Railway stock

“ The amount of railway stock which has been issued without consideration of money or value is unquestionably very large, although no approximation to the real sum is possible of being estimated. Occasionally such stock is issued pro rata to the stockholders of a very profitable road to make the rate of dividends less prominent, which might otherwise invite restrictive legislation. More frequently the object of issuing watered stock is to keep the control of the railway by means of the apparent investment it represents, or to balance some difference in cases of reorganization. ”

“ It is doubtful whether the aggregate plant used in all manufacturing industries can equal it in value. The capital engaged in banking is but a trifle beside it. The world's whole stock of money of every kind—gold, silver, and paper—would purchase only a third of its railroads.
Yet these facts by no means measure the whole importance of the railroad in the modern industrial system. The business methods of to-day are in one sense the direct result of improved means of transportation. The railroad enables the large establishment to reach the markets of the world with its products ”

“ It is a monopoly which not only extorts millions upon millions every year from the people, but which enables railroad companies, through their intimate business and financial relations with the express companies, to conceal a very considerable part of their earnings. The express companies are large holders of one another’s stock, and also of railway stock; in turn, the men who control the great railway combinations [92] are themselves big owners of express-company stocks and bonds. The express companies lease from the railroads the right to transport freight over the railroad lines. ”

“ The increase in industrials was mostly in stock, the figures being $259,416,250. Formerly industrials were unable to market stock in competition with the railways, but this year they have been able to place between three and four times as much as the railways. ”

“ As for the railway, whereas prior to John Harley's introduction as shareholder and director it could get no consideration in the way of freights from those giant corporations which have to do with beef and sugar and oil—it being both slow and crooked as a railroad—thereafter it was given all it could haul at rates even with the best, and its prosperity became such that fifty-five points were added to the quoted value of its stock. ”

“ Securities have been consolidated, equipment trusts have placed what are practically chattel mortgages on rolling stock, and money cannot be raised except for a short term and at high rates. Ten or fifteen years ago 4 per cent would bring in capital for railroad improvements. Strong properties sold their bonds bearing 31⁄2 per cent interest. Now some of the strongest roads are paying 41⁄2 per cent for new capital. Properties less well known for stability and earning power pay more. The rate has advanced by from 11⁄2 to 2 per cent in little more than ten years. ”

“ Perhaps this is offset by the claims save for missing the market with delayed stock. Is it not a sad commentary to think that legislation is necessary to make us do what is for our own best interests?
There can be no doubt that for a heavy and regular movement of low grade commodities on two or four track roads the big train is logical and economical. Most of the prairie roads are single track. Most of the distances between the prairie cities are relatively long. Stock, perishable freight and merchandise must have rapid movement. ”

“ Owing to the incompleteness of the returns on this subject and the fact that large blocks of stock are held in the names of associations and trustees, it is safe to estimate that the actual ownership of railway stock is distributed among at least 440,000 persons. ”

“ The peculiar feature of this railway is the territory attached to the concession, namely, a league on each side of the line, comprising a total of about a million of acres, one half of which is the property of the contractors, the other half belonging to the shareholders, who have, besides, the national guarantee of 7 per cent. on the capital of £1,600,000, which the railway is to cost, or about £6,500 per mile. It is, perhaps, one of the easiest railways in the world to make, the chief expense being the rails and rolling stock, few earthworks or ordinary sleepers being required. ”

“ The evolution of the so-called store department on most railways has been a striking instance of one-sided development. A railway exists to manufacture and sell an intangible commodity, transportation, not necessarily to carry either a large or small stock of material and supplies. The purchasing agent tells us in good faith how much money he has saved the company by time spent in driving good bargains. He is not in a position to know how many men have been worked to poor advantage, or have been idle, while waiting for proper tools, materials and supplies. ”

“ The railway companies, too, have considerably improved their permanent ways, constructed heavier rolling stock, while the contrivances for controlling and maintaining the trains in check are of the most perfect description. ”

“ Have we not overdone the matter of low working stocks? Is is not more expensive for a railroad to carry too small a working stock of material and supplies than one too large? Is not the problem too extensive to warrant very rigid comparisons as between different roads? ”

“ Yearly contracts for these are made, and while the actual cost of a single ticket may not exceed one mill, [306] the aggregate on a road carrying fifteen millions to twenty millions or more passengers per annum is considerable.
To induce the public to travel, and encourage shippers to send their freight to market over any road, attention must first be paid to the condition of the track and rolling stock.
It is not economy to allow anything to be out of repair, on the supposition that it is less expensive than it would be to spend comparatively little from day to day to keep it up. ”

“ One year they are operating ratio, another, train load, and later on, net earnings. In no storehouse do material things deteriorate to scrap value faster than does the intangible, indeterminate stock article, results. No, I am not a pessimist; I still see the ring of the doughnut on the lunch counter. But I do object to being fed on birds from year before last's nests. I believe the railways hatch out better results every year, but I also feel that improvement should and can be made even faster. It is largely a breeding problem. ”

“ The financial and political aspects of this great enterprise were as striking as was the construction. Governments have many a time given lavish aid, promoters have often built roads entirely out of the proceeds of bond issues, financiers have dominated great railway systems by a majority or controlling interest in the stock. ”

