The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1907-04-04
'THE|NTERESTS.OF
q BOTH IRE MUTUAL
Pres dent Finley, oftl1c Southern,
Says When Railroads Are 1durt
Public Suffers.
NOT FIX RATES ARBITRARILY
1his Cannot Be Done on Basis
disqualification But Is Rcgu-
tlatcdby Economic Laws.

GREENSBORO, N. c., April AT
tllc, annual banquet or the Merchants
And Manufncturers' Club, OF Green's
toro. tonight, w. w. Finley pres.s
dent or the Southern Hallway Com.
tHny, responded to the toast north
Carolina and It's Relation to the Rail-
fvad Problem
After discussing the interest OF North
Carolina in improved railway trans
EOrtation and pointing out the need
of additional railway construction in
Tho State, Mr.. Finley spoke OF the
identity OF the interests OF the public
and the railways, and showed what
would be the effect upon both OF some
olsthc proposed legislation lie said
INC interests of n railway and Of
tic people dependenr upon it for trans
pcttation are so completely Identical
that | have no hesitation In saying
tlat every Legislative proposition that
is inmical to the railroads will be
found, on careful examination, to be
saually nlmical. In Its ultimate effects
to the interests Of the people Of the
territories served by their lines
AS to Overcapitalization.
Mr. Finley said that. while capital;-
fntion OF each railroad must be con-
s!Gercd on Its merits, he was cons
WINGED that there was serious popular
error in surprising that there is any
considerable decentralization OF rail-
roads In the United States.
licEpoints out that some OF the argu-.
nicnts as to overcapitalization were
z based on estimates OF average cost Of
construction that might be ample for
lghtly-built and lighty-equipped roads
IN level or nearly level country with
& Few bridges and tunnels and without ex-
pensivc city terminals. He said: .Whcn
the entire facilities OF the carriers are
Z considered. including rights of way
through cities, towns and elsewhere, ter
s mnals. yards, roadbcd. tracks, tunnels,
structures. and equipment, ! think 1t will
be admitted by all persons acquainted
with the cost of railroad construction that
the property OF these carriers could not
@ generally speaking. be reproduced at n
NJ cost equal to their capitalize ton. But,
leaving aside the question as TO whether
the railroads of this country are over
capitalized, wish to say to you that the
~ idea that rates are controlled by CAPT.
ta'lzation Is entirely without Justification.
i capitalization may affect the intrinsic
3sg value Of company's securities. and thus
AFFECT the investing public Il cannot
@Sciitols q CARTIER rate, ana hence cam
!l not affect the shipping public
lie supported this statement by quo
tatlons from President Hadley, OF Yale,
nnd from Chairman Knapp, OF the In
@ tsrEtatc Commerce Commission Mr..
finley gave examples OF the competi-
ton OF producing localities, OF markets.
OF carriers, and OF commodities to show
that railway charges are the but
growth OF economic laws and commer-
5S58 z ., Conditions.
Economic Laws Fix Rates.
''No rate he said. "cnn ever, with
rroper consideration for the business
h OF the country or Of the carriers. be
made Independently of these economic
1aws--not by again arbitrarily fixing
the rate, and not by capitalization OF
tie carrier likewise arbitrarily fix
81 Ing the rate. In a broad sense, there
fere, the management Of a railway is
pcwerless to fix It's rates. 1t must
accept the rates that are the resultant
of economic and commercial forces.
(which are as absolutely beyond the
control OF its managers as are the
t:6es of the ocean. THAT this is true
i.8furthcr shown by the fact that many
railroads have never been able to pay
dividends on all Of their capital stock,
b while others are unable to pay any
dividends at ALL, and still others are
not able to pay interest on their bonded
Indebtedness
IF a railway could adjust its rates
& to Its Capitalization there would be no
reason why any road should not ehrn
dividends on It's capitalization, and thus
forever abolish rcceiverships and bank
ruptcy.
In all the discussion about the sup
posed relation between railway capitals
cation and rat ties, have been unable to
find that any one has attempted to formu-
late a comprehensive and practicable
scheme for basing rates on capitalza-
tion. ] am convinced that IL cay one
Should seriously undertake to work out
such a scheme lo would soon find it to
be absolutely impractcab!e. Take the
case OF two railways competing for busl-
ness between two common points. One OF
them may be a line constructed through
comparatively level country at relatively
4 small cost and the other may he con-
structed through mountainous country
Mt very heavy cost. Tho capitalization
Of the mountain limo may very properly
be two or three times as great as that
of tho oW-grade line
"A 1f$ratcs should be based on capltali-
cation. the rates on the mountain line
would be two or three times those
on tho other. and the mountain line,
because Of high rates, would be nut
put Of business between the competl-
tive points The loss of its business
between these points would probably
make it impossible for 1t to earn from
non-competitive business alone enough
to pay tho interest on It's bonds. IT
would gotinto tho hands OF q receiver
with4no prospect of ever getting ont
This presents only one Of the minor
difficulties in the way Of basing rates
pm capitalization. A perfect maze OF
The most intricate problems would be