Univ. of ill. Libra 
 
 Wb,^' 51 
 
 THE ARGUMENT 
 
 Oak Street [ " "°*2^N 6$*^ 
 UNCLASSIFIED I ^^RARy 
 
 - STATE RAILROAD OWNERSHIP. 
 
 A TRANSLATION OF THE DOCUMENT SUBMITTED TO THE 
 PRUSSIAN PARLIAMENT BY THE CABINET IN 1879, 
 WITH A BILL GRANTING THE POWER AND MEANS 
 NECESSARY FOR ACQUIRING SEVERAL IMPORTANT 
 RAILROADS THEN OWNED BY PRIVATE CORPORATIONS. 
 
 NEW YORK: 
 PUBLISHED BY THE RAILROAD GAZETTE 
 1S80. 
 
THE ARGUMENT 
 
 FOR 
 
 STATE RAILROAD OWNERSHIP. 
 
 A TRANSLATION OF 
 
 THE DOCUMENT SUBMITTED TO THE PRUSSIAN PARLIA. 
 MENT BY THE CABINET IN 1879, WITH A BILL 
 GRANTING THE POWER AND MEANS NECES- 
 SARY FOR ACQUIRING SEVERAL IM- 
 PORTANT RAILROADS THEN 
 OWNED BY PRIVATE 
 CORPORATIONS. 
 
 NEW YORK: 
 PUBLISHED BY THE RAILROAD GAZETTE. 
 1880. 
 
INTRODUCTION. 
 
 For several years the question of changing the railroad 
 policy of Germany from the 11 mixed system " — that is, a 
 system composed partly of railroads worked by the state 
 and partly of roads owned and worked by private corpora- 
 tions — to an exclusively state system has been warmly dis- 
 cussed, and finally decided in favor of the state system, 
 which is begun by acquiring all the principal railroads of 
 Prussia (not of the other German states) by the government 
 of that country. When the Prussian cabinet submitted to 
 Parliament in November, 1879, its plan for acquiring 
 the remaining important private railroads in Prussia, it 
 presented with the bill granting the necessary powers and 
 means a long and elaborate document in justification of its 
 action, which is probably the most important government 
 document respecting railroads ever published, and the most 
 complete statement of the arguments in favor of a state rail- 
 road system. 
 
 It must be remembered that this question has had the atten- 
 tion of the best minds in Germany for several years, during 
 which the books and pamphlets published concerning it 
 <p probably number hundreds, and that thus the government 
 ' had the opportunity to make use of all that could be said on 
 this side of the question. Being thus the formal statement 
 the reasons which have caused for the first time one of the 
 ^reat nations of the world to unite its railroads under gov- 
 *A yrnment administration, we have thought it desirable that 
 It should be put on record in our language, for the benefit of 
 railroad men, legislators and students of the economics and 
 politics of transportation.. 
 
ARGUMENT FOR THE BILL CONCERNING THE 
 ACQUISITION BY THE STATE OF SEVERAL 
 PRIVATE RAILROADS. 
 
 THE PAST RAILROAD POLICY OF PRUSSIA. 
 
 The present condition of railroad affairs in Prussia renders 
 the completion of the State railroad system absolutely neces- 
 sary. The idea of consolidating the whole of the railroads of 
 the country into one enormous net of iron roads, connected 
 together for the facilitation of travel and forming a single 
 transportation establishment under government control, 
 was, under the former condition of the Prussian code of rail- 
 road laws, incapable of expression. Although the nature of 
 railroads as public highways was never ignored, and is 
 indeed plainly affirmed in the law of Nov. 3, 1838, yet their 
 real importance as great highways for the movement of 
 armies and for universal intercourse did not become fully 
 apparent until they had reached a later period of develop- 
 ment. The inconveniences caused by the private manage- 
 ment of railroads in consequence of the existence of a num- 
 ber of different enterprises of doubtful solidity and restricted 
 working capacity, the abuse of their privileged position by 
 their managers ; the oft recurring resistance to reforms of 
 public utility; the complication and for the most part arbi- 
 trary differences among the various administrative and 
 working arrangements ; the intricacy of the tariffs ; the quar- 
 reling and extravagant expenditure accompanying the bit- 
 ter competition existing among such a number of corpora- 
 tions have altogether caused the widespread injury to 
 the public welfare that is inseparable from an ex- 
 tended private management of railroads. Meanwhile, on 
 the other side, by the extended development of the govern- 
 ment railroad management, another and a more favorable 
 solution of the question was in preparation. The consider- 
 able increase in the government railroads that occurred on 
 the annexation of the provinces acquired in 1866, and the 
 establishment of connecting lines between the Eastern and 
 Western railroads have proved the government railroad sys- 
 tem to be unequivocally the best for Prussia, and it has 
 gained thereby considerable ground against the so-called 
 mixed system. The necessity has therefore become apparent 
 
5 
 
 for providing fully for the public interests, not by regulating 
 the operation of the private roads through legislative reform 
 and state supervision, which do not promise to be effective, 
 but by the abolition of the private railroad system and the 
 union of all the principal inland railroads in the hands of the 
 government. The conditions which, under the old railroad 
 laws, would have rendered such a solution of the question 
 impossible, have fallen into the back-ground. The greater 
 extension and compactness of the territory of the country, 
 the development of its financial strength, and the fortunate 
 state of the national credit have proved favorable to those 
 ideas which deal with a question of such weight and impor- 
 tance to the state. 
 
 As long ago as 1873, in the report of the special commis- 
 sion appointed to investigate railroad charters, we find these 
 ideas expressed in the following words: 
 
 "In consequence of the extension and perfection of rail- 
 roads that have already occurred, and that may be expected 
 to a greater extent in the future, economical reasons and 
 considerations point to the desirability of the ultimate con- 
 solidation of all railroads in the hands of the government." 
 
 Since that time this result has been greatly favored by the 
 further improvements effected in the condition of railroad 
 affairs. The extent of the government railroads has been 
 nearly doubled— the extent of the roads worked by the gov- 
 -ernment already exceeds the total length of the roads under 
 private management ;\the inadequacy of government super- 
 vision^ which can hardly be remedied, in regard to the grow- 
 ing inconveniences characterizing railroads under corporate 
 direction, has added largely to the numbers of those in favor 
 of a state railroad system, while the attempts to bring about 
 reform by laws have shown the futility of hoping; for a sat- 
 isfactory improvement through legal measures, without 
 trenching materially on established rights and interests. 
 The government, therefore, did not hesitate during the de- 
 bates over the budget at the last session of Parliament to 
 intimate to the members of the investigating committee that 
 the ultimate aim of the railroad policy was the realization 
 of the state railroad system, with a prospective view to the 
 introduction of an act empowering government to acquire 
 such private railroads as might be desirable. 
 
 It may be safely said that, to an impartial judgment, it is 
 certain that the question whether the state railroad system 
 is desirable for Prussia is no longer an open one ; it is already 
 
decided in the affirmative. And although the unsettled state 
 which the existence of powerful independent corporations 
 in competition with the normally growing governmental 
 railroad system will cause must be tolerated for a longer or 
 shorter time, in consideration of the financial convenience of 
 the government, it is impossible, as well as incompatible with 
 the interests of the country, to maintain them permanently, 
 and they would in addition be a source of economical injury 
 of serious import. 
 
 Although after the above justification of this system it 
 may hardly be thought necessary, we will endeavor in the 
 following explanation to pass in review the chief points 
 which have influenced the government to adopt and carry 
 out the state railroad system. 
 
 i. 
 
 THE STATE RAILROAD SYSTEM AND ITS DEVELOPMENT 
 IN GERMANY AND PRUSSIA. 
 The development of the railroad in modern civilized coun- 
 tries has been dissimilar and disproportionate, according to 
 the conditions and peculiarities of the various nations. 
 
 The wealth of the country and the density of its traffic 
 have determined the extent of the outward development; 
 while its natural conditions, its relations, the peculiar char- 
 acteristics of its people and the nature of its institutions 
 have determined the method of that development. 
 
 In England and the eastern portion of the United States, 
 the extensive commerce and great wealth prevalent have 
 developed the railroad system to an extent that Germany 
 in its present condition cannot attain, nor do her necesssities 
 demand it. The magnitude of the arrangements for the dis- 
 patch of traffic, the frequency and high speed of the trains 
 and many other of the operating arrangements of the rail- 
 roads in those parts, are only warranted where the wealth 
 of the country furnishes the means for such an outlay, and 
 the augmented expense is covered by a corresponding in- 
 crease of .business. 
 
 The extent of this development is bv no means to be as- 
 cribed to the effects of the system under which it has occurred. 
 The latter is the result of the domestic and foreign conditions 
 and relations of these countries, of the national character and 
 state institutions, and, in fact, of the internal economy of 
 the countries. The geographical positions of both England 
 and North America render the national defence 
 
7 
 
 of secondary importance in considering the system of rail- 
 roads, when compared with the requirements of commerce 
 — the commercial and industrial element in the population 
 of both countries is vastly the most influential.- In both 
 countries, the government's care for the public welfare is 
 narrowly limited. The furtherance of personal interests is 
 left to the individual, the advancement of common interests 
 to the narrow circle of those immediately concerned. In 
 both these instances, the great independence and capacity 
 for action of the individual gives the widest scope to private 
 initiative, and renders the intervention of the government 
 superfluous. It may thus be understood how private rail- 
 road management, in spite of the efforts made of late years 
 to combat the theory, is thus credited with being most favor- 
 able to the perfection of railroad development. 
 
 It is otherwise in Germany, where different conditions 
 have altogether changed the direction of development. The 
 national defense, which, owing to the geographical situation, 
 is of grave importance, the influential, if not paramount, 
 military and official element in the population, the fostering 
 care of the government for the public welfare in every de- 
 partment, the lesser effective capacity of the individual — all 
 these circumstances point to the government as the most 
 suitable conductor of enterprises, particularly as the political 
 constitution of Germany presents gra ve difficulties to private 
 railroad undertakings. As early as Nov. 3, 1838, this view 
 occurred to the revisors of the law regulating railroad enter- 
 prises, and they were only influenced by political considera- 
 tions then existing, and ignorance of the importance and fi- 
 nancial range of railroads, in giving scope to private 
 railroad ventures provisionally. Formed by circum- 
 stances, state railroad management has manifested 
 a more vigorous development as compared with pri- 
 vate railroad management. Until the year 1850 the rail- 
 roads in Prussia were under private control exclusively, with 
 or without financial assistance from the government ; from 
 that period, with the removal of the before mentioned politi- 
 cal difficulties, the government makes its appearance as a 
 railroad proprietor, partly by building or purchasing on its 
 own account considerable lines of railroad (often because no 
 capitalists could be found willing to take up the enterprise), 
 and partly by assuming the management and control of 
 private railroads for account of the owners. Thus we find 
 by the side of the private railroad management a state rail- 
 
8 
 
 road property of growing proportions, though not formed 
 into any system. Out of this confused state of affairs arose 
 gradually the so-called "mixed system," which owed its 
 origin to the efforts made to transform this disjointed, un- 
 systematic condition of the state railroads into a well ar- 
 ranged and serviceable transportation system of leading 
 lines, securing to the state a controlling influence in the con- 
 duct of transportation. The necessitous condition of certain 
 private roads, in themselves eminently unfitted for private 
 management, as well as the liberal means placed at the dis- 
 posal of the government in 1870-71, in the shape of the war 
 indemnity, favored the tendency toward a well-planned ex- 
 tension and constitution of the state railroad system. In this 
 manner, out of the so-called "mixed system" arose natural- 
 ly a majority of roads under state management, bearing in 
 itself the reasons for its progress, and which will eventually 
 result in the final transfer of the great controlling lines of 
 private railroad into government hands. According to the 
 method of development which is demonstrated in the fore- 
 going explanation, the pure state railroad system for all 
 leading Prussian roads will be the ultimate phase into 
 which the present unsettled condition of railroads will find 
 its solution. 
 
 DEVELOPMENT OF THE RAILROAD IN MODERN CIVILIZED 
 COUNTRIES— TENDENCY TO CONCENTRATION. 
 
 In order to recognize the final aim of the national railroad 
 development as an absolute necessity demanded by circum- 
 stances, the evolution of the railroad system in the principal 
 civilized countries necessarily comes under observation. 
 
 At the first origin of railroads, the extent of the individual 
 lines was confined to a length of barely 90 to 140 miles. 
 The number of these independent corporations was rapidly 
 increased, however, as soon as they were found to be pay- 
 ing undertakings, the rate of increase being about propor- 
 tionate to the increase in mileage. The necessity for the 
 establishment of direct communication between the chief 
 traffic centres, by agreeing upon through trains and tariffs, 
 and the consequent negotiation necessary between the differ- 
 ent corporations respecting interests and arrangements com 
 mon to all, soon made manifest the difficulties connected with 
 a large number of separate managements. To this came tht 
 experience that with the extension of the administration tho 
 general expenses were proportionately reduced, and the 
 
 / 
 
9 
 
 constantly demonstrated superiority of the lines under one 
 management over those made up of a number of short roads, 
 with their attendant disjointed direction, with which the 
 former came into competition. In addition, therefore, to 
 the extension and greater proximity of lines in the al- 
 ready existing network of railroads, in addition to the con- 
 stant starting of fresh enterprises, we find an early tendency 
 to a fusion of the separate corporations into great systems. 
 The nearer the construction of the network of the trunk 
 lines approached completion, the more marked this tendency 
 became. The avoidance of unnecessary outlay and un- 
 necessary friction, and the necessity for a quicker and 
 more simple agreement respecting matters common 
 to the different lines interested, the formation of 
 through routes for the principal currents of traffic, and last 
 but not least the superior influence naturally exerted by the 
 more powerful corporations over the smaller companies sit- 
 uated in their vicinity, all these circumstances have assisted 
 in bringing about the consolidation of ownership, conduct or 
 interests, which has resulted in a diminution of the number 
 of independent administrations. In the countries where the 
 private railroads prevail, we find a few great corporations 
 that have gradually absorbed the other smaller ones. In 
 those countries where a strong state railroad administration 
 has been developed side by side with the private roads, the 
 government has naturally had an important share of the 
 smaller roads thus absorbed. In all countries which possess 
 a fully- developed system of railroads, we shall be able to ob- 
 serve the gradual completion of a few great railroad sys- 
 tems, beside which, with the exception of secondary 
 branches for the accommodation of local traffic, no new en- 
 terprise of any importance can be undertaken. Only in 
 France, in consequence of peculiar events that have lately 
 transpired, state railroad administration has attained a posi- 
 tion by the side of the private lines that promises the possi- 
 bility of a vigorous development in the future. On the other 
 hand, in Belgium, Bavaria, Baden, Wurtemburg, Saxony, 
 and latterly in Prussia also, it is the government through 
 which the concentration of railroads, as demanded by the 
 age, is consummated. In Austria, Italy and Russia, also, we 
 find that this process has already commenced, although the 
 more backward state of the railroad system in those countries 
 has not yet made the necessity so pressing. 
 We may see therefore that from the period when the de- 
 
10 
 
 velopment of the railroads and the augmentation of traffic 
 have reached a certain limit, the phenomenon of the fusion 
 of the roads into one or a few great transportation syst3ms 
 makes its appearance. This appearance points unmistak- 
 ably to a necessity, founded in the nature of railroad op- 
 eration and the requirements of railroad traffic, of a single 
 administration within a certain district. Whether this con- 
 solidation be left in the hands of private companies, or 
 whether it be undertaken by the government, we must 
 acknowledge that we have on one side the advantages that 
 accompany unity of operation and administration, on the 
 other the disadvantages that experience shows division and 
 diversity in the railroads bring with them, both operat- 
 ing in furtherance of the realization of the constantly grow- 
 ing tendency to consolidate the lesser with the more im- 
 portant enterprises, and bringing us nearer the final object; 
 the formation of one grand system of intercommunication 
 under a single direction. 
 
