with coke 40 per cent.
cheaper exceed £1,500, we know to some extent
how the contrast has arisen. The real truth of the
case, however, lies deeper still.
What renders English lines comparatively unre-
munerative is the unnatural magnitude of their
capital accounts. The receipts would suffice to pro-
vide a magnificent rate of interest on all the capital
legitimately expended ; that is to say, on all the
money fairly consumed in the construction and
establishment of the line. Unhappily, this is little
more than half the total. Interest has to be found
out of the traffic returns on a sum of about
£300,000,000, whereas less than £160,000,000 of
that amount represents original capital, or money
originally raised upon ordinary shares for the
accomplishment of the undertaking. In point of
fact, that £160,000,000 expresses the amount of
money which railways were expected to cost
when nothing beyond the natural charges were
taken into the account. That is the extent of
capital for which interest would be demanded if
nothing had been squandered in litigation, com-
petition, and strife. It is easy to finish the de-
duction. If things had been wisely ranaged,
the capital accounts of railway companies would
the
dividends been about half what they are, an ie
dividends just about double. Fifty per cent. of the
aggregate investment is unproductive,
thand
hole.
the
remainder has to yield interest o
ch resembles
Railway finance very
finance, and Mr. Gladstone perial
s work is just like that
of a railway manager. He wants to economise, and
sets to work with his budget, but the old scores
created by old extravagance are so heavy, the dead-
weight so enormous, and the margin for parings
comparatively so riarrOW that the task is a desperate