National Republican. (Washington City (D.C.)) 1872-1888, 1874-09-09
THE AMERICAN RAIL WAY SYS-
ITEM


The leading Characteristic of the Ameri-
can people Of the present age is their love
of tho magnificent. They despise the day
of small things. They farm it on large
scale they speculate upon a large scale !;
they buy and sell in large quantities they
dig long canals; they construct immense
trunk lines Of railways and lease all lateral
branches they build large steamers and,
in short, they make haste to be rich. They
are impressed with the idea that this is an
immense country, and that consequently
everything about it and going on in it or
going out from it should be little in advance
of what can be produced in any other part of
the world.
This extensive idea of the proper magni
tude of our affairs is illustrated by no other
branch of our industry so well as by our
railway system. This is simply gorgeous
in its magnifcence. Eighty-five thousand
miles of track have been laid in forty years,
upwards of four thousand of this having
been constructed during the year 1873.
Thirteen thousand five hundred Of the
eighty-fve thousand miles is made up of
double track and sidings, leaving the actual
mileage at seventy-one thousand five hun
bred. Of this vast line the New England
States have 8, 1852, the Middle States ID, 200,
the Northwestern States and Territories
80, 9O5, the Southern States Is, 316, and the
Pacific States 2, GIL miles. The cost of this
mileage is stated at an average of $50, 900
by some authorities, and by others at
S57. 900, including equipment. The aggre-
gate capital stock is about g, 072, 251, 954,
and the floating and funded debt 81, &c.,
IA, 597. This is a grand aggregate of CAPT.
tai invested of a. III, 993, SOL, or a little
over $49, 900 per mile of single track
1t is well known to all those at all IA
miliar with the construction of railways
that this is nearly double the actual average
cost Of a good single track railway in the
Western or prairie country, where there is
comparatively little rock excavation in the
preparation of the road bed, and where the
bridging is usually inexpensive. For in
stance, the Galena and Chicago Union rail-
way was originally laid for about $4,000
per mile. But this was the actual cost of
construction and equipment under the care
full supervision of the mon who furnished
the funds. The average net earnings Of
those roads from which returns were OBJ
tainable were $3,201 per mile, or over six
per cent. upon a cost of $50,OO If we are
right in our assumption that the actual cost
is only $500 per mile on the average,
these roads have earned twelve per cent.
upon their actual cost, and are earning it
now.
1t is clear, therefore, that we are widely
wrong in our assumption regarding the &C
tual cost, or railway property fairly IMAM
aged pays, and will continue to pay good
interest upon the money invested. But we
are asked, why, then, do they default upon
their bonds and dividends2 The reasons
are obvious. The stock is magniied for the
benefit of sharpers. The contracts are too
often let to some of the leading managers
at enormous sums, payment to be made in
stock and bonds. These parties sublet to
those who do the work. 1t is a little
Credit Mobilier," by which the stockhold-
ers are made to pay double price for the
work of construction. But this is not the
worst of the operation. The construction
account is not closed when the work is COM
pleted. In order to pay interest promptly
upon the first mortgage bonds and make a
few cash dividends upon the shares, and
foist them upon the stock board at par or a
premium, second, and perhaps a third
mortgage bond is issued, charged to con-
struction account, and hypothetical to raise
the money for these purposes. Then, when
the stock is well up, the capital is doubled,
under the pretence CT laying a second track
or making some other grand improvement
which will add greatly TO the income, and
the shares divided among the old share
holders and managers. These are put upon
the market, and the shrewd ones sell out in
the quietest manner possible and leave the
road to its fate.
Of course there is collapse. The insti.
tuition is hopelessly in debt, and must make
a compromise. The bondholders meet and
sell, or reorganize, agreeing to recognize
the old bonds at trile and wipe out the
old stock entirely. This is the kind of mis-
management which has ruined the credit
of our railway system abroad. 1t is down
right swindling. But it is done in the
name of a soulless corporation, and no one
is responsible The truth is, that there is
scarcely q mile of road in this country to
day that will not, with fair management,
or that does not, earn good interest upon
its honest actual cost. High fares and
freight tariffs are put on to make the people