 GOVERNMENT PROTECTION OF SUCH PUBLIC INTERESTS AS ARE 
 AFFECTED BY THE RAILROADS. 
 
 The railroad laws of all countries are founded on the ex- 
 perience, that the most important public interests are affected 
 by railroads, and the responsibility of the protection and 
 advancement of these interests rests with the government. 
 For this reason we find imposed on the roads, with their 
 legal privileges, a number of obligations respecting their 
 construction, operation and administration, by which the 
 otherwise free inclinations of the proprietors are limited m 
 the public interest. In all legislation the railroads are, 
 therefore, placed under the supervision of the state the 
 officers of which are granted well defined and regulated 
 authority for the protection and preservation of public in- 
 terests ' None of these legislative measures has been limited 
 to this indirect supervision by the state however ; in every 
 case, in addition to providing for the careful regulation of 
 the railroads in their relation to public interests, the idea as 
 foreshadowed that this regulation may not suffice for the 
 purpose intended, that at the same time some other 
 way must be kept open by which the govern- 
 ment may provide effective protection to the public 
 interests; that their future development may demand in- 
 stead of the indirect, supervision the direct administration of 
 the railroads by the government. In all laws relating to 
 
this subject, from the earliest initiation of railroad enter- 
 prises, the idea has been incorporated and is expressed in 
 many different ways, that the possible acquisition of all 
 roads must be reserved as a government right, whether it be 
 arranged by act of legislature, or in return for several 
 privileges granted, that on the expiration of the concession,* 
 after the lapse of a certain time, the line is to become govern- 
 ment property; or whether it may have been stipulated that 
 after a certain stage of development of the separate private 
 railroads has been attained, the government shall have the 
 right to acquire them on payment of a previously determin- 
 ed sum of money. To be sure, these arrangements have, so 
 far as is known, not yet been practically carried out, either 
 because the stipulated period of time has not yet elapsed on 
 the expiration of which the government rights come into 
 effect, or because the legal or agreed conditions respecting 
 the means of acquisition have not proved advantageous to 
 the interests of the government. 
 
 In spite of this, the experience of the inadequacy of state 
 supervision for the protection of public interests concerned 
 has caused the question of the advisability of transferring 
 the railroads to the government to be by degrees raised uni- 
 versally. In the proceedings of the legislative bodies and in 
 the reports of investigations instituted by governments, in 
 discussions in the public press, and in countless pamphlets 
 and treatises, this same question has been the subject of ex- 
 haustive discussion. Already we find m the railroad policy 
 of many of the European countries a tendency by appropri- 
 ate acquisition of private roads to placing railroads in the 
 hands or under the predominant influence of the govern- 
 ment. Recent events in Bavaria, Saxony, Belgium, France, 
 Italy and Austria* have shown in the national policy the 
 I extent and importance of this tendency to turn the railroads 
 lover to the state. In Prussia this policy has been encouraged 
 by the great extension of the state railroads of late years 
 and the approval of last year's Parliament, and it only re- 
 mains to be determined what time shall be fixed for the 
 completion of the system. 
 
 It is evident from the foregoing that, in legislation, in the 
 
 * In most European countries one of the provisions of railroad 
 charters is that after the expiration of the period of concession 
 (which in France is 100 years) the road shall become the property 
 of the government.— Translator. 
 
 t They will be found elsewhere treated as a separate subject. 
 
1£ 
 
 current of popular opinion, and in the policy of the different 
 states, the opinion is being urged more forcibly than ever, 
 that railroads are of such extended and constantly increas- 
 ing importance to public welfare that they cannot be per- 
 manently abandoned to private management, but should be 
 placed in the hands of the government. 
 
 In the development of the railroad system, as we have en- 
 deavored to explain above, the following appear unmistak- 
 ably as the ends which it is expected to attain: 
 
 1. Complete unity of administration and operation within 
 a certain commercial district with government boundaries. 
 
 2. Direct attention by the government to public interests, 
 which do not permanently find sufficient furtherance and 
 protection where the railroads are in the hands of private 
 corporations whose object is gain. Just as clearly as we find 
 these aims expressed m the foregoing explanation of the de- 
 velopment of a railroad system, are they manifested, on 
 close observation, in its peculiar nature. 
 
 The exigencies of railroad management and the commerce 
 these roads are expected to foster demand the consolidation 
 of the owning, administering and operating powers into one 
 paramount authority. Meanwhile, with the growing im- 
 portance of the public interests depending upon railroads, the 
 inadequacy of private management and state supervision be- 
 comes daily more obvious, so that the problem of taking the 
 chief management of inland railroads into its own hands is 
 imperatively forced on the government. 
 
 ADVANTAGES OF A SINGLE ADMINISTRATION OF ALL 
 THE RAILROADS OF THE COUNTRY WITH REGARD TO 
 CONSTRUCTION. 
 
 (a.) DISADVANTAGES OF COMPETITION IN BUILDING. 
 
 The advantages of complete unity in the management and 
 operation of an extended railroad system controlling traffic 
 territory enclosed within state lines, compared with the 
 economical disadvantages resulting from the piecemeal 
 direction of different managements strung together without 
 system, are so considerable that they not only outweigh the 
 highly lauded but supposititious advantages of competition, 
 but, m the end, cannot be dispensed with without serious 
 economical injury to the country concerned. 
 
 This question we can now leave, to discuss the enormous 
 waste of the national wealth which is caused by the com- 
 \ petitive construction of different railroads in the same traffic 
 
13 
 
 district. As soon as the system of leading railroads in the 
 interior can be regarded as pretty nearly complete, such 
 capital as may be invested in the construction of superfluous 
 roads may be regarded as lost, without taking into account 
 sums that may in the future be thrown away on the con- 
 struction of unnecessary competing lines. Although it is 
 hardly possible to estimate the amount of money thus 
 wasted, still the loss and the waste of national wealth thus 
 occasioned must not be underrated. Many and extensive 
 lines, numerous and costly structures (bridges, stations, etc.) 
 have been constructed at an expense of hundreds of millions 
 [of marks], solely to insure the independent development of 
 already-established enterprises, or in order to exercise compe- 
 tition, or to meet competition that may have arisen. Although 
 we cannot regard all these works as absolutely unproductive, 
 they nevertheless entail a deplorable waste of the national 
 wealth, as the money expended on them has been withdrawn 
 from other and more useful public enterprises. 
 
 With these direct losses, entailed by competitive railroad 
 construction, these evil consequences are by no means at an 
 end . The hasty and precipitate competition of the different 
 railroads has contributed not a little to the over-production 
 from which our commerce and industry still suffer, and may 
 long be subject to. Innumerable industries are to a great 
 extent dependent on railroad construction and operation, so 
 that over-production in this department naturally recoils on 
 the manufacturing interests. This precipitation, the hurried 
 competitive construction, the excessive production of rail- 
 road supplies, have disarranged the standard by which the 
 normal development of railroads is judged, and have given 
 rise to the extension of investments and operation in all in- 
 dustries connected with the construction and operation of 
 railroads far beyond their requirements. It would not be 
 unjust to attribute to this senseless competition in building 
 during the period of original construction a good share of the 
 blame for the present business depression, a depression which 
 would have affected the national industries still more severe- 
 ly, if the government had not stepped in, and with the means 
 acquired by a fortuitous train of circumstances, began to 
 build considerable additions to the state railroads, and thus 
 infused new life into the almost prostrate industries. 
 
 It would be far from safe to accept the theory that the 
 disadvantages accompanying competitive construction are 
 no longer to be apprehended as soon as the construction of 
 
14 
 
 the main lines is regarded as finished for all conceivable 
 time. The question of the activity of a railroad in con- 
 struction is by no means to be considered disposed of when 
 the line is opened for traffic. At this point a new task is 
 begun, namely, to utilize as completely as possible the lines 
 constructed within the territory they include. For this 
 purpose, the connections of sources of traffic situated on 
 either side of the road have to be established and improved. 
 Factories, industrial establishments, coal-pits, mines and 
 quarries of all descriptions are to be connected with the 
 main line by the construction of side-tracks. For tranship- 
 ments from the cars to vessels and vice versa, side-tracks, 
 terminal facilities at harbors, transhipping arrangements of 
 all kinds are necessary to complete the connections. At such 
 points on the line as may be desirable for receiving traffic, 
 stopping places must be established or new stations built, 
 according to circumstances; with the growing traffic, the 
 arrangement of the depots, the sidings and other structures 
 must be altered and enlarged, and through the country con- 
 tiguous to the main line local branches must be run to afford 
 a market for the country's produce, and provide means of 
 intercommunication for commercial and growing localities, 
 in short, to arrange the many different contrivances which 
 tend to stimulate local business and develop the full value to 
 the railroad of the district through which it runs. The ex- 
 penditure that occurs for building purposes of this descrip- 
 tion, after the road has been apparently fairly opened, ab- 
 sorbs a considerable and proportionately large share of the 
 total capital devoted to construction. It will readily 
 be seen how competition can cause an enormous waste 
 of capital in this respect, where in industrial districts 
 like those of the Upper Silesian and Rhenish- Westphalian 
 coal fields, it determines the policy of construction of seve- 
 ral corporations which are all trying to do the same task. 
 The closer together the competing main lines are, the more 
 intricate are the crossings and re-crossings of their side con- 
 nections and branches, and the greater the cost of construc- 
 tion. The cost of land is increased immeasurably, and the 
 unavoidable provisions for the safety of working call for a 
 constantly increased expenditure. Costly passages of one 
 line over or under the others take the place of level tracks 
 and level crossings of highways and other railroads. The 
 expense of the signal anft'safety apparatus is also considera- 
 ble. It is only necessary to glance at the map of the Rhenish- 
 
01 f* * 
 ir> 
 
 Westphalian coal fields, in which the lines of the three great 
 Rhenish railroads with their hundreds of branches and con- 
 nections with the pits, mines and industrial establishments 
 cross and reoross one another in an apparently inextricable 
 manner, to realize what a squandering of capital has taken 
 place in the ( construction and operation of such a tangled 
 net-work of roads, the condition of which is due, not to the 
 demands of commerce, but to the competitive tendencies of 
 the projectors. The entry into the coal fields of the West- 
 phalian Railroad, by the continuation of its line from Wel- 
 ver via Dortmund to Oberhausen, would entail for the estab- 
 lishment of connections with the neighboring mines and 
 works a fresh waste of several millions of capital. There 
 remains no doubt that the requirements of traffic might have 
 been provided for by the outlay of a fraction of the capital ex- 
 pended in construction, if a well planned, connected single 
 system had taken the place of the competitive constructions 
 undertaken in consequence of the conflicting interests of the 
 different constructors. With the creation of new works and 
 the construction of new branches and connections, this ex- 
 penditure of capital uselessly employed and lost to the 
 country will be increased, and likewise the working expen- 
 ses must increase continually by reason of the greater com- 
 plication and number of the lines. 
 
 (&.) WITH REGARD TO OPERATION— DISADVANTAGES OP A 
 DIVIDED AND COMPETITIVE MANAGEMENT— OF THE DIREC- 
 TORS, NUMBER OF OFFICIALS AND BUSINESS TRANSACTIONS. 
 
 The loss to the nation in consequence of the useless squan- 
 dering of building funds in competitive construction is thrown 
 into the shade by the daily increasing disadvantages that 
 constantly result from the independent management and 
 operation of the different roads from the want of a syste- 
 matic connection of the several railroad districts. We have 
 here to do, not with a single loss which might be lived down 
 in the course of time, but with a constant increase of work- 
 ing expenditures that keeps down the income from railroads, 
 and with a continuous annoyance to the public. 
 
 In Prussia we find in the year 1877 50 independent rail- 
 road managements, in addition to which there were 45 super- 
 visory councils of joint-stock companies, controlling collec- 
 tively 17,948 kilometers, [about 11,150 miles] of railroad in 
 operation, giving each management an average of about 359 
 kilometers [223 miles]. If we consider only the roads under 
 
16 
 
 independent private management, we find 39 managements 
 with a total length of 9,648 kilometers [6,000 miles], or an 
 average of 247 kilometers [153 miles] each, and among them 
 we have no less than 12 companies operating less than 100 
 kilometers [62 miles] of railroad. Not one of these roads 
 forms in itself a complete system with an exclusive, inde- 
 pendent traffic territory ; but the different lines rather run 
 in motley confusion alongside of or across each other. 
 
 It stands to reason that such a multiplicity of independent 
 administrative machinery, comprising directories and super- 
 visory councils, with their considerable salaries and per- 
 quisites, with their central offices and liberal staff, the per- 
 sonnel of which may often be counted by hundreds, (in 1877 
 there were in Prussia 8,518 officials and operatives with a 
 total income of 16,212,836 marks [$4,050,000] employed in 
 the general offices of the Prussian railroads), are 
 the cause of an outlay that might.be reduced to a very con- 
 siderable extent from its present amount, if the roads were 
 under a single organized management. It would indeed be 
 by no means possible to transact all the business now m the 
 hands of different authorities in one place and at the same 
 time ; on the contrary, not only could local officials be re- 
 sponsible for direct operation, according to the nature ot the 
 business, but the complete centralization of all other admin- 
 istrative business would be avoided as neither useful nor 
 practicable; yetwith the number of managements ^taskot 
 management would be appreciably simplified. With tne 
 abolition of the joint-stock companies all the expenses would 
 be avoided that are incurred by the directors on account ol 
 general meetings, auditing accounts, fixing of dividends, 
 etc Far more considerable is the labor demanded m conse- 
 quence of the reciprocal business intercourse necessarily ac- 
 companying a number of independent managements It is 
 in realitv the chief work performed by directories. It can 
 hardly be realized to what an extent the correspondence and 
 consultation necessary for the achievement of this ob 3 ect is 
 carried The negotiations respecting mutual tarift regula- 
 tions or similar traffic arrangements, the detailed statements 
 of claims arising in the business of roads associated in 
 " lines " the agreements concerning the use of cars, on man- 
 agement at transfer stations or other common concerns 
 the time-tables and the conduct of traffic, the disputes of 
 the various competing lines-all these transactions require 
 an expenditure that would be avoided where, as m a single 
 
17 
 
 organization, such questions would all be referred to the 
 same authorities. 
 
 TARIFF ARRANGEMENTS. 
 
