The daily morning journal and courier., 1907-06-22

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 part of the physical problems that railroad managers have had to face. When they started to accomplish these improvements, the money mar kets of the world had for some time 1 been gorged with idle funds and it had been possible to float securities on favorable interest basis. But within l the period that we are contemplating the Boer war destroyed one and one half billions of the worlds capital; the Russo Japanese War dissipated al- most an equal amount, and the San Francisco and other disasters made further appalling inroads upon the worlds assets. War and calamities on one hand, and industrial activities on the other, therefore, united in putting a perhaps unprecedented strain upon the money markets of the world
 | Our railroads, in providing the money for the complete rehabilitation which was in progress, encountered more and more unfavorable conditions in the markets in which they must float their obligations. The usual Eu- ropean outlets for our securities be- came clogged. The marvellous indus trial development and the commercial prosperity that was ruling the situa- ton at home, however, accumulated wealth so rapidly that the railroads were able to float securities sometimes hundred millions at single opera tion. That money was poured into q stream that further vlvified existing activity An altogether unprecedent- ed production of gold helped to ob- scure our view of the rapidity with which liquid capital was being absorb ed into fixed forms of investment. Still the interest rates advanced and the outlook for floating new long term obligations grew more unfayorable. The companies then resorted to what was for time an extremely popular form of investment-s time notes. Hundreds of millions of these short term obligations were created and were absorbed by banks and investors. The rate at which they were put out rose steadily from four and one-half per cent. to five per cent, to six per cent. and a time came when really secure l OpllEdllOIlo u SllOllS OOAhPelAiSS NSAS offered on basis to net materially above even the latter figure,
 Still with large new provision of capital for railway improvements, in dustry was given added impetus and with every added impetus to industry the demand upon the transportation facilities grew more severe and made more pressing the necessity for rail- | way expenditures. The circle of ex- lpansion seemed indefinite, but for the steadily hardening interest rates. At Hast even the short-ti time notes began to lose their popularity, and then rail- lroads whose stock sold sufficiently above par made forced loans by the issues of stock which existing stock holders could not afford to decline. But In order to accept the tempting in- vestment oportunity, they had to sell other securities.
 So much for the financial side of the position. There was another phase of as great importance. Our increased prosperity had been accomplished by advancing prices. Labor and material alike rose to unprecedented figures. It seemed as If every purchasable thing advanced in price but the one com modiy of railway transportation, Railway rates showed little tendency to change; if there was any, 1t was in the direction of lower rates. Operating lexpenses increased enormously. The wage fund rose to by far the highest point in the history of railway opera tion, and accompanying this advance in wages came an absolute deteriora- ton in the efficiency of labor. It is, think, a perfectly safe statement to say that with the advanced wages of the last three or four years, labor has, on an average, shown decreased eff1- ciency of twenty per cent Every large employer of labor will corrobor- ate this tendency. It can readily be seen that in applying this percentage of deterioration to the total labor field the matter becomes a factor of appall- ing importance.
 It was not enough that railway transportation failed to advance at a lperiod of increased prices for every other commodity There began to de- velop a socialistic tendency in State legislatures and paternal attitude at the Capitol, that promised to be of se- rious importance to the holders of railway securities. Some fifteen or twenty States began to discuss the ar- bitrary reduction of passenger fares by edict of legislation. In but one or two of these States was there any at tempt at a serious inquiry as to the Justice or wisdom of the proposed measures The matter was given no more consideration in most cases than were any of a hundred measures of minor importance. It was a popular thing with voters to legislate for a re- ducton of railway fares; therefore, it was good politics to legsate That was the circle of reasoning, and it seemed not worth while to move out of that circle to inquire what the eff feet in the long run would be, or to ap- Iply the standards of justice to the question.
 Prom Washington there started an Influence of most momentous charact- CT There developed national tcnden- cy toward a more vigorous control of common carriers by the Federal gov ernment. Practices which had grown up in railway management, par ticularly in reference to rebates and discrimination, were beyond question ethically indefensible. Indeed, there came to the whole country an awak- ening in commercial ethics, and rail- way managers, quite as well as the