The Emporia weekly news. [volume] (Emporia, Kan.) 1881-1889, 1883-07-12
WoRKING IT'S OWN DsFEAr.

has very intelligent and interesting Al
tiele on the railroad pool business
which will be Of interest to all our read
ers who give the workings of our Tailroai
syIem that attention which its import
ance deserves This paper seems 10 b
of opinion that the pernicious pool
dodge In the management of railroads i
rapidly working out its own defeat, anS
presents its reasons for this opiniOs
plainly. The article throws suggestive
light on certain present tendencies in IN.
stock market, which the wis
MIR. Vanderbilt has already prepar
ed for, because sooner OF
later there will be disastrous break in
the wild speculation in railroad stocks
Vanderbilt is reported to have assured
some of his friends that the New York
Central would continue an per cent
stock while he remained president.
But he has now resigned that Office,
which IS taken as sign that initiation
cannot last forever. The Bulletins ar
ticle is as follows:
The pooling of traffic necessitates
the existing roads to take every new
competing line into the combination;
for otherwise the new road would cntf :
rates and break up the pool The Older
companies being thus obligated to take
every new conner into their copartnef-
ship and divide the competitive traffic
with them, premium IS conferred upon
new constructions by guaranteeing them
share of the aggregate traffic at full
rates of freight. The old companies
dare not declare war against the new
ones; for the result would be to drive
the latter into bankruptcy, IN which
case they would be run without
regard to profit and thereby
ruin the older lines. Plainly, there is
but one possible end to this policy-a
division of the traffic among such an en-
laIged number of companies that none
of them will be able to make paying
profit; an increase of carrying facilities
tar beyond the business TO be done; and
an increase of capital or debt simuIta-
neouslY with the dIminutlOn of profits.
What disaster to railroad finances this
result implies 1t is unnecessary to point
out. The result is no more, however,
than might be expected as the outcome
Of an attempt to defeat the natural oper-
alton of competition, which artificial
devices may temporarily obstruct but
can never finally overcome.
"1n the meantime, ii may be well to
note few facts showing how rapidly
the pooling system is working out Its
own defeat. The Vanderbilt system of
roads has been prominently protected
by this Continuance; snd yet for that
very reason has been most exposed to
attack. Paying regularly per cent.
upon it's doubly watered STOCK. it seemed
to have ample resources for dividing its
business with competing companies.
This tempting fact has brought into ex-
istence the Nickel plate line, the West
Shore, the Delaware 81 LackaWanna ex-
tension, the Lake Ontario % Western,
the Erie new line, and the Jersey Cen
trail d Reading combination.
1.-THE full effect of the opposition
arising from these new arteries will ap-
pear in the course of few months,
when they will all be in operation.
What the effect is likely to be may be
inferred, in some measure, from the
present financial condition of certain of
the Vanderbilt roads. From informa-
ton which we have every reason to re-
gard as entirely trustworthy, We learn
that, for April and May combined, the
profit of the Lake Shore available for
dividends amounted to less than $780,
600, while to pay an 8 per cent. dividend
the sum of 5000, 900 would be required;
and yet that company has just declared
a dividend o. per cent. for the last
quarter. The condition of New York
Central appears to be even less satisfac-
tory. During the first halt of the last
fiscal year, the net earnings, after pro-
viding for the bonds, amounted to only
81, BAT 600. or ~ per cent. on the stock.
This bad result was partly owing to a
disruption of the pool and partly to
the making of long deferred repairs.
During the first six months of the cur
rent fiscal year, when the business was
done at pool rates, the gross earnings
were the highest ever realized, and
about 81, 800, 600 above those of the same
months Uf-2J81-2; and yet the fact re-
mains that, Notwithstanding this unpre
cedented amount of earnings, the ex-
penses haYc been SO largely increased
that only 81, 136, 900 remains available
for dividends, or 81 per cent. for the
six months. we also learn that the
business for the quarter ending
June 80 estimating the final two
weeks) leaves a profit available
for dividends of only $1,360,OO0, or
at the rate of Is per cent. SO that for the
llESS IHO uCb dN-
eraged per cent per annum; and even
this has been made by reductions in
maintenance and repairs which must
soon be compensated for. The truth is
that the company is now only beginning
to discover the full effects of the error into
which the late Commodore Vanderbilt
tell in assuming that a double track
road could be run at about the same eX-
pense as the old single track. The in
creased expenses demanded by this
change have been postponed as long as
possible, in order TO keep up dividends
TO the old rate; but postpOnement can
now be carried no further, and a higher
percentage of operating expenses has
become inevitable Tor the future.
This is the condition of the New
York Central at the juncture when new
ana formidable competitors are coming
into the field, one of which will attack
it at its hitherto secureSt point-Its val.
uahle way traffic. One of two conse-
quences must tollow-either division
of its business among the new lines, or
an open and ruinous competition with
them. Mr.. Vanderbilt may well have
deemed il prudent TO reduce his invest
ments III this property and in Lake
Shore mainly to the mortgage BONDS
and retire from the management. Had
other stockholders possessed the same
knowledge they might have protected
themselves IN the same way; Sbut they
are left TO bear the loss of what appears
to be an inevitable reduction of diVi
dends and to endure long and tedious
series of trials such as the road has not
hitherto experienced.
at would hardly have been expected
that these companies, generally regarded
az tho StrnnPQaf Ann Gnnn6aRf nf nnP
railroad corporations, would be the first
to feel the effects of the competition that
| the pooling system must evoke where
| ever applied; but the question arises,
| what must be the consequence when
these effects reach the multitude of weak
er companies now upheld by this de-
structive device for protection. We
have no desire to play the role of
alarmist; but we submit that the
signs OF the times indicate that
the time Is not far distant when
the pooling system must everywhere
prove an utter failure and When rail-
roads will be left to be regulated by the
same law of competition as controls
| other kinds of enterprise. The first
consequence of such q state of affairs
must be exceedingly disastrous, for it
will occur upon an enormous over-sup-
ply of carrying capacity, and must
therefore breed reckless competition.
| and il will also have TO contend against
an enormous 0ver-capitalization of the
roads; but the final result must be 70
| put the railroads of the country upon q
sound and conservative financial basis. "
The Grand July ExeuraIOn.
In order to accommodate all who &c
ON our excursion to Davenport, Rock Is