 Prominent among those regulations forming the subject 
 of public complaint, and imposing an amount of extra labor 
 on the management itself that cannot be imagined except 
 by those concerned, we find the number of rates and com- 
 binations of rates employed in freight traffic, often arbitrary, 
 complicated, confused and varying. This evil will remain 
 without remedy as long as a number of independent organ- 
 izations exist, each exercising the right to make all such 
 arrangements on the lines of road it controls. If it is 
 found difficult to effect among the directors a minute agree- 
 ment, either verbal or by means of correspondence, respect- 
 ing the principal features of the tariff, which must include 
 not only the tariff proper but also the determination of what 
 the shares of each road shall be in the freight receipts; how 
 much more time, labor and expense must be expended in 
 the execution of such mutual agreements ? After the bureau 
 of tariffs has fixed a schedule of rates which is to be pub- 
 lished, we have to undergo the waste of time incurred by 
 the tedious calculation at the hands of the accountants as 
 to how much shall be allotted to each road in the combina- 
 tion. Is the schedule luckily published and not perhaps 
 rendered obsolete by new resolutions of the associated 
 roads, we next undergo the adjustment operation* 
 which consists of a minute calculation, undertaken at 
 stated periods, generally monthly, as to how much of the 
 total receipts each road in the combination is entitled to. It 
 is in these tariff and accounting offices that we find a whole 
 army of officials, which with a single administration could 
 not be wholly disbanded, it is true, as it would be required to 
 compute the receipts of the different receiving points, yet 
 could be reduced in number by at least one half. Some idea 
 of the waste of power caused by these computations may be 
 obtained from the following figures : The German railroads 
 possessed in addition to 63 artfully arranged local tariff s, with 
 their various classification, numerous exceptional and special 
 tariffs and clauses, 184 general tariffs for the through traffic 
 interchanged on the German railroads, 351 special rates for 
 particular articles or freight, and in addition 199 general 
 tariffs for international through traffic, with 314 special 
 rates for particular articles of freight. The total receipts of 
 
18 
 
 the Prussian railroads from their freight traffic alone in 1877 
 was 373,419,716 marks (about $98,354,000) ; almost two- 
 thirds of this amount, viz., 245,265,634, was from inter- 
 changed freight, and only 128,154,072 marks from local 
 freight traffic. In consequence of this complex system of 
 accounts, it not infrequently happens, in spite of the enor- 
 mous number of employes, that months, often a year, will 
 elapse before the shares of each road in a certain tariff are 
 properly determined. It has even happened repeatedly that 
 a schedule of rates has been out of date for months, before 
 the prospective shares of the roads concerned could be 
 determined. 
 
 TIME TABLES. 
 
 Similar inconveniences to those arising in the freight de- 
 partment occur with the passenger traffic of railroads, in 
 consequence of the division and unsystematic arrangement 
 of the different managements. 
 
 Here we have a state of affairs that more closely concerns 
 public interests and convenience. We refer to the arrange- 
 ment of the passenger train schedules. The preparation of 
 a joint time-table for the main lines of travel and their 
 branches, with suitable connections, forms a semi-annual 
 task of railroad conferences. The time-tables for the next 
 six months are founded on the conclusions reached by these 
 conferences. Such a periodical regulation of the time 
 schedules is the cause of a constantly recurring series of dif- 
 ficult and tedious proceedings, in which, as may be supposed, 
 each road has its particular interest at heart, and is disposed 
 to avoid, as far as possible, any sacrifice of its own to the 
 public interests. In spite of the frequent waste of time, 
 money and labor demanded to achieve a harmonious time- 
 table, the result is often far from satisfying the reasonable 
 desires of the public, so that complaints never cease of in- 
 sufficient connections, and of the narrow-minded and reckless 
 pursuit of their competitive interests by the different roads. 
 A removal of these disadvantages, and the possibility of ar- 
 ranging a time-table, without delay or difficulty, that shall 
 not be brought by competitive interests into collision with 
 the public welfare, can only be secured by a thorough unity 
 in the management and operation of the railroads. 
 
 ADJUSTMENT OF CLAIMS. 
 
 To what extent a proper transaction of business is hin- 
 dered by the profuse correspondence and red-tapeism conse- 
 
19 
 
 quent upon the existence of a number of small corporations 
 is plainly shown in the adjustment of claims arising from the 
 through traffic of connecting lines. The time occupied in the 
 adjustment of a claim made for a traffic in which several 
 managements are involved is well known to the commercial 
 public by the time they generally have to wait for a settle- 
 ment. That this delay is not caused in many cases by pro- 
 crastination is hardly understood, but it is more easily re- 
 alized when we remember that the settlement requires an 
 agreement of all the roads involved. It must be subjected 
 to a minute test and examination on the part of each road, 
 as far as the object of inquiry relates to the part of the route 
 it controls. That these negotiations, in spite of the con- 
 tracts existing among the German railroads with respect to 
 the adjustment of such claims, as well as the distribution of 
 the responsibility for damages and lost baggage or freight, 
 in important cases seldom ends in an agreement among the 
 different roads as to each one's share of the responsibility, is 
 readily explained by the many conflicting interests. Often 
 enough a judicial decision is found necessary to bring about 
 a settlement between quarreling managers, which could 
 never happen were the managements undivided. , 
 
 TRANSFER STATIONS. 
 
 In addition to numerous offices for the adjustment of 
 claims, with their dozens of officials who occupy themselves 
 exclusively with the transaction of such business, the man- 
 agers require for the possible obviation of such claims a 
 further and not inconsiderable increase in working expenses 
 to provide the arrangements made by each road at its junc- 
 tion with another to secure the proper transfer of all freight 
 and baggage. Even this increased expenditure includes only 
 a portion of this unbusinesslike and totally unnecessary out- 
 lay, caused by the unpractical and unsystematic crossing 
 and entanglement of the roads belonging to different sys- 
 tems. In Prussia alone there are 175 stations where different 
 lines come in contact, and where a transfer of passengers 
 and freight from one road to another takes place. These 
 figures do not include frontier transfer stations, the depots 
 of the Berlin Junction Railroad, and those points where only 
 state railroads come in contact. 
 
 At a large number of these transfer points, the working 
 force of each of the different roads (we find frequently three 
 and four, sometimes even five roads running together,) is 
 
so 
 
 separate and independent. Often the depots are separate, 
 and, to the great inconvenience of the traveling public, 
 situated at considerable distances one from another. At 
 other depots we find in a common depot building that each 
 road has its separate ticket office, a separate baggage room 
 and often its separate waiting room. Separate freight de- 
 pots with their special loading apparatus, separate freight 
 houses and freight offices, together with their own switching 
 yards, costly of construction and operation, are found where 
 one of the stations would be fully sufficient to accommo- 
 date the traffic. Every road has its own switching 
 service with separate officials, its own reserve loco- 
 motive service with its own locomotives, its own car inspec- 
 tors who at the same time inspect the same cars ! It 
 sometimes happens that the managements are constrained 
 to avoid senseless outlay to organize a single cooperative 
 service at one or a few stations for certain branches of the 
 service. If after long negotiations they succeed in arrang- 
 ing an extended and complicated system of general service, 
 it is a source of constant and costly calculation and uncom- 
 fortable quarrels. By simplifying this transfer service, al- 
 most universally provided with double the required working 
 force, by the establishment of practical working arrange- 
 ments and by the consolidation and rational distribution of 
 the service, large expenditure may doubtless be avoided, al- 
 though it is not possible at this period to give the exact fig- 
 ures of the saving that could be effected at the 175 Prussian 
 transfer stations, if the railroad service were under a single 
 management. 
 
 DISPOSITION AND UTILIZATION OF CARS. 
 
 The evil consequences of the division of railroad property 
 make themselves felt to a further extent in the lack of a 
 common stock of cars. We find that in addition to owning 
 the road, each corporation has its own cars, and expects to 
 exercise absolute control over their employment for its own 
 private interest. It is true that in accordance with the 
 directions included in Article 44 of the constitution of the 
 German Empire, the transfer of rolling stock from one road 
 to another must be permitted on payment of an agreed price ; 
 and an arrangement has been made concerning the reciprocal 
 use of the cars by the so-called tk Car Regulations"* ; but, in 
 
 * See the Railroad Gazette, page 198, 1879, "German Regula 
 tions for the Interchange of Cars."— Translator. 
 
21 
 
 consequence of the multiplicity of owners, this does not 
 obviate the necessity for an increased number of officials, and 
 only allows of an incomplete utilization of the cars. 
 
 It is evident that the use of the rolling-stock by another 
 corporation could not take place without payment ; on the 
 contrary, a certain compensation must be secured to the 
 owners, which compensation, by the u Car Regulations" be- 
 fore mentioned, is made up of a time and mileage rental ; the 
 first providing for the loss to the owner during the time the 
 car is withdrawn from his employ, the latter being compen- 
 sation for the wear of the car, and computed according to 
 the distance the car has run. In order to calculate this car 
 hire satisfactorily to both parties concerned, it is necessary 
 to keep an accurate record of the time and distance the car 
 has run on foreign roads. Accordingly, it is necessary to 
 record the transfer station where the car goes on to the con- 
 necting road's track, and the point on that line where the 
 car starts on its return journey, as well as the time of arrival 
 and departure of the car ; this is then reported to the account- 
 ing department. How considerable this reciprocal use of 
 cars has become may be gathered from the fact that of the 
 12,333 freight cars owned by the Rhenish Railroad Com- 
 pany in 1878, an average of 2,798 were running daily on 
 other lines, and that the number of Rhenish Railroad cars 
 transferred to other lines, or foreign cars received by the 
 Rhenish Company, was 2,347 daily. With a single operating 
 management of all railroads of the country, the noting and 
 reporting of these cars, as well as the occupation of 
 the officials employed in managing this business, 
 and the central accounting department, by which 
 in 1 877 for the Prussian railroads alone claims rep- 
 resenting 15 millions of marks [$3,640,000] in car 
 rent were liquidated, could be dispensed with, so that only a 
 few officials would need to be retained for the purpose of se- 
 curing the proper circulation of the cars through the whole 
 united system. At the same time the expense and delays to 
 traffic due to the fixing of the amount of car damages and 
 the liquidation of the cost of repairing cars, which 
 necessitates the presence in the shops of the several compa- 
 nies of a large number of officials, could be dispensed with. 
 
 To what extent the reasonable utilization of the cars is re- 
 tarded by the multiplicity of owners, and how much the 
 working capacity of the rolling stock is reduced in conse- 
 quence, may be learned from the following figures: In 1877 
 
22 
 
 the distance traveled by the car axles in their revolutions, 
 on all the Prussian railroads, amounted to 3,681 millions of 
 kilometers [2,286,000,000 miles], during a period corre- 
 sponding with 2,338 millions cf kilometers the cars to which 
 the axles belonged were loaded, and during 1,343 millions of 
 kilometers of revolution they were empty, showing that one- 
 third of the travel was made with empty cars. The united 
 Magdeburg & Halberstadt and Hanover & Altenbeken 
 roads made a still poorer showing; 175 million kilometers of 
 the total distance run by their axles were under full and 103 
 million kilometers under empty cars. 
 
 It is, to a certain extent, an established and hardly change- 
 able condition, that the bulk of the freight in any district 
 moves in only one direction. Coal-fields, in the neighbor- 
 hood of which we often find an important iron industry 
 springing up, send their products in all directions, but a re- 
 turn freight, in any quantity, for coal-cars is very 
 seldom procured. Large cities receive their supply of live 
 cattle in cars constructed specially for the transport of ani- 
 mals, and hardly capable of use for any other purpose: they 
 must all be returned empty. In the neighborhood of the 
 seaport cities it has been observed that the inequality exist- 
 ing between exports and imports is the cause of the cars run- 
 ning empty one way and full another. The chief cause of 
 the imperfect utilization of freight cars, however, is the rer 
 stricted use to which they may be put when running out full 
 and returning empty. In busy times, when the roads are 
 haunted by a dread of a lack of cars, each company seeks to 
 secure the return of its cars from others as quickly as possi- 
 ble ; while, when the times are dull and rolling stock in ex- 
 cess, they hurry the cars from other companies in and out 
 again in order to save as much as they can on rent. 
 
 These considerations have led to the regulation of the re- 
 ciprocal use of cars within the limits of the German Railroad 
 Union.* According to directions embodied in Art. 44 of the 
 Imperial Constitution, already referred to, cars, when once 
 loaded, must go direct to their destination, reloading on 
 foreign lines being confined to freight for transportation to 
 stations on the home road, or some station on the route to 
 that road. 
 
 The bad effect of these directions, unavoidable under the 
 present state of affairs, is to affect very greatly the utiliza- 
 tion of interchanged rolling stock, and its practical appli- 
 cation renders it still more hurtful. At such times as the 
 
present, when there is plenty of cars, all the companies 
 strive to employ their own cars for transportation over con- 
 necting lines, whether others be present or not, in order to earn 
 a small amount in the way of car rent. The station officials, 
 in consequence of the forfeit incurred by delay, are anxious 
 to return every strange car home, whether full or empty, as 
 soon as possible. Not infrequently the managements, for the 
 greatest possible advancement of their own interests, will 
 tranship freight carried over their roads from foreign cars 
 to their own at the first opportunity, returning the foreign 
 car and thus saving rent. 
 
 Although the ownership of cars by so many different cor" 
 porations has very bad effects on the transportation system, 
 they may not be very apparent to the public at a period 
 when cars are plentiful. But so soon as from any cause a 
 scarcity of available cars sets in, the disadvantage at once 
 becomes prominent; for the restricted utility and working 
 capacity of the cars, and the many useless empty journeys, 
 considerably increase the evils of a dearth of cars, and they 
 are further aggravated by the strict rules, accompanied by 
 numerous penalties, which the companies generally apply 
 rigorously at such times. With the institution of one con- 
 solidated stock of cars for the largest possible traffic district, 
 the distribution and circulation of the cars could always be 
 arranged according to current requirements, so that each 
 car, on arrival at its destination, would be promptly dis- 
 patched in any direction with whatever freight might be on 
 hand; journeys empty would thereby be avoided, and with 
 an undivided direction of the railroad district the supply 
 of means of transport could be adjusted to the demand. 
 That such an end cannot be attained with the present divided 
 management and the various and competing interests of the 
 numerous independent corporations, and that it can only be 
 achieved by uniting the ownership, operation and adminis - 
 tration of the railroads under one authority, is evident. 
 
 With the united management of the car stock a saving 
 in working material would also be effected. The better 
 utilization of the cars would render a reduction of their 
 number possible, and, by avoiding so many empty trips, we 
 reduce the locomotive power required to do the same 
 amount of transportation. The original cost of the 6,818 
 locomotives and 143,060 freight cars in use on the Prussian 
 railroads in 1877 was, respectively, 349,134,739 marks and 
 439,660,134 marks; total, 788,794,873 marks [four marks 
 
24 
 
 are about equal to one dollar]. An important reduction in 
 the number of cars and locomotives required would, if not at 
 once, in course of the period in which the stock has to be 
 renewed, set free a considerable amount of the total capital, 
 that might be employed for other industrial purposes, and 
 relieve the operative management of the railroad of some of 
 the interest payable. 
 
 tVe have thus demonstrated, that as well in the con- 
 struction and equipment as in the different branches of 
 management, the existence of many independent railroad 
 organizations in one and the same commercial district must 
 result in a considerable increase in the cost of transporta- 
 tion, which can only be obviated by union and amalgama- 
 tion into one dominant system. 
 
 TWO KOADS TO DO THE WORK OF ONE. 
 
 The most obnoxious form in which commercial extrava- 
 gance caused by divided ownership of railroads appears is in 
 the competition of several roads ; that is to say, where the 
 traffic that could be accommodated by one line is divided 
 between two or more. 
 
