Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1881-05-21


detailed statement of the case than that
given by the present Commissioners, but
it shows how carelessly these questions are
considered when we find the New York
Chamber of Commerce adopting the cur
rent fallacy as to the effect of stock-watering
upon rates. No man could hold this view
if he undertook to think it out tor himself,
for he would see at once that it involved
the absurd assumption that railroads could
regulate their own volume of business in
advance. As a railroad manager observed
before the Congressional Committee on
Transportation to the Seaboard, when this
same question about the effect of stock
watering on rates was asked him "There
never was such a thing heard of as
company that increased its capital stock
as an excuse or occasion for putting up
rates. If the capital were doubled, and
an attempt should be made to double
g the rates so as to pay on the doubled
"capital the same percentage of dividend
that was primarily paid, the diminution
of the business would probably make the
"results less aggregate compensation
&C than before"
The fact is that the Railroad Commits.
sioners are quite right. There Is no con-
nection between the rates charged and the
dividends or interest on capital invested.
1t is common for corporations to capitalize
their surplus earnings, and this they have
perfect right to do, nor does it make the
least difference to any body what dividends
they pay in this way. Every railroad
tariff is framed upon principles which lit
orally ignore all such considerations as this
of dividends upon stock. The tariff is
| framed with view to make the maximum
| profit on transportation. That is the fun
damental principle of all business. How
| this is to be done is complex question.
II involves consideration not only of what
the freight will bear, as tested by its
market value, but of what the future in
| terests of the road require for the develop
ment of business of the general and special
costs of operation; of through and way
competition and of multitude of other
factors each Of which has its peculiar i'm
portance.
What profit shall be made over and
above operating expenses is a question
which cannot be determined in advance.
It depends entirely upon influences all of
which are beyond the control Of the rail
road managers. A drought, food, a
riot, an epidemic, may at any moment
unsettle all calculations, and change profits
| into losses. If profits are made they have
no connection with the capital invested.
No matter whether that is large or small
every company follows the same rule,
namely, to make all the profit possible.
Some companies capitalize their surplus
earnings, and others do not. That is a
matter, however, of no concern to the
| public. No company can raise its rates in
order to pay larger dividends upon
| watered stock, That idea is preposterous,
Ii the stock is increased and the same
dividends are paid upon it, the fact merely
indicates that the profits of the business
are larger than formerly; that is to say,
that the volume of the business has In
creased. But it does not indicate that the
charges have been raised, and in all such
cases inquiry. would show that they had
not been raised. a little investigation in
a case of this kind is better than great
deal of loose conjecture. Let the public
make inquiry and it viii soon ascertain
that the statement of the Railroad Com
rnissioners in this regard is strictly true