“ The railroads of the United States are entitled to both confidence and relief because they have not abused their trust in the matter of capitalization. While, to make possible the raising of money, stock-bonuses undoubtedly were given in their earlier history, it is true of them as a whole today that they have by far the smallest capitalization per mile in the world ”

“ The company might be merely the owners of a highway and toll takers for the use of it by other people with their own carriages and locomotives. That state of things would be worked out by the railway company possessing the mere line of railway from end to end, and by the persons making use of it, buying or renting contiguous land whereon to keep their rolling stock, and have their offices, availing themselves of the powers of Section 76 of the Act of 1845, and getting on to the railway by means of sidings connected with the railway. ”

“ It has become a definite policy. And it has left in the pockets of the people an enormous amount of money that would have gone to the carriers or at least been shared by them if they had fought against cheap transportation for the farm instead of fostering it. If the freight and passenger rates in force on the Great Northern system in 1881 had remained unchanged until 1910, there would have been collected from the public $1,267,411,954 additional. This amounts to more than eight times the average par value of its outstanding stock and bonds in the hands of the public during the same period. ”

“ It is generally assumed that the railways in Germany were purchased with the view of more effectually utilising them, and the rolling stock for military purposes. The Government in this country are under no necessity to undertake the liability of acquiring the railways and guaranteeing the dividends for such a reason ”

“ Other examples of waste under the present system, although not so apparent to the public, are well-known to the railway expert, and involve much greater expenditure of time and money.
I refer in particular to the waste of rolling stock, especially of goods wagons, occasioned by the multiplicity of goods stations, the transfer of rolling stock to and from the lines of different railway companies, the shunting of trains, and the large number of road vans used by the various companies. ”

“ Other testimony shows that locomotive shops and car builders are putting out not more than half of their capacity; that the supply trade is receiving no new orders. Never, since the beginnings of the American railway industry, has the American and foreign investor been so reluctant to supply necessary capital, or so doubtful of the future of railway enterprises. ”

“ Along such lines there always had been large traffic, and it was no doubt greatly stimulated by the facilities which the new mode of locomotion afforded for its expansion. But as fresh railways were completed, and as the capital invested in them increased, the profits receded. Even at the present time, with larger receipts per mile than have ever been taken, the position of railway investment is almost from every point of view, unsatisfactory. ”

“ Henry C. Adams, statistician of the Interstate Commerce Commission, says in his third annual report:
"It certainly appears ... that the motive for ownership in railroad stock is quite different from the ordinary motives which lead men to invest in corporate enterprises, thus presenting an additional proof that railways are a business not subject to ordinary business rules."
There is no safer business in the world than railroad transportation; there is none that has less elements of uncertainty; none whose returns in the aggregate are less varying. ”

“ It is over three times the annual gross revenue of the railroads, and it amounts to nearly one half of the existing railway capital represented by stocks and bonds. The question of obtaining the $8,500,000,000 necessary to make railroad facilities equal to the expanding traffic of the country during the next five years, therefore, constitutes the most important problem now confronting business men. ”

“ Railways, as developed in England, have thus done more than increase the facilities and decrease the cost of actual transport. They have, in various ways, increased the facilities for, and decreased the cost of the exchange of, commodities, since there is many a trader in the country who conducts his business much more with the help of a railway company's capital than he does with his own. It is not alone that trade and industry have vastly increased in volume as the result of railway operation. ”

“ The most important single factor in the production of increasing returns upon a railroad is the density of traffic; that is to say, the amount of business which can be conducted with a given set of rails, terminals and rolling stock. In other words, it is the degree of effective utilization of the plant and equipment. It is too obvious to need demonstration, after what has been set forth concerning the nature of railroad expenditures, that economy of operation and, consequently, profits are more or less directly dependent upon this fact. ”

“ Economically and theoretically it is not up to the railways to solve this world old conundrum. Practically they are called on to meet every advance in the cost of living of their employes to which in twenty years they have not added a nickel, and they are denied the privilege, enjoyed by every other employer of labor, to add its increased cost to the price of their only commodity or service—transportation.
Today the advances in the scale of railway wages awarded, proposed and demanded mean an increase of from $60,000,000 to $75,000,000 in the annual "cost of living" of the railways. ”

“ The same and still larger economies in working could be effected under private enterprise if competition were abandoned in favor of universal combination or monopoly. The whole question depends on the waste of competition. Each railway company works for its own route. The result is that unnecessary train mileage is run, and train loads are lessened. The secret of success, the foundation of all economy in railway working, lies in securing the largest possible train loads. ”

“ The traveller and shipper had less to complain of than the shareholder. The service of the road had been greatly increased. The mileage was large in proportion to population. Rates were low. True, it was a rare event for a Grand Trunk train to arrive on time, but it usually arrived.
For these various ills corresponding remedies were sought in turn. Drastic capital reorganization was discussed, but nothing was done. Commercial prosperity could not be revived by the efforts of a single railway. Competition was met by agreement after agreement, 'gentleman's' and otherwise, but in vain. ”