 Among the mines and iron works of the Ruhr coal dis- 
 trict, we find that no less than fifty-six establishments have 
 complete and independent side-track connections with two 
 roads, and there are twelve that connect with three dif- 
 ferent roads, although either of them, if properly managed, 
 would suffice for the whole traffic of the works. The capital 
 city, Berlin, has at least duplicate railroad communication 
 with almost every commercial centre in Germany ; with the 
 five hundred miles distant industrial district of Rhenish 
 Westphalia it is united by three fully equipped and indepen- 
 dent railroad lines. On two of these lines there are daily 
 three fast through trains, starting at the same xninute each 
 day, and arranged and furnished as through passenger 
 trains. The passenger and also the freight traffic between 
 these points might, in ordinary times, be accommodated 
 easily by any one of the roads. In fact, there is scarcely a 
 place of any commercial importance in Germany but 
 is served by two or more competing corporations, although 
 the traffic does not nearly require them. This duplication of 
 the means of communication, without any other reason than 
 competition, and devoid of any good effect on the transport 
 service, is the cause of such an enormous expenditure that 
 the interests of the roads themselves demand a different ar- 
 
25 
 
 rangement. After the opening for business of the many dif- 
 ferent enterprises that owe their origin to the financial 
 activity following the two successful wars of 1866 and 1870, 
 while at first and during the steady increase of traffic the 
 traffic management was dictated by reckless and unsystem- 
 atic competition, latterly for the purpose of regulating com- 
 petition the so-called " apportionment system" has been 
 largely introduced, which consists in a mutual agreement 
 among the different roads, by which the traffic is divided 
 among them for certain fixed periods. Without consider- 
 ing the endless and disagreeable quarrels among the dif- 
 ferent roads that are inseparable from the system, this 
 method is not calculated to reduce the increase of expenses 
 that is caused by competition. 
 
 ALTERNATIVE OPERATION. 
 
 The division of traffic between the differsnt roads is gen- 
 erally effected monthly, proof in itself that either road is 
 capable of undertaking alone all the business that may exist 
 at that point. This method of apportionment entails on each 
 road the necessity of being fully prepared, on the frequent 
 recurrence of a certain period, to conduct the whole of the 
 transportation. The necessary motive power, the brake- 
 men, trackmen and station hands on full time, and often at 
 increased rates for night service, must be kept constantly 
 ready, although they may perhaps be employed half, perhaps 
 even one-third of the time. A reduction of the force of the 
 road to the strength requisite for the local traffic cannot be 
 thought of, in consequence of the rapid changes that must 
 occur between activity and idleness, and the impractibility 
 of dismissing the superfluous force for the short periods of 
 inactivity. It happens in this wise that the working force of 
 one railroad only out of several connecting lines is fully em- 
 ployed, while the other roads, though fully equipped for ser- 
 vice, have no employment for their capacity. 
 
 CIRCUITOUS TRANSPORTATION. 
 
 The apportionment system brings with it a further increase 
 in the cost of transportation, for the reason that the roads 
 entitled by the agreement to share in the traffic are not al- 
 ways those best adapted by circumstances for that duty ; 
 that is, they are not always the shortest routes or those over 
 which the traffic may be carried most economically. It is well 
 known that freight is carried over roads exceeding in length 
 by 100 per cent, the shortest route. In making the rates, 
 the shortest route is always made the basis, which is founded 
 
26 
 
 in the nature of competition, so that the longer roads which 
 have entered into the contest are compelled to carry at ex- 
 traordinarily low rates per mile, often hardly covering the 
 bare expenses, without benefiting shippers, to whom the 
 short route is also constantly available. The abolition of 
 this indirect transportation service can only be achieved by 
 permanent amalgamation of the railroads, as it is impossi- 
 ble to prevent, otherwise, competition with the shortest route 
 by other corporations in their own interest. 
 
 INCREASE OF WORKING EXPENSES AND OF RATES CHARGED. 
 
 It is inevitable that the increase in the cost of transporta- 
 tion resulting from the circumstances here detailed must 
 eventually impair the capacity of the Prussian railroads and 
 result in prices for transportation which will be permanently 
 so high as to be eminently unfavorable to traffic. The lower 
 the cost the cheaper the transportation rates; a reduction of 
 rates below the actual cost of carrying cannot be expected 
 permanently from the most reckless competition, because 
 interest in the business ceases as soon as this limit is reached. 
 The waste of power occasioned by return journeys and com- 
 petition would finally have to be paid for by the shippers 
 in the shape of higher freight rates, while complete unity in 
 the ownership, management and operation of the railroads 
 of the country will result in a gradual reduction of the 
 actual cost, and leave room to hope for cheaper freights. 
 
 in. 
 
 GOVERNMENT PROTECTION OF PUBLIC INTERESTS AF- 
 FECTED BY RAILROADS. 
 
 The public interests which are involved in the location, 
 construction and operation of railroads require the influence 
 of the government for their protection and advancement. 
 3ut imperfectly recognized at the commencement of railroad 
 development, they were insufficiently provided for almost 
 everywhere. Government confined itself to indirect care, 
 leaving the construction, working and management of the 
 lines to private enterprise, and only limiting the powers of 
 the owners by laws and charters, as the public welfare ap- 
 peared to demand. In the course of forty years' develop- 
 ment, however, the great importance of railroads to com- 
 merce and the whole of modern civilization has been mani- 
 fested, so that the legal regulation of government super- 
 vision of railroads has become one of the most important of 
 legislative problems. That an effective regulation and or- 
 
27 
 
 g'anization of the state supervision of railroads is impossible 
 as a permanency, and that the indirect care of government 
 for the public interests affected is not to be accepted as a so- 
 lution of the problem of government protection and further- 
 ance of such interests, has not yet become a universal con- 
 viction. The regulation of railroads in the various coun- 
 tries still presents a motley picture of the most heterogeneous 
 systems. That among all these systems, the direct and unre- 
 stricted control of the government, and the union of proprie- 
 tary, administrative and operative powers over all leading 
 roads in government hands, form the only effective and 
 practical method of solving the problem, will be manifest on 
 the closer consideration of the important public interests af- 
 fected by the railroads, and the serious claim the advance- 
 ment and protection of those interests has upon the govern- 
 ment. 
 
 The laws protecting and advancing public interests, as far 
 as they are affected by inland railroads, are for the most 
 part contained in the law concerning railroad enterprises, of 
 Nov. 3, 1838, and in the constitution of the Empire. In the 
 railroad law (§ 8, No. 5), the railroads are designated public 
 highways. The exclusive right of carrying on the trans- 
 portation business over them is given to the constructors only 
 for a limited period, at the expiration of ^ hich time others 
 are to be admitted to the business on payment of a stipulated 
 sum (§ 26). On granting the charter the capital stock and 
 the constitution of the company are fixed (§ 1 and § 6). The 
 construction of the road must be according to plans that 
 have been examined and approved by the government in- 
 specting officers (§ 4). The right of eminent domain, for 
 the compulsory acquisition of land, is granted by the state 
 to those who undertake the construction of a railroad (§ 8). 
 With the granting of the charter, the grantees are not merely 
 permitted, but are required, to build and operate the road 
 (§§ 21, 26, 33, 36 and 47). They are bound to keep the road 
 and equipment in a safe and serviceable condition (§ 24). 
 They must carry only on the terms set forth in the published 
 tariff, and without discrimination among their customers 
 (§§ 26 and 32). The tariff itself is subject to government 
 control (§ 32), and must, under certain circumstances, when 
 required by the government, be suitably reduced (§ 33). The 
 corporation is also bound to undertake certain services for 
 the post-office, and to regulate the working of the road ac- 
 cording to certain requirements of the post-office (§ 36). The 
 
28 
 
 enterprise is finally under government supervision, and any 
 breaches in the contract undertaken may be punished by a 
 revocation of the charter. 
 
 In the imperial constitution we first find the idea expressed 
 that the whole of the German railroads should be considered 
 and managed as one connected network (Art. 42.) In conse- 
 quence, the necessity is fundamentally recognized of common 
 standards for the construction and equipment of railroads, 
 and for uniform regulations of track service and operation, 
 of harmonious time schedules for the passenger traffic, 
 through shipments in both passenger and freight traffic, the 
 transfer of cars from one line to another, and the greatest 
 possible agreement of the schedule rates (Art. 42 to 45). 
 The imperial constitution further declares the interests of the 
 national defense and of commerce in general to be those 
 which should shape railroad legislation and supervision. 
 
 In the interests of national defense, the railroads are bound to 
 provide the military authority transportation at uniform re- 
 duced rates, and it is made their duty to yield implicit obedi- 
 ence to the authorities of the Empire with regard to the use of 
 the railroads (Art. 47). The necessities of traffic are declared 
 to be sufficient cause for requiring united management of the 
 lines, their provision with equipment, the establishment of 
 the time-tables and the arrangement of the freight trains 
 (At. 43 to 44). 
 
 In the whole of these national and imperial regulations, 
 the controlling considerations for the protection of public in- 
 terests aff ected by railroads are prominent. 
 
 GENERAL VIEW. 
 
 I Railroads are public highways, the right of transportion 
 over them belonging to the proprietor. The exclusive char- 
 acter of this right is necessitated by its very nature. The en- 
 deavor to divide its exercise among several contracting par - 
 ties, as contemplated in Sec. 27 to 31 of the railroad laws, and 
 to a more considerable extent in the legislation of foreign 
 countries, has proved on the whole practically impossible of 
 execution. The indispensable precautions necessary to in- 
 sure safety and regularity of working allow of the common 
 use of a road by several operating managements for short 
 distances only, and, where it does not relate to the passage 
 of through trains over short connecting routes, only in con- 
 sideration of a mutual understanding. While thus the pro- 
 prietors of the roads have a monopoly of the conduct of 
 
29 
 
 transportation over them, not only private traffic but also 
 the state, on account of the mail and military transportation 
 service, must have recourse to these same proprietors. 
 
 The importance of railroad transportation for all business 
 interests forbids the abandonment of such important rights 
 to private enterprise, except on conditions which will 
 effectually prevent the exercise of the monopoly to the dis- 
 advantage of the public welfare, and will subject the con- 
 struction, operation and administration of the enterprise, so 
 far as the aforesaid conditions are concerned, to the su- 
 pervision of the government. From this general point of 
 view results the problem which devolves upon the state re- 
 specting the permission to construct, the operation and the 
 transportation service of the railroads. 
 
 (a) ON THE PART PERFORMED BY GOVERNMENT IN AUTHOR- 
 IZING RAILROAD ENTERPRISES. 
 
 For the establishment of railroads such demands are made 
 on the national wealth that it becomes an indispensable duty 
 of the state to insure its well regulated and useful application. 
 According to information gathered, the capital invested in 
 the different railroads in all the countries in the world 
 amounts to a colossal sum. As well from the comparatively 
 narrow stand-point of national economy, as from the cosmo- 
 politan view of universal economy, the disadvantages of an 
 ill-planned, unsystematic building of railroads are incalcula- 
 ble, as the capital resources of every county are limited, and 
 capital uselessly employed is forever withdrawn from its 
 proper object — the furtherance of economical development. 
 The idea that every railroad, even when not established in a 
 manner to assist economical development in the most suita- 
 ble form or direction, is useful to the country, is a serious 
 and fatal error that has rendered hundreds of millions of 
 hard earned capital unproductive, that has caused wide- 
 spread commercial distress, and withdrawn from really 
 meritorious works the means of their accomplishment. The 
 expenditure of such enormous sums as are requisite in rail- 
 road construction cannot, therefore, be left to the whims of 
 individuals, although wide latitude may be allowed to the 
 spirit of enterprise and the profitable investment of private 
 capital. It is rather the duty of the government in author- 
 izing railroad undertakings to follow an intelligent, careful 
 and well considered policy, so that the capital of the country 
 shall be expended only where it will prove fruitful, and thus 
 
ao 
 
 what is useful and necessary be secured at the least sacrifice 
 and without economical waste. 
 
 THE PROBLEM OF THE STATE WITH REGARD TO THE ACCOM- 
 PLISHMENT OP RAILROAD ENTERPRISES. 
 
 The successful accomplishment of a railroad undertaking 
 is impossible, unless the projector be empowered, in order to 
 gain possession of the necessary land, to acquire and affect 
 private proprietary rights, and where public interests prove 
 antagonistic, to demand even their limitation to such an ex- 
 tent as may be demanded by the projected structure. The 
 industrial relations of the districts which the railroad 
 divides suffer a disturbing and often in the highest degree 
 injurious change. Enclosed landed property is cut in two, 
 cultivation interrupted and delayed, communications be- 
 tween the two sides of the line by means of public or private 
 roads are broken, transferred, or their utility impaired by 
 the railroad crossings, the water courses are interrupted or 
 removed, the progress of shipping on navigable rivers, as 
 well as the banks of such rivers, are impaired by bridge 
 arches and embankments— in short, every imaginable public 
 interest in the land comes into collision with the construction 
 of the railroad, and as far as may be necessary is compelled 
 to give place to the higher interest involved in the comple- 
 tion of the undertaking. All this but increases the obliga- 
 tion of the state to authorize only those enterprises whose 
 evident utility to the community will justify such an en- 
 croachment on the private rights of individuals and indus- 
 trial interests of small communities. But in order to con- 
 fine the evils and derangements accompanying railroad con- 
 struction to as narrow a limit as possible, it is the business 
 of the government to secure the completion of the structure 
 within a proper time and in a proper manner. To achieve 
 these results, the period to be occupied in building must be 
 fixed by the government, and the whole of the plans and the 
 total estimate of the cost subjected to examination and con- 
 firmation at the hands of state authorities, and the latter 
 must be empowered to compel the completion and equip- 
 ment of the road within the time and according to the ap- 
 proved plans. As the fulfilment of the building agreement 
 by the constructor depends mainly on the provision of the 
 necessary material for construction, government must de- 
 termine the amount of capital required to insure its com- 
 plete provision and systematic supply. 
 
31 
 
 DUTY OF THE GOVERNMENT WITH REGARD TO THE TECHNI- 
 CAL OPERATION. 
 
 The technical working of a railroad calls for the atten- 
 tion and co-operation of the government no less than its 
 construction. The dangerous nature of railroad operation 
 has certainly been reduced to a considerable extent by the 
 technical improvements effected during a forty years' pe- 
 riod of development, as compared with the primitive work- 
 ing arrangements in vogue in earlier years, but on the other 
 hand, a steady increase in the dangers of operation has ne- 
 cessarily been caused by the extension of the railroad sys- 
 tem and the increase of traffic. 
 
 The greater amount of traffic to be accommodated, the 
 more numerous the trains to be despatched, the shorter the 
 intervals between succeeding trains, the more numerous the 
 employes required to make up and despatch the trains, and 
 the more complicated the working and station arrangements, 
 the greater the increase in the dangers of operation. It 
 must be admitted that the means of fulfilling the require- 
 ments of operation have been improved and perfected, but 
 the problem of operation itself has grown more and more 
 difficult and complicated with the increase of traffic, and a 
 constant increase in the number of accidents may be ex- 
 pected. Just as the number of accidents in England and 
 Belgium, in consequence of the extensive development of 
 the railroad systems in those countries, is higher than in 
 other lands, so for the same reasons the number of casualties 
 now is greater than in earlier years. To guard against this 
 constant and unavoidable increase in the dangers of opera- 
 tion, it is the duty of the government to see that all the con- 
 ditions on which the safety of railroad operation depends are 
 conscientiously fulfilled by the companies. For these reasons 
 the projected structures of the road are subject to govern- 
 ment examination and sanction ; on this account we have 
 government supervision of the construction of rolling stock, 
 government control of railroad track regulations, 
 the determination by government of the qualifica- 
 tions of the track-men and engine-men, the examination 
 and approval of the time-tables, the control of the hours of 
 service and distribution of service of the employes entrusted 
 with guarding the road, the reports, inspections and in- 
 quiries into irregularities of trains, respecting the mainten- 
 ance of the road and equipment, the establishment, provision 
 
32 
 
 for and condition of the reserve and renewal funds, as weil 
 as the current condition of the stock of locomotives and the 
 work demanded of and accomplished by the various man- 
 agements. Even all these rules and directions, which are in- 
 tended to secure the regularity and safety of operation, fulfil 
 their object but imperfectly when the management does not 
 conscientiously support the government and carefully meet 
 the requirements that are arising from constantly changing 
 circumstances. 
 
