Evening star., 1914-12-27
INCREASE IN RATES
A|DSSTOCK MARKET
Real Significance of !. c. C.
Decision Lies in Its Effect
on investments.
FOREIGN BUYERS SHY
OF AMERICAN ISSUES
Greater Income, With No Additional
Expenses, Great Help
to Carriers.
~ W. 5. COUSINS.

NEW YORK. pecember 26.-1t is now
generally accepted that the real sig
nificance of the railroad freight rate
decision lies in its effect upon the in
vestment market and upon the kindred
trade situation. After the first glow Of
enthusiasm for the favorable" decision
had died away it was realized that in
Withholding the increase in some divi-
the commission had come far short of
fulfilling the expectations of the rail-
road managers. Though the real mean
ing of the decision, in dollars and
cents to the road, is somewhat disap-
pointing, it nevertheless is important
from a practical as we'll as a senti-
mental standpoint. The advance given
to the roads is a net advance and calls
for no addition either to equipment or
to operating expenses in order to Sc
cure it's benefits. This. it has been
pointed out, is equivalent to an advance
of about IL per cent in gross revenues
and means much more than an addi-
ton of Il per cent in the volume of
freight carried, since any increase in
that volume would mean a correspond
ing addition to the operating costs.
Thus the practical influence Of the de-
I
not more so than the sentimental in
fiuence. The decision may be regarded
as a distinct mark Of the new condl-
tions that are prevailing In polltical
circles in connection with what has
been such bitter antagonism to big
business.
One of the most important effects OF
the rate decision will be its effect upon
foreign investors. many of whom IN
recent months, and without any rela-
ton whatever to the European war,
have been inclined to sell, rather than
to buy, American railroad securities
In fact it is common knowledge that
about one year ago some OF the lead
ing financiers of Europe turned against
our railroad stocks and bonds because
of the unfair treatment which our leg
islatiye bodies were giving to the rail-
roads. A famous German banker warned
his friends and clients that American
railroads were doomed to bankruptcy
because wages and other costs of main
tenance and operation were constantly
rising while rates were being scaled
down. Our railroads were being COM
nelled by law to spend more money,
often unnecessarily, as for full crews,
while their receipts were falling OH.
Severe But Just Criticism.
This was a severe. but just criticism,
and it gained weight in Europe because
it was backed up by comparisons De-
tween the receipts and expenses OF our
railroads and those of Prussia. Our
railroads had to charge lower freight
rates than those prevailing in Prussia,
while paving three times as much for
labor. What European investors learned
to fear was the destructive animus
shown by our legislative bodies, and
apparently by the interstate commerce
commission. toward our railroads. The
psychological effect that the commits
sfons exhibition of constructive spirit
such as President Wilson recently
urged will probably be very great In
Europe. We cannot expect European
investors and bankers to buy our secu-
rites or lend US money freely while
this war lasts; but 1t is reasonable to
expect that they will recognise the
intrinsic worth of these securities and
the factor of safety added by the iso-
Iation of the United States from the
theater of war. Encouraged by the
| freight rate decision. Europe. especially
England, should again be in the mar
ket for American investment securities
Then again, there is the relation OF
| the railroads to home industries, espe-
cially to the steel trade. The roads
have been unable to indicate even theil
| approximate requirements In SO far al
new equipment and general improve
| what source they would be able to Sc
cure sufficient funds to make provision
| for payment. They had promised, how
| ever, that should the commerce COM
mission show any evidence OF treating
them with consideration they would
| endeavor to pass along prosperity by
placing commensurate orders with the
| steel companies and supply houses in
| every section. They also indicated
! their desire. and their ultimate inten-