 GOVERNMENT CARE FOR THE INTERESTS OF NATIONAL 
 
 DEFENSE. 
 
 In their capacity as public carriers, the railroads are 
 primarily designed to serve the interests of commerce and 
 the national defense. The railroad system has shown one of 
 its most important uses to be its furtherance of the national 
 defense. The rapid concentration of the necessary masses of 
 troops at any point that may be threatened by an enemy to 
 a great ex tent decides the success of strategical operations. 
 The interests of national security therefore demand that the 
 connections of the railroad network provide for the means, 
 first of facilitating in the different military districts the 
 mobilization of the different contingents and their prepara- 
 tion for march to the seat of war with the least possible de- 
 lay, and on the other hand ensure the rapid transport, to 
 such a point as may be threatened by the enemy's army, 
 of as many troops as may be necessary to oppose them, 
 as the particular emergency may require. The rap- 
 idity with which the disposable troops may be con- 
 centrated frequently makes up for their deficiency 
 in numerical sti ength. Of no less importance are the ca- 
 pacity and systematic interconnection of the railroad system 
 for lines of supply and to keep up the rear communications 
 of the army in the field, for the reinforcement of troops and 
 war material, for the sustenance of the army and for trans- 
 portation inland from the seat of war. In a country with 
 boundaries such as inclose the German Empire, the interests 
 of the national defense are of preponderating importance in 
 determining the constitution and development of the rail- 
 road system. It becomes, therefore, the duty of the govern- 
 ment, in controlling the construction and configuration of 
 the railroad system, to provide direct military roads with a 
 capacity adapted to any emergency of war, to arrange as 
 systematically as possible their ramifications into all the dif- 
 
83 
 
 ferent military districts of the various army divisions, to 
 prepare and develop the roads for the accommodation of the 
 utmost amount of military traffic that could in any event 
 fall to their share, to supervise the construction of stations 
 suitable for the shipment of troops and war materials, to 
 see that they are kept in good condition and to provide for 
 the possibility, if necessary, of a speedy and effectual de- 
 struction of some such structures of the more important lines 
 as are essential to their working. Even the distribution of 
 technical operatives of the road must be considered in their 
 relations to the use of line in time of war, or for extensive 
 military operations ; if the force is already organized, the 
 road may be utilized at once. The responsibility of the 
 state for the interests of national defense thus entails a far- 
 reaching co-operation of the government authorities that 
 must trench considerably on the independent disposition of 
 the managements, and which must extend its supervising, 
 regulating and restricting influence to an equal extent over 
 the location, construction, equipment and working arrange- 
 ments of the railroads. 
 
 CARE OF THE STATE FOR COMMERCIAL INTERESTS. 
 
 Just as the railroad lines, in their capacity as public high- 
 ways, form the military roads by which armies are moved, 
 so are they the routes pursued by the currents of the world's 
 commerce. 
 
 A large proportion of the products of the country are de- 
 pendent on the railroads for means of transportation. The 
 through railroad lines, extending beyond the borders of prov- 
 inces and countries, and, in fact, almost over the whole con- 
 tinent, and the passage of cars, from the starting point to 
 their destination, in the European system of railroads 
 constructed of uniform gauge,* has extended the carrying 
 capacity of the railroads to the furthest limits of our conti- 
 nent. The possibility of exchanging goods throughout this 
 enormous territory,regulated by the international commercial 
 agreements supported by the connecting water-ways and the 
 minor systems of transportation in operation in the districts 
 bordering on the railroads, has given scope to the productive 
 powers of the nations, opened up their natural resources and 
 the wealth of their produce which before were unknown or 
 unemployed, and unavailable for the growing require- 
 ments of a progressive development, and has rendered them 
 * Spain and Russia have not the standard gauge.— Translator, 
 
34 
 
 available material for home and foreign productive 
 power and enterprise. From the inland traffic of narrow 
 territories, from the straitened commercial relations ex- 
 isting between different countries, hampered by endless diffi- 
 culties and obstructions, has grown gradually the great inter- 
 national commerce. Inasmuch as producers are able to draw 
 their supplies from, as well as forward their products to, the 
 most distant quarters, the inventive and enterprising spirit 
 of commercial life has, during the short age of the railroad, 
 already shown results which far exceed those of centuries of 
 activity in olden times. Countless new industries have been 
 called into existence, the economical activity of whole nations 
 has undergone a complete transformation, new powers have 
 arisen, new values have been created, and many ancient and 
 long-cherished industries have, under the changed conditions 
 and more abundant resources of foreign competition, lost 
 their old vitality. Unforseen, irresistible and sudden, these 
 changes have often been effected in such a manner as to 
 jeopardise the economical importance, not only of the in- 
 dividual but of whole populations. The extent of these con- 
 stantly progressive changes in economical conditions, which 
 necessarily accompany the development of a railroad sys- 
 tem, is still unrevealed, so that the removal of the danger 
 arising from the transformations, which is always most 
 threatening in the case of a people poorly supplied with 
 natural resources, can hardly be expected at the present 
 time. As it devolves upon the government to further the 
 prosperous development and building up of the home trade, 
 so it should be one of its first and most important tasks to 
 make and keep the railroads tributary to their great destiny 
 as high roads of commerce, for the benefit of the whole com- 
 munity. 
 
 It becomes, therefore, a duty on the part of the govern- 
 ment to provide for a growing commercial intercourse by 
 corresponding additions to the different railroads, and by en- 
 suring their proper equipment with rolling stock. The de- 
 mands arising herefrom, such, for instance, as the laying of 
 double tracks, the reconstruction of stations, the establish- 
 ment of new stations and stopping places, the construction 
 and maintenance of connections with other roads, under cer- 
 tain conditions the erection of union depots for common use, 
 as well as the supply of cars and locomotives as far as may 
 be necessary for the sufficient acccmmodation of the traffic, 
 must be enforced by the state even in the case of private 
 
35 
 
 corporations, if the railroads, in spite of their private owner- 
 ship and administration, are to be regarded as public com- 
 mercial highways. For the same reason the duty falls to the 
 government of regulating time schedules, even in the 
 case of private management, and the power to alter 
 the time of existing trains, and to introduce new ones, 
 as soon and to such an extent as the exigencies of 
 traffic may require. The responsibility of the govern- 
 ment for the running of trains also entails on it the duty 
 of seeing that all arrangements necessary to effect 
 this purpose are provided, and if not to compel their 
 provision. That the government cannot successfully under- 
 take all the duties we have referred to without interfering 
 in all the branches of the management, and under certain 
 conditions severely damaging the interests of the owners, 
 will appear plain. On account of the considerable expense 
 that will certainly attend the carrying out of requirements 
 of the kind described, the maintenance of commercial inter- 
 ests depends to a great extent on the ability of the manage- 
 ment, while public considerations must evidently give way to 
 the conflicting; financial interests of the corporations. 
 
 WITH REGARD TO FIXING RATES. 
 
 The most difficult and at the same time the most important 
 task devolving on the government is with regard to the fixing 
 of the rates of the railroads. In order that the railroads' 
 practical monopoly of transportation may not degenerate 
 into a system of extortion on the traffic which depends upon 
 them, the fixing of the rates must not be left to the arbitrary 
 will of the parties working the roads. 
 
 It is rather the business of the government to see that the 
 use of the railroads shall be secured to all who have to do 
 with transportation for a fixed and proper consideration. 
 The net cost of every article produced that is not consumed 
 in the immediate neighborhood of production consists in part 
 of the cost of transportation. The greater the distance at which 
 producers obtain their supplies and market their products, 
 the larger will be the proportion of transportation charges 
 included in the cost of production and in the selling price of 
 the article. With the facilitation of the exchange of goods 
 over great distances, as effected by the extension of the rail- 
 roads, the whole productive economy, as we have explained 
 above, has undergone a complete change of form, since the 
 sources of supplies and the markets for almost every branch 
 
36 
 
 of productive industry have been extended far beyond the 
 previous narrow limits. The cost of railroad freightage 
 forms, therefore, a considerable proportion of the cost of 
 production of most articles at present, so that the develop- 
 ment of all the chief branches of production that are not 
 from some cause independent of transportation by rail, are 
 to a great extent dependent on the fixing of tariff rates. 
 
 (a.) Moderation of the Railroad Tariffs.— We will endeavor 
 to show that the government has first of all the highest in- 
 terest in a proper limitation of railroad tariffs. In the law 
 regulating railroad enterprise of Nov. 3, 1838, the rates 
 chargeable by any railroad are limited to the realization of 
 a clear profit of 10 per cent, on the capital invested; and as 
 soon as this profit is exceeded a reduction in the rates 
 charged is directed (§33). The imperial constitution, without 
 fixing any particular point as the limit,- establishes the 
 greatest possible reduction of the rates of transport 
 as the problem to be solved by the railroad policy of the 
 Empire, and only fixes the one pfennig rate* for application to 
 the transport of those raw materials whose movement over 
 great distances is considered one of the prime requisites for 
 the stimulation of trade and industry, as the object first to 
 be accomplished. (Art. 45, No. 2.) 
 
 The schedules of rates of the railroads fluctuate widely be- 
 tween the cost of transportation to the management, which 
 is calculated only with difficulty and imperfectly, and the 
 value of the transportation to the shippers. 
 
 The cost of transportation to the carrier has been enor- 
 mously reduced since the initiation of railroad enterprises. 
 The great progress in the science of operation, in the nature 
 and construction of the rolling-stock, in the systematic and 
 economical regulation of the operation, in the reduction and 
 simplification of the methods of administration and opera- 
 tion, and especially by the great increase in the traffic, have 
 contributed to this result. The advantage accruing to the 
 railroads in making the carrying powers of their lines as 
 valuable as possible to shippers has also assisted in bringing 
 about this reduction in the tariff. These various causes will 
 suffice to explain the extraordinary reductions in the rates 
 of transport which have been made on all important articles 
 of freight since the introduction of the railroad. + 
 
 * That is, one pfennig (0.243 cent) per centner (110 lbs), per Ger- 
 man mile (4.68 English miles). This is equivalent to 0.935 cent 
 per ton (of 2,000 lbs.) per English mile.— Translator. 
 
37 
 
 In its care for the encouragement of domestic trade, 
 government has the liveliest interest in the re- 
 duction of general freight charges, but more par- 
 ticularly in the rates imposed on the least valua- 
 ble rough freights which are absolutely necessary in 
 the development of industries. This becomes all the more 
 evident when we consider that the enormous progress of 
 traffic which the railroad age has brought has kept pace 
 with the gradual reductions in freight charges, as well as 
 with the extension of the network of railroads. To ensure 
 a proper formation and development of the railroad system, 
 it is, therefore, absolutely necessary that the government be 
 assured of a continuance of the reduction in tariff rates, 
 sufficient to meet the economical requirements of the coun- 
 try. The principle of railroad policy, expressed in the be- 
 fore-mentioned Art. 44, No. 2, of the imperial constitution, 
 is, therefore, founded on the proper appreciation of an una- 
 voidable necessity. The designation of the one pfennig 
 tariff as the normal rate which it was desirable to attain 
 for that class of bulky merchandise which is indispensable 
 to economical interests is the concrete expression of the 
 opinion, that the movement of these substances over a wide- 
 spread territory is the fundamental requirement for the ad- 
 vancement of industry and the development of the natural 
 resources of the country. In consequence of the extraordi- 
 nary difficulty attending the acquisition by government of the 
 means necessary to reduce the rates of transport, the principle 
 included in Art. 33 of the constitution has never been con- 
 summated. Aside from the reductions of rates, necessitated 
 by the adoption of through shipments, and the famine rates, 
 a compulsory reduction of the freight charges by the state is 
 attended with difficulties which can scarcely be surmounted. 
 It entails a weighty and direct attack, not only on the man- 
 agement, but also on the financial interests of the corpora- 
 tions concerned. On the other hand, to render this action 
 of the government subordinate to the financial interests of 
 the different corporations, would not only contradict its ob- 
 ject, but also would be inflicting an injury on those districts 
 which are dependent for their means of transport on a finan- 
 cially embarrassed railroad. If the reduction of the tariff 
 is left to the free action of the railroad companies, it be- 
 
 t Appendix 7 contains the tariff rates for a number of articles 
 of commerce as they have appeared at intervals of five years 
 since 1848, in order to give a distinct idea of the reduction of 
 drices that have taken place. 
 
38 
 
 comes a question not of the interests of trade, but of the 
 financial interests of the railroads, and the freight rates 
 charged will be subject to the complaints on the part of the 
 commercial world that have been prevalent for many years, 
 respecting the instability, inequality and complication of the 
 rates. 
 
 (b) Stability and Uniformity of the Tariffs. — Just as much 
 as the moderation of the railroad tariff is an important con- 
 sideration to the successful development of the commercial 
 system, so are their stability and equality, so far as they are 
 not excluded by the former. The equalization of distance 
 effected by all means of communication, by which the pro- 
 ducing and consuming districts are brought more closely to- 
 gether, is in the case of railroad transport possessed of in- 
 creased importance, because the amount of traffic on the 
 railroads, which is of the first importance in determining 
 their rates, depends not only upon the quantity carried, but 
 on the length of the haul. Not in the number of tons car- 
 ried, but rather in the number of tons carried one mile (ton- 
 nage-mileage), is the amount of the freight traffic of a rail- 
 road properly expressed. Therefore, the reduction of rates 
 for long distances is for the interest of the railroads, just as 
 is a similar reduction for the coarse freights, whose carriage 
 enables them to utilize to the utmost their cars and motive 
 power. Were their manipulation of the tariffs unrestricted, 
 it would lead to a still more varied system of rates, accord- 
 ing as the above considerations should have greater or less 
 application. In addition to what we have already men- 
 tioned, it must be remembered that the currents of traffic 
 generally are limited to certain directions — the direct 
 lines between consuming and producing districts. The num- 
 ber of lines competing for the carriage of this traffic, how- 
 ever, has been enormously increased, as the railroad system 
 has been extended, by the combination of connecting roads 
 for use as through lines. The further apart the termini of 
 the route are situated, the greater the number of competing 
 lines between them; and this number is further increased by 
 the water-routes, especially for the traffic to and from 
 sea-ports. With the large, and in consequence of the con- 
 stant extension of the railroad system, continually increas- 
 ing number of competing routes in those directions in which 
 the currents of the world's commerce move, a constant varia- 
 tion in the tariff is inseparable from the continually changing 
 interests of the different managements forming the sepa- 
 
rate lines. So long and to such an extent as is demanded by 
 the interests of competition, and as long as the customary 
 understanding between them does not occur, the rates will 
 be reduced; but whenever these conditions are fulfilled, they 
 will remain at their original height. This unequal and 
 variable form of the tariff, in consequence of the importance 
 of the railroad freight charge to the cost of the production 
 of goods, is a constant and serious danger threatening every 
 branch of industry. Under the influence of a tariff which 
 owes its existence to a fortuitous concurrence of events, we 
 find that in one neighborhood new industries and new works 
 are called into existence, while at another point, a formerly 
 flourishing industry is practically killed. These variations 
 occur most frequently on the long routes of transportation 
 extending over the borders, and here not only do the condi- 
 tions at home, but also those of the foreign country, affect 
 the competition of the carriers. The construction of new 
 lines and short routes at home and abroad, the consolida- 
 tions and operating agreements of the managements, the 
 changes in the schedule rates of foreign railroads, the justi- 
 fiable and, unfortunately, oftener unjustifiable, competitive 
 measures of the foreign forwarding lines, the constant 
 changes in the conditions of water competition, 
 the rise and fall of ocean freights, the estab- 
 lishment of new steamer lines, as well as the 
 withdrawal or changes of those existing, changes in the 
 customs laws, political entanglements with their restrictions 
 of traffic and their effect on the money market, epidemics t 
 and all imaginable events that interrupt commerce — in short, 
 countless unexpected and unforseen circumstances exercise 
 a constant effect on the railroads and conditions of trans- 
 portation. They change and disarrange the competing in- 
 terests of the different companies, transfer business from one 
 route to another and cause a change of relations which finds 
 expression in a constant variation and change of the freight 
 rates on the different routes . Although it must be admitted 
 that these conditions, as far as they originate in the state of af- 
 fairs abroad, are to a great extent beyond the reach of the 
 home government, it still remains desirable, in order to se- 
 cure a constant and regular commercial progress, to neutral- 
 ize their evil effects as far as possible by the establishment 
 of a well-regulated tariff on the home railroads, and at least 
 t© guard against the dangers and disadvantages to commer- ' 
 cial development caused by an arbitrary system of rates de- 
 
40 
 
 termined chiefly by competition, abandoning the system 
 by which the variation and instability of the prices for 
 transportation are increased. It is therefore incumbent on 
 the state to subject the making of exceptional rates to its 
 supervision and control, and to permit those only which ap- 
 pear desirable in the interest of the development of 
 traffic and the industrial resources of the country, and rig- 
 idly to exclude all that flagrantly transgress against the 
 regularity of the tariff, or that are disadvantageous to those 
 commercial interests it has undertaken to protect. 
 
 The experience of recent times shows that a settled sched- 
 ule of freight charges, and not one subject to arbitrary and 
 frequent fluctuations, is most advantageous for the substan- 
 tial and regular development of commerce. Only by this 
 means can a safe and trustworthy foundation be given for 
 business combinations, and the conduct of those industrial 
 undertakings that are dependent upon the railroads. The 
 assumption that reductions in freight charges are to be ac- 
 cepted as everywhere desirable and permissible, if they suit 
 the interests of the shipper and the railroad alike, is not to 
 be accepted as universally true. Most of the reductions in 
 rates that have been allowed on the intercession of certain 
 commercial interests, are, as a rule, accompanied not only by 
 advantage to those business relations that are suited to these 
 arrangements, but also by disadvantage to those who con- 
 duct a competing business dependent upon the same district for 
 a market but which cannot take advantage of the special re- 
 duction of rates made for the benefit of their competitors. 
 • Under these circumstances, the effects of reduced tariff ar- 
 rangements can be foreseen neither by the railroad manage- 
 ments nor by the government supervising officials, as the 
 commercial relations of the different shippers, the conditions 
 of production and the limits of the markets supplied by the 
 different producers cannot be exactly known by them. It 
 has repeatedly happened that exceptional rates of this de- 
 scription, which had been granted at the urgent request of 
 the shippers and also in the interests of the railroads, imme- 
 diately afterward have become the subject of earnest and 
 justifiable complaints on the part of competing producers, 
 who found their market not only opened, in consequence of 
 the reduced rates, to outside competition, but sometimes com- 
 pletely closed to their own trade. 
 
 It is therefore evident that by such variations in the rates 
 of transportation, the conditions of existence may be with- 
 
41 
 
 drawn from an established Industry, just as they may be 
 given to a new industry. From all these reflect ions the 
 thought arises, whether it will suffice for any lengt h of time 
 to make the supervisory officials responsible for the allow- 
 ance of such exceptional rates, whether these supervising 
 officials themselves have the in l oi n ki( ion at their command 
 that will enable them rightly to estimate the ultimate effects 
 of such rates, their advantages and disadvantages to in- 
 dustrial life, and to weigh and consider them, or whether it 
 appears more advantageous, in place of such an adjustment 
 of rates, made according to the requirements of commerce 
 in the many different parts of the country and branches of 
 industry, and comprising numerous exceptional rates to suit 
 a changing and motley variety of conditions, to provide a 
 permanent and uniform foundation for the rates of railroads 
 and have it fixed by law. The establishment of such a 
 standard, to the exclusion of all arbitrary fluctuations and 
 unexpected disturbances, whether it be established by fixing 
 the rates by law or otherwise, would be of the greatest im- 
 portance to the development of commerce, as without it the 
 constant and widely differing changes that business relations 
 undergo cause continual changes in the form and arrange- 
 ments of the tariff, and thereby unavoidably lead to the un- 
 certainty and complication, by which the certain calculation 
 of freights is rendered difficult or impossible and one of the 
 most important considerations of business intercourse is left 
 questionable. 
 
 Whether the action of .the state be confined to the passive 
 exclusion of all such arbitrary tariffs as jeopardise commer- 
 cial prosperity, or whether it appears indispensable to fix by 
 law a positive uniform standard for making the rates, in 
 either case the protection of the public interests, which is 
 vested in the government, demands a restriction of the func- 
 tions of an independent administration, of such deep and 
 far-reaching importance as to seem hardly compatible with 
 the independence of the private operation of railroads. 
 
 (c) With Regard to Customs Policy— The determination 
 of the tariff acquires an increased significance for public in- 
 terests by the close connection which its effect on foreign 
 commerce has with the customs policy of the country. The 
 industrial crisis, which, in consequence of unlimited over- 
 production in all branches of manufacturing industry, has 
 compelled this and foreign countries to restrict the produc- 
 tion of manufactures and bring it down to the level of the 
 
42 
 
 actual demand, is naturally fraught with the greatest danger 
 to the weaker manufacturers. In the underbidding of 
 prices, often below the cost of production, the struggle for 
 existence is carried on, by which in the competition of nations, 
 as of individuals, the weaker go to the ground. Although it 
 is perfectly true that over-production can only be cured by 
 its restriction, still it appears to be the most urgent and indis- 
 pensable duty of the government to see that the restriction 
 does not affect domestic production solely or unduly. If, 
 then, the state must assist the latter in this struggle and lend 
 its protection, so much the more and the more certainly is it 
 its duty in the further development and building up of 
 commerce to prevent whatever might restrict or hinder 
 the competition of home against foreign industries. Such a 
 hindrance, and one of most deadly effect, consists in railroad 
 rates arranged to favor foreign products as against home 
 manufactures. The favor shown foreign products, in the so- 
 called foreign differential rates, has no close connection with 
 the provision of goods from abroad, but is rather chiefly the 
 natural consequence of the function of the railroads in equal- 
 izing distances, of the circumstance that the foreign transport 
 route is generally longer than the road to and from the do- 
 mestic competing districts, that with the length of 
 the route the number of competing connections 
 increases, and that in this trade the circumstances 
 are subject to the most rapid and frequent changes. 
 If, then, the railroads are inclined, in their own interests, to 
 reduce the rates for the export and import of foreign pro- 
 ducts, it is the duty of the government to take measures re- 
 stricting this tendency, and in proportion as the home in- 
 dustrial interests are liable to suffer, to hinder it, so that the 
 domestic market may not be exposed to a ruinous flood of 
 goods which are the result of over-production abroad. Re- 
 pressive measures against such an arrangement of rates be- 
 come, therefore, chiefly the consequences of a healthy and 
 justifiable national self-regard. Still more are these regula- 
 tions necessary, when the depressed state of home manufac- 
 tures demands the direct protection of the government, by the 
 imposition of a protective duty on foreign products. If the 
 right of government to protect home manufactures against 
 foreign competition by the imposition of a protective duty is 
 recognized as justifiable, how much more is it justifiable for 
 government to ensure the effectiveness of this protec- 
 tion by preventing any neutralization of these restrictions 
 
43 
 
 by the adoption of lower freight rates on Imports. The as- 
 surance of this protection has become not merely a question 
 of arbitrary consideration as to whether the tariff in indi- 
 vidual cases is injurious to domestic- production ; it becomes 
 a positive duty to prevent the avoidance or reduction of a 
 protective duty on foreign manufactures by a reduction in 
 charges on dutiable foreign freight. It especially devolves 
 upon the government, in such a case , to protect the customs 
 policy against a railroad tariff that is mainly determined by 
 the pecuniary interests of the road. Such a restriction, 
 trenching as it does so considerably on the interests and the 
 free action of the railroad corporations, will not be so sur- 
 prising when we consider that railroads, as public highways, 
 can only be left to unrestricted private control so far as 
 public interests permit; and that a policy of protective cus- 
 toms duties, which has been demanded and sanctioned by 
 law as essential to the most important public interests, justi- 
 fies all such interference with the operation and management 
 of a railroad as may be necessary in order to carry it out 
 successfully. Whether on the one hand such limitations are 
 consistent with the existence of an independent private 
 system of railroad operation, or whether on the other hand 
 the government will be in a position to prevent effectually 
 any selfish encouragement of transportation business on the 
 part of the railroads in contravention of the protective tariff 
 policy, are questions that must be left to futurity for a 
 decision. 
 
 (d) Uniform Treatment of Shippers .—If the right to the ex- 
 clusive conduct of transportation over his road granted to 
 the constructor of a railroad should be united with the con- 
 dition that it shall open for the use of the whole community, 
 as the nature of a public highway requires, then its use must 
 be secured to everybody on equal terms. In the price of 
 transportation, as well as in the other terms of transporta- 
 tion, no difference between individual shippers, no preference 
 of one before another, can be permitted; either would be in- 
 consistent with the fundamental principles of a well ordered 
 state, which guarantee equal rights to all. This principle of 
 equality does not, it is true, absolutely exclude those favor- 
 able conditions of transportation or reductions in rates 
 that may be made for fixed considerations, such as the quan- 
 tity shipped, the length of the haul, or other requirements, 
 as long as they are guaranteed alike to everybody who com- 
 plies with the before-mentioned requirements and conditions. 
 
44 
 
 Such a regulation of these requirements and conditions as 
 would allow of their definite statement, in order to secure to 
 one shipper the privileges granted to another, would be prac- 
 tically impossible, but although they may not be formally 
 expressed, they must be founded on facts. The just and 
 equable treatment of all shippers demands at the same time 
 the publication of all rates and conditions of transportation, 
 so that they may be known and available to all. The prin- 
 ciple of the publicity of the rates and the equal treatment 
 of all shippers, (§§ 26 and 32 of the law of Nov. 3, 1838), 
 which are embodied in the railroad legislation of all countries, 
 are liable, as experience has shown, to be circumvented on 
 account of the competing interests of railroads, and also by 
 individual interests which have influence with the manage- 
 ments. The granting of these secret advantages in trans- 
 portation in the most diversified ways to individual shippers, 
 and in particular the so-called rebate system, is the most in- 
 jurious misuse of the powers granted to railroad corpora- 
 tions. It renders government control of the rates impossible, 
 makes the competition between the different lines, as well as 
 that of the shippers dependent on them, dishonorable and 
 unfair, carries corruption among the railroad employe's and 
 leads more and more to the subordination of the railroad 
 management to the special interests of certain powerful 
 cliques. It is the duty of the government to oppose this evil, 
 to uphold the principle of the equal treatment of all ship- 
 pers, and to enforce the legislatiye regulations on this sub- 
 ject. The importance of this problem is only equaled by the 
 difficulty of its solution. 
 
 IV. 
 
 DIFFERENT FORMS OF RAILROAD DEVELOPMENT. 
 According to the above deductions, no doubt can remain 
 that it is the duty of every rational raiload policy to dis- 
 cover the best means and ways to accomplish : 
 
 1. — On one hand, the uniformity of the railroad system, as 
 required by its development, and the gradual concentration 
 of the administrative and working systems. 
 
 2. On the other hand, to protect and advance the public 
 interests that are affected by construction., operation and di- 
 rection daring their progressive development and unifica- 
 tion. 
 
 This being the case, the question will naturally arise, 
 which of the different forms that the railroad system as- 
 
45 
 
 sumes during the period of its development is most favorable 
 for the accomplishment of the problems of railroad policy? 
 These forms, of each of which a representative may be 
 found in the railroad systems of modern civilized countries, 
 are : 
 
 1. Private ownership and private operation of the rail- 
 road. 
 
 2. Government ownership and private operation. 
 
 3. Private ownership and government operation. 
 
 4. Government ownership and operation. 
 
 In the first two forms, the efforts of the government to at- 
 tain its objects must be indirect, as state supervision over 
 private enterprise obstructs and restricts the latter. The 
 supervision exercised by the state is in the first case chiefly 
 dependent on the laws and charters granted, while it is 
 strengthened in the second place by the owner's reserva- 
 tions." In the two last-named forms (3 and 4), the control of 
 the government is direct, for, in place of private enterprise, 
 we have the action of the government. In the third case, 
 this latter action is hampered by the private proprietorship ; 
 in the fourth case it is unlimited . 
 
 PRIVATE RAILROADS UNDER THEIR OWN MANAGEMENT. 
 
 1. The pure private railroad system, that is, the union of 
 ownership and operation in the hands of a private enter- 
 prise, presents the most difficulties and hindrances to the 
 fulfilment of the government's objects in the development of 
 the railroad system. 
 
 Uniformity in the construction, administration and 
 operation of railroads, though it may be conceived with- 
 out complete unity of ownership and operation, can, in 
 consequence of the individual interests of the different 
 companies, be realized only to a very limited extent. 
 A systematic construction of the railroad net-work, 
 without due consideration of the ownership relations, is 
 impossible. The latter, in the case of an arrangement of the 
 different lines so as to work together in such a manner as to 
 further commerce, necessitates a configuration that will ma- 
 terially differ from the configuration of the whole net- work 
 produced where there is complete unity of ownership and 
 management, because it must provide for the maintenance 
 of the independence and the ability to compete on the part 
 of every management. A systematic partition of the rail- 
 road districts among the corporations, if carried out with 
 
46 
 
 this object in view, although it might meet all the require- 
 ments of commerce, would still retain all the disadvantages 
 and entail all the loss to the community that is consequent 
 on competitive building and competitive operation. Uniform 
 standards for the building of the railroads and the construc- 
 tion of the rolling-stock are of comparatively little value, 
 as they can only be regarded as guiding and 
 regulating the future construction and equipment of rail- 
 roads. To come into general use, they would require a com- 
 plete period of renewals, and during that time, the techni- 
 cal progress made would probably cause them to be super- 
 seded. JSTot less difficult is the establishment of harmonious 
 working regulations among the different roads under private 
 management. Only where the disadvantages to some lines 
 are balanced by the advantages accruing to others — that is, 
 where all the lines are under one management — are uni- 
 form working regulations possible without injury to the in- 
 terests of the owners. The introduction among the German 
 railroads of a tariff uniform, in system and prin- 
 ciple, at least, has only been accomplished with extraor- 
 dinary difficulty, and many modifications and restrictions 
 to protect the special interests of the different managements. 
 Again, the effort to establish within a narrower district uni- 
 form regulations, insuring direct transport and through 
 trains for certain transport routes, has encountered the 
 greatest imaginable hindrance and difficulty, chiefly on ac- 
 count of the diverging, and often utterly mistaken interests 
 of the different administrations. Several of the through 
 and connecting trains now running for the acccommodation 
 of passenger traffic on the more important routes were 
 originally introduced, in spite of the opposition of some of 
 the railroads concerned, by compulsory measures. It occurs 
 occasionally, even at the present time, that the introduction 
 of certain trains over routes formed by the connecting lines 
 of several different roads is opposed by some of the roads 
 over which they run, either for the reason that it does not 
 pay the line complaining, or because the interests of the 
 owners would be better served by the development of traffic 
 over some competing line. In cases of this kind, even where 
 it is possible to break up the opposition by means of compul- 
 sory measures, the discussion whether and to what extent 
 private are to be sacrificed to public interests becomes a del- 
 icate and troublesome subject. 
 On the other hand, the union of all domestic railroads in 
 
 \ 
 
47 
 
 the hands of one private enterprise would be absolutely 
 inadmissible. Although the disadvantages and dangers of 
 an unsystematic division and wasteful competition would 
 thus be avoided, to place the complete monopoly of all means 
 of transport in the hands of one enormous profit-seeking 
 corporation would be antagonistic to every public interest 
 concerned, as will be apparent to all. Already in those 
 countries where private railroad management is the rule, 
 and where the technically and economically justified process 
 of absorption by the powerful corporations of the smaller 
 and less important railroads prevails, their course hitherto, 
 the dangerous influence which these powerful corporations 
 have acquired over the whole public existence, the reckless 
 pursuit of the profits of their monopoly and their chartered 
 rights within the district they serve, and the impotency of 
 government supervision compared with their far-reaching, 
 well organized power, controlling all interests, together 
 cause the gravest apprehensions for the welfare of the 
 country, and even for its political independence. A remedy 
 is there naturally sought for, and can only be obtained in 
 the form of an acquisition of the railroads for government. 
 
 It will be readily realized, after what we have urged, that 
 the simple private ownership of railroads is not the system 
 of development most favorable to the plan of uniformity of. 
 railroads, nor is it likely to advance the gradual concentra- 
 tion of the systems of administration and operation. But 
 it appears much more serious in its effects, and quite impos- 
 sible as a permanency, if we consider the further duty of 
 the government, the protection and advancement of all pub- 
 lic interests that are affected by the railroads. 
 
 The only means at the disposal of government to fulfill this 
 purpose is the right of supervision, secured by laws passed 
 and in return for chartered privileges. The problem of rail- 
 road legislation, in the presence of a powerful and rapidly- 
 growing phenomenon, has naturally received but a very un- 
 satisfactory solution. The importance and peculiar nature 
 of this phenomenon has been only imperfectly recognized 
 and appreciated, so that the laws dating from the first 
 period of development, in spite of the most careful prepara- 
 tion, stand out like ruins in the present times. The railroad 
 law of Nov. 3, 1838, the best recommendation of which is 
 that it has remained in force until the present time, is also 
 found to be far behind modern requirements. A part of the 
 provisions it embodies (§§ 27 to 31, 33, 42) have never been 
 
48 
 
 of any practical utility, the hypothesis and assumption 
 on which they were grounded having been found not to 
 agree with actual conditions; another portion (§§ 2, 3, 8 to 
 19, 25, 36 to 41, and 44) has been superseded by later legis- 
 lative action; the remaining part has proved so utterly inad- 
 equate for the legal regulation of the railroads, that already 
 the scant regulations contained in section VII. of the impe- 
 rial constitution, by means of which the duties that 
 fall upon the railroads with relation to general traffic 
 and the interests of national security were first 
 fixed provisionally, have appreciably assisted in filling the 
 gap in the existing railroad legislation. If we compare the 
 task of the government with regard to the furtherance and 
 protection of public interests, as specified in our third section, 
 with the powers granted by the present laws, it will be at 
 once apparent that the latter are totally insufficient for their 
 purpose. Is the government justified, whether in the inter- 
 ests of safety and regularity of operation, or in the interests 
 of commerce, or of national safety, in demanding changes in 
 and additions to the plans of construction, the rebuilding of 
 depots, the construction of new stations and stopping-places, 
 the laying of double tracks, the removal of level crossings 
 or the alteration of the existing rolling-stock ? Some of these 
 powers are in reality claimed by the government on the 
 strength of the general purport of § 34 of the railroad law and 
 the rights of supervision guaranteed in § 46; but the exercise 
 of these rights is disputed by the railroad administrations. 
 In consequence of this want of a sufficiently certain and 
 clear legal title on which to base its assumption of the power 
 claimed, government has been obliged to confine itself to the 
 application of compulsory measures only in the most fla- 
 grant cases of necessity. It was left to the later develop- 
 ment of railroads and the business dependent on them, to 
 demonstrate the pressing necessity of such powers to the 
 supervising authority. That a legislative reform, for the 
 purpose of regulating and determing these powers, must 
 meet with the bitterest opposition on the part of the oppos- 
 ing interests of the railroads, the experience of the past few 
 years has abundantly demonstrated; and even if such a re- 
 form measure were attainable, it would, as far as can be 
 realized, only temporarily suffice for these necessities. 
 Just as the fate of earlier legislation was to be 
 distanced by progressive development, so will it be sooner 
 or later with all future laws. The technical progress 
 
49 
 
 made in the building and operation of railroads as 
 well as in the construction of the rolling-stock and 
 working arrangements, the changes in business relations 
 in consequence of the growing extension of the rail- 
 road system and of the exchanges of merchandise 
 between districts and nations, the short-lived innova- 
 tions and rapid transformations by which the progress and 
 development of the railroad system is accompanied, will al- 
 ways offer obstacles to government regulation that are to 
 a certain extent inseparable from an unsettled state of con- 
 ditions and relations in course of development. In propor- 
 tion as the existing laws prove themselves insufficient for pres- 
 ent requirements in securing to government the authority that 
 public interests require, they must be corrected through the 
 conditions and privileges granted in the case of new under- 
 takings ; and we see the results of this constant struggle for 
 reform in the increased complication and more comprehen- 
 sive nature of the conditions under which charters are 
 granted. As the legal privileges of the existing railroad 
 companies, as fixed by previous concessions and stipu- 
 lations, cannot be altered to their disadvantage with- 
 out compensation (§ 49 of the railroad law), the conditions 
 under which concessions have been made for their later ex- 
 tension are, as a rule, only applicable to the old lines when 
 further conditions have been imposed on the application for 
 further privileges. The result of such a piece-meal and in- 
 complete regulation is the creation of an unequal, compli- 
 cated and difficult legal position of the different administra- 
 tions in their relations to the supervisory powers of the gov- 
 ernment, and an increase in the difficulty accompanying 
 thorough-going regulations on the part of the latter. 
 
 Even if it were possible, by means of a legal reform that 
 could breakthrough the legal rights of the different corpor- 
 ations as they at present stand, to secure such state super- 
 vision of railroads as would satisfy present requirements, 
 the application of such a law would still fall short of the re- 
 quirements of public interests. The proper character of the 
 lines as public highways, the achievement of their functions 
 as institutions of public utility— and only on these grounds 
 are they granted the powers of eminent domain — demands 
 the subordination of the private interests of the party work- 
 ing the road to the public interests affected. The exercise, 
 by the state, of its right of supervision must be accompanied, 
 therefore, by a constant conflict between public and private 
 
50 
 
 interests, and is in many cases impossible without serious 
 financial injury to the latter. From the practical exercise 
 of this right of control arise endless hindrances and hard- 
 ships. 
 
 In authorizing railroad enterprises, the government is re- 
 sponsible that only on account of such undertakings as are 
 of evident importance to the interests of commerce and na- 
 tional security shall the national capital be employed, and 
 such an extensive trespass on private rights and the economi- 
 cal condition of the districts affected as is entailed by the ex- 
 ercise of the powers of appropriation of property, be per- 
 mitted. The preservation of the independence and competi- 
 tive ability of the existing private railroads frequently de- 
 manded the addition of such lines and connections as could 
 be dispensed with in the case of a united management and 
 operation. The question here arises, whether the authoriza- 
 tion of such extensions appears justifiable. If in one case 
 we give an affirmative answer, the country must bear the 
 burden of the consequent injurious effects on its economy £ 
 if our answer is negative, the development of the private 
 enterprise whose interests demand the addition may be re- 
 stricted or compromised. 
 
 With regard to construction, it rests with the state to fix the 
 amount of capital and control the mode of raising it, so that 
 on the one hand the undertaking may not be burdened with 
 an excessive mortgage and loan capital that would tend to 
 exhaust its credit, and on the other the provision of the means 
 necessary to secure the proper construction and and equip- 
 ment of the read may be ensured. The experiences of the 
 period of the projection of railroads has proved how difficult 
 it is to solve the problem. By means of the ever varying 
 methods of secretly evading the regulations established by 
 law, a number of enterprises without credit have arisen, 
 accompanied by an enormous waste of capital, through the 
 establishment of which the welfare of the country has been 
 considerably injured. 
 
 The government supervision of the systematic and pre- 
 scribed execution of the construction of private railroads, 
 does not by any means always afford the necessary protection 
 to public interests. Although it may be possible to prevent 
 the execution of the construction contrary to the approved 
 plans, and to compel the completion of the road and its 
 equipment in accordance with those plans, yet the exercise 
 of such compulsion would not infrequently be accompanied by 
 
51 
 
 financial ruin to the parties who have undertaken the 
 scheme, and at the same time often inflict great damage on 
 important public interests, and so become practically im- 
 possible. The experience of the last few years has unfor- 
 tunately furnished frequent proof of the correctness of this 
 insertion. None of the independent corporations chartered 
 as the " railroad project " years have been able, with the 
 means of construction at their command, to complete their 
 construction according to the approved plans and specifica- 
 tions. Many sought and obtained the assistance of the gov- 
 ernment, the total exhaustion of their credit, as well as their 
 means, leaving no other method open. Others have con- 
 trived at great sacrifice to obtain the means to get their lines 
 into condition fit to be worked provisionally, leaving the 
 complete construction to the chance of future favor- 
 able growth of the profits of their enterprise. 
 Had the government insisted on the fulfillment of all the re- 
 quired conditions and opposed the opening of the road under 
 any other circumstances (§ 22 of the Railroad Law), the 
 collapse of those undertakings would have been unavoidable, 
 and the non-opening of the road for traffic at the appointed 
 time would have caused serious injury to the whole business 
 district dependent on that particular road and have given 
 rise to loud complaints and accusations. 
 
 To a similar extent the requirements made by supervisory 
 authorities in the matter of maintaining a proper condition 
 of the road and transport arrangements after the line has 
 been opened for traffic, either in consequence of their having 
 been undertaken by incapable managers, or because the road 
 has not shown the expected returns, on account of the oppos- 
 ing interests of the railroad companies meet with active 
 opposition on the part of the latter, which is only overcome 
 with difficulty. Here, too, by the exercise of their authority 
 the action of the supervising officials may seriously affect 
 the financial standing of the enterprise ; for instance, they 
 may order the rebuilding of stations, the removal of level 
 crossings, the laying of a second track or the erection of new 
 depots and stopping-places. Orders of this kind are made 
 more troublesome and more serious to the supervising 
 authorities as the question of their necessity, whether re- 
 garded from the standpoint of requirements of traffic, or of 
 the regularity and security of operation, or of the pro- 
 tection of the interests of national defense, is often 
 eapable of very different opinions, and they are 
 
 U. Of ILL UB. 
 
52 
 
 chiefly dependent upon the arbitrary estimate of 
 the supervising officials. The various and important 
 public interests that are affected in the operation of a rail- 
 road, demand, according to our third section, the restriction 
 to a certain extent of the free powers of administrating the 
 railroads. The compulsory introduction of profitless trains 
 to effect such communications as may be essential to com- 
 merce, the requirement to arrange for through shipments, 
 which may be opposed to the interests of the roads affected, 
 the manifold restrictions imposed on the rates which are 
 found requisite to protect the interests of commerce, to fos- 
 ter home industries, and on behalf of the customs policy of 
 the government, will often be the cause of serious losses to 
 the separate private enterprises. 
 
 Even if we were unable to find, in all the phases we have 
 described, sufficient grounds for interference on behalf of 
 public interests, we may still affirm that the constant col- 
 lisions with the opposing interests of private administrations 
 are the ? ource of constant efforts on their part to evade or 
 violate the restrictions placed on the method of conducting 
 traffic that best suits their wishes and interests, and are an 
 infallible sign of an unhealthy and, for a permanency, an in- 
 sufferable state of affairs. The untenableness of such a sys- 
 tem is still more conclusively shown in the inability of the 
 government regulating authorities, with the powers of com- 
 pulsion at their command, to prevent, for any length of 
 time, the evasion by the companies of such restrictions and 
 regulations as they consider to be opposed to their interests 
 in the conduct of traffic. 
 
 More than all, in the operation of railroads by private cor- 
 porations, the principle of equality, the uniform treatment 
 of all shippers, seems endangered. It suits the interests of 
 the railroad proprietors to favor large shippers in preference 
 to the smaller ones, and, by means of secret favors of all 
 Mnds, to divert the most important shipments from the com- 
 peting lines. The opportunities of securing secret favors to 
 particular shippers are so manifold that their effectual last- 
 ing hindrance by means of the state supervising power is 
 impossible. Rebates on freights may be made through a 
 second or third party, by means of the secret interposition 
 of agents who are appointed for the purpose of regulating 
 and securing the business of a certain competing route, 
 through the mediation of the foreign railroads concerned, as 
 well as by pre-arranged connivance in admitting and al- 
 
53 
 
 lowing fictitious or unfounded claims, etc., and so may be 
 covered and withdrawn from public as well as 
 official control. The many facilitations of traffic in 
 which a consistent business-like treatment of the pub- 
 lic finds expression, the provision of space and arrangements 
 for storage, the exemption from storage and warehouse 
 charges, the attention to the peculiar wishes of the shipper 
 in the matter of the position of his cars, and even the injuri- 
 ous practice of giving free passes to the chief shippers and 
 showing them favors in the way of contracts for supplies 
 and labor for the road, render possible an illegal preference 
 of the interests of one before those of another. The large 
 shippers, the best customers of the road, are readily granted 
 all these favors and privileges, while the smaller shippers are 
 held to the strict letter of the regulations. The more the 
 competing interests of the different roads necessitate culti- 
 vating the large shippers, the more this system of secret 
 favors is likely to flourish. How is it then when the owners 
 of great manufacturing establishments situated on the line 
 of the road, of great commercial houses which ship their 
 freight by it or have an interest in the financial credit of an 
 enterprise, succeed in entering the board of directors which 
 controls the administration and operation of the road ? 
 
 The organization of a joint-stock company does not pre- 
 vent the possibility of the operation of a railroad being 
 brought into a condition of complete dependence on some 
 other industrial undertaking, nor does it ensure that the 
 directors of a private railroad company shall not be inter- 
 ested in a series of other enterprises whose successful opera-* 
 tion is dependent upon their business relations with the 
 railroad, so that the management of the road may be 
 directed and governed, not so much in its own interest as in 
 the interest of some other business, often enough opposed to 
 that of the road. Against such an organization, which by 
 reason of its abundant means, and by effective channels, 
 often leads astray and corrupts public opinion, even the in- 
 fluence of the government is powerless, the principle of 
 equable treatment of aU railroad shipping interests becomes 
 an empty form, and legislative regulation nothing but a 
 meaningless phrase. 
 
 Even if it were possible to imagine, that not only in the 
 legislation, but in the organization of the supervisory author- 
 ities, the duty could be so thoroughly performed that in real- 
 ity an effective protection of public interests with relation to 
 
54 
 
 private railroad management were possible, it is evident 
 that with the exercise of such a thorough system of govern- 
 ment control, reaching into every branch of the management 
 and operation, and touching on the most vital interests of the 
 corporation, the existence of a profitable and independent sys- 
 tem of private railroad monagement could not be maintained. 
 The regulations enforced by the supervisory authorities re- 
 strict and hinder the free disposition of the administra- 
 tion, endanger and damage, under certain circumstances, 
 the earning capacity of the road, and make such demands on 
 its financial capacity that the enterprise of the corporation 
 may become heavily burdened and its income greatly re- 
 duced. Whether, in consideration of the want of economy 
 entailed by the costly divided operation and unreasonable 
 competition that accompanies the private system, a paying 
 private operation of the railroad system is possible for any 
 length of time, may be passed by. In any case, pri- 
 vate capital will show little inclination to share in an 
 undertaking, the operation of which is subject to extensive 
 restrictions and interference, and the profitable nature 
 of which may be rendered doubtful on account of 
 the rules imposed by the supervisory authorities. On the 
 other hand, the accomplishment of their object by these su- 
 pervisory authorities is in great measure dependent on the 
 means at command by the different corporations, and their 
 financial retrogression is accompanied with danger to the 
 very public interests which are protected by government 
 supervision. Often enough the authorities find themselves 
 in such a position that they are obliged to abrogate rules 
 made in the public interests in order to maintain the effective 
 capacity of the railroads and avert the public calamity that 
 would accompany their collapse. For the rest, the main- 
 tenance of the working capacity of private enterprises depends 
 chiefly on the management by their own officials and certain 
 other circumstances over which the authorities can exercise no 
 influence, so that the risks of the favorable or unfavorable 
 development of the individual undertakings are unavoidably 
 thrown on the effectiveness of the government supervision. 
 While, therefore, an independent and profitable system of 
 private railroads, in conjunction with a careful and consci- 
 entious protection of public interest on the part of the gov- 
 ernment officials, is an impossibility for any length of time, 
 so on the other hand, an effectual advancement of those in- 
 terests, so far as they are affected by the private railroads, 
 
55 
 
 is only possible when their profitable character, and thereby 
 their ability to fulfil the conditions imposed by the govern- 
 ment, is maintained. The private railroad system will 
 therefore be wrecked on the contradiction that is found in the 
 circumstance, that the protection of the important public 
 interests affected by the railroads must be left to private ac- 
 tion, and that the same result is expected from the indirect 
 supervision of the government as can only be achieved by 
 direct government administration. 
 
 STATE RAILROADS UNDER PRIVATE MANAGEMENT. 
 
 The association of government ownership and private oper- 
 ation of railroads is already practiced incases where govern- 
 ment roads have been leased to private managers. Although 
 this system possesses certain advantages over the exclusively 
 private railroads in the matter of government control of the 
 development of the railroad system, its chief failure is found 
 in the perpetual strife between considerations of profit on the 
 part of the lessee and the public interests, and in fact the ex- 
 perience of the practical application of this system, so far, 
 hardly justifies us in calling it a reform in the true sense of 
 the term. The system has existed, as is well known, for a 
 long time in Holland, and has lately been, although probably 
 only temporarily, adopted in Italy, while the idea of applying 
 it to the reconstruction of a group of several necessitous rail- 
 road lines in France was entertained for some time, but after 
 due consideration by the national representatives was 
 dropped. The rental of the Dutch railroads has, up to the 
 present time, yielded an utterly insufficient rate of interest 
 on the capital invested, and at the same time it has been ac- 
 companied with so little profit to those renting them, that 
 only a few years since an alteration in the conditions of 
 rental in the interest of the lessee had to be granted by the 
 government. The leasing of the railroad lines in Northern 
 Italy to the corporation formerly owning them must be at- 
 tributed in the main to the difficulty experienced by the gov- 
 ernment in assuming the immediate operation of the acquired 
 roads. 
 
 The disadvantages that accompany the system of leasing 
 state railroads are certainly sufficiently weighty to 
 counter-balance any advantages that result there- 
 from. The separation of ownership and employ- 
 ment, as effected by the act of leasing, has gen- 
 erally resulted in collisions between the interests of the 
 
56 
 
 owner in maintaining and improving his property and the 
 object of the lessee to increase as much as possible the net 
 profits, attended as a natural consequence with all the evils 
 and dangers to public interests which have been already 
 demonstrated in the discussion of the private system- 
 Against the risk that, in the collision, one or other of the in- 
 terests must suffer, we may urge that advantages from the 
 leasing of the railroads can only be expected when it is the 
 means of securing business-like operation at the hands of an 
 experienced direction, hereby compassing a more generally^ 
 useful, thorough and profitable management. This supposi- 
 tion is inapplicable to the leasing of state railroads ; opera- 
 tion by the government, equally with private operation, can 
 only be accomplished by experienced, trained officials, and 
 in this direction the state possesses more abundant resources 
 than are at the command of any private management. The 
 results of government operation are therefore by no means 
 behind the average results of the private management. Inas- 
 much, however, as government administration and opera- 
 tion entail the simultaneous advancement of other public 
 interests, the increased cost could not be counted as; 
 an economical loss. Moreover, except where in special 
 cases combined circumstances enforce such a state of 
 affairs, there cannot be imagined any case, where the 
 state railroads are rendered more valuable by leasing 
 them to private corporations than by placing them 
 under government direction. Even the financial advantages 
 to the state, which are anticipated from the income of a 
 settled rent from the lessee in place of the fluctuating receipts 
 of the management, are imaginary. As long as the returns 
 from operations, the lessee's profits, exceed the rental, there 
 is manifestly no financial advantage to the government p 
 but as soon as the profits fall below the rent, there is no 
 further security for the government than the working capital 
 of the lessee. The lessee's credit lacks the foundation with 
 which the ownership of the road endows the proprietor, so 
 that the lessee's operation will lack the resources which are 
 at the command of one who is both owner and operator. 
 The longer the lease, the less frequent will be the opportuni- 
 ties of the government to strengthen and complete its super- 
 visory authority. The shorter the lease, the more bitter wiR 
 be the collision of the two interests, that of the lessee in ob- 
 taining the greatest amount of profit from his monopoly, 
 that of the state in securing the preservation and improve- 
 
57 
 
 ment of the property leased. The creation of dividends, by- 
 means of increasing as much as possible the profits of the 
 current working year, is, in the private system, the opera- 
 tion by the owner of his own property, always moderated 
 by regard for the preservation and improvement of the 
 enterprise. In the leasing system, however, this considera- 
 tion is absent, so that the danger of neglecting the main- 
 tenance of the permanent way and rolling stock exists, and 
 it demands the sharpest control on the part of the govern 
 ment to prevent a reckless management and the 
 consequent damage to the leased property. This risk 
 is increased by the fact, that the lessor is always 
 obliged to supply the whole stock of equipment,, 
 because the lessee, when his lease had expired, would have 
 no further use for equipment he has furnished, while it is to 
 a great extent indispensable to the owner in order that he may 
 continue the operation of the road. To enforce the keeping 
 in order of the working stock would be to encounter such end- 
 less difficulties that the most careful supervision would only 
 guarantee partial success. For the government, moreover, 
 the exercise of any supervision over the lessee management 
 is attended by extraordinary disadvantages, as such control' 
 is influenced not only by the fiscal interest of the lessor, but 
 also by the protection of public interests. At every inter- 
 ference of the government with the k ssee's management,, 
 the question would rise as to whether it was to be regarded 
 as the exercise of the government supervisory authority- 
 or on behalf of the government's rights under the contract- 
 In the latter case the lessor would be amenable to justice, in 
 the former its action would be final. The legal relations 
 existing between the government and the parties who held 
 the leases of the government railroads would then be based 
 on a mixture of considerations for public and private rights, 
 the determination of which would be attended with difficul- 
 ties and disadvantages of every description. The duty of 
 the state with regard to encouragement of the development 
 of the railroad system would finally encounter difficulties, 
 which could scarcely be avoided if the state railroads were 
 leased out, especially where the holders of a lease of a state 
 road, to which an addition had been built, declined to under- 
 take the operation of the latter. As the independent operation- 
 of such short stretches of railroad is generally impracticable, 
 the government would neither be able to work them itself nor 
 to find a suitable lessee for them. To provide for the accept- 
 
58 
 
 ance of the management of such short lines by the lessee 
 on concluding the contract, would only be possible as far as 
 it might refer to roads already so far built or projected as 
 to allow of the terms of their future operation being made in 
 advance. As the experience had repeatedly in Holland has 
 shown, the government will be dependent for the leasing of 
 its new lines on the good-will of the previous lessee and will 
 be compelled to purchase his willingness by offering the 
 lease on such terms as must prove as disadvantageous to the 
 government as they are profitable to the lessee. For the 
 prospective construction of a network of secondary railroads, 
 the outlook for the future would, under such conditions, be 
 very serious. 
 
 PRIVATE ROADS UNDER GOVERNMENT ADMINISTRATION. 
 
 The conjunction of private ownership with government 
 direction of the railroads ; that is, the system of government 
 management of the private railroads, certainly insures the 
 government an easier solution of the problem that devolves 
 on it respecting the development of the railroad system. But 
 the development of this system is only possible where, in ad- 
 dition to private railroad companies, a capable and well or- 
 ganized government system of operation exists. This will 
 explain how it is that this system has been most successful in 
 Belgium and with the home railroads. Originating in the 
 necessity of placing the building of new, or the 
 maintenance of established undertakings, under the 
 direct protection of the state, and entrusting the manage- 
 ment to its direct care, it finds in the cause of 
 its origin also its historical justification. A number 
 of railroad undertakings, whose necessities called for the in- 
 tervention of the government, have found here the only 
 means of their completion or preservation. In the case of 
 an extensive participation by government in private rail- 
 road enterprises, the state direction is the only effectual 
 means of protecting its interests. In particular, to insure the 
 payment of the interest guaranteed by the state on the cap- 
 ital invested, without government management of the 
 guaranteed railroads, has been found very difficult as long 
 as the independent direction of the road by the corporation 
 finds no interest in the re-imbursement of the guaranteed in- 
 terest from the receipts. In those instances where the cor- 
 poration includes both guaranteed and unguaranteed rail- 
 Toads, the overcharging of the first in the division of the 
 
59 
 
 ^common working expenses can hardly be avoided except by- 
 go vernment management. 
 
 This system, undeniably, is accompanied by many dis- 
 advantages that show at once its insufficiency. As is always 
 the case where the ownership and management of the road 
 .are in different hands, we find here the collision between 
 the interests of the owner, of the speculative stockholder, 
 and those of the management. The state management will 
 foe influenced on one side by considerations of government 
 supervisory powers, on the other by regard for the financial 
 interests of the operator. As the two interests are often 
 sharply opposed to each other, the exercise of government 
 supervision would be likely to be influenced by the dutiful 
 regard of the manager for the interests of the undertaking 
 committed to his charge. More serious still are the collisions 
 between the interests of such enterprises as may be 
 under government management with the fiscal interests 
 of the government itself. As a result of the intricate branch- 
 ings of the home railroad system, the interests of the different 
 roads come in contact so variously in their countless traffic 
 connections, that the development of the traffic on the ex- 
 tended government railroads depends more or less on their 
 competition with the private roads managed by the state. 
 The task of the government, to unite the cultivation of the 
 traffic of its own lines with due care for the interests of the 
 private railroads managed by it, can only be achieved 
 by means of a reasonable and equitable division of the 
 traffic ; yet equal consideration for its own interests and the 
 interest of the enterprises managed by it is attended with 
 such difficulty, that neither the extension of the present re- 
 lations nor their retention for any length of time is desirable, 
 except in case of the most urgent neccessity. Among all 
 the forms of government management of private railroads, 
 as the above considerations indicate, that has the fewest dis- 
 advantages and difficulties, in which the interests of the 
 owners depend least on the profits of the road. 
 
 Therefore, the most favorable phase of this system, so far 
 as the public interests are concerned, is when the state as- 
 sumes the complete control of the road on payment of a 
 stipulated annual rent. The powers acquired by the govern- 
 ment according to such an agreement very nearly approach 
 those that are entailed by complete ownership, the transfer 
 of which to the state is only prevented for a time, because 
 the legal attributes of a joint-stock company will not allow 
 
60 
 
 of the immediate liquidation of the company without seri- 
 ous loss and inconvenience. This form of agreement has re- 
 peatedly occurred in the history of the development of the 
 home railroads, and in case of the transfer of the private 
 railroads to government will therefore generally form the 
 basis of .the contracts with the corporations which may be the- 
 actual owners. 
 
 STATE RAILROADS UNDER STATE MANAGEMENT. 
 
 The explanation of the different systems of railroad man- 
 agement, as contained in the foregoing descriptions, will 
 make it plain to the reader that only the union of complete 
 ownership and unrestricted management in the hands of the 
 state, t, e., the pure state railroad system, can fully secure 
 the fulfillment of the task devolving on the government with 
 regard to the direction of railroad matters. Only by the 
 adoption of this system can the economical advantages of 
 united management be obtained, without this monopoly of 
 transportation compromising the advancement and promo- 
 tion of the interests of the community. The great advan - 
 tages of complete unity in the management and operation of 
 the railroads are, according to the explanations contained m 
 Section II., so necessary to the economical interests of too 
 country that the only question left is whether a monopoly 
 by the state or by private corporations is to be regarded as 
 the most advantageous form of unity. If a private monop- 
 oly, as just described, is wholly incompatible with the 
 proper protection of public interests, but would render all 
 business requiring transportation dependent on the interests 
 and views of a private enterprise, then a government mon- 
 opoly, one single transportation establishment conducted by 
 the state for all the railroads of the country, appears to be 
 the only possible form in which complete unity of opera- 
 tion can be accompanied by the protection of the interests of 
 the community. 
 
 It must not be expected that the effects of the state rail- 
 road management on the economical interests of the country 
 will be entirely independent of its financial results. It stands 
 to reason that the revenue of the administration, in state as 
 in private railroads, will make its influence equally felt on 
 the rates of transport as well as on the facilitation of other 
 traffic privileges, that the financial possibility of such ad- 
 ministrative regulations must be considered with the 
 entire financial position of the administration; since the 
 
61 
 
 government administration can as little afford, per- 
 manently, to do without a suitable interest on the 
 capital invested in the railroads as can private cor- 
 porations. But it may be accepted, according to the 
 deductions in Section II, that the financial results of a 
 united government administration will be considerably more 
 favorable than the total results of a divided system of pri- 
 vate roads. The savings that would be effected by a united 
 administration of all home railroads cannot be exactly cal- 
 culated, it is true, but the minimum estimate shows such 
 large figures, that in the purchase a burdening of the state 
 treasury in excess even of the probable average profits 
 would be unimportant. Again, in the case of a single man- 
 agement covering a wide expanse of territory, the scale gov- 
 erning the financial admissibility of an administrative regu- 
 lation is more uniform, and therefore more reasonable than 
 with a multiplicity of divided directions. The unfavor- 
 able results of individual lines can, where they be- 
 long to different owners, totally prohibit the trial 
 -of regulations of uncertain effect, while in the ter- 
 ritory of a great organization, where advantage and 
 disadvantage are distributed over the different lines, the 
 average total results would allow of the experiment without 
 hesitation. The nature of the joint-stock company, the great 
 mobility and facility of transfer of the stock causes a ten- 
 dency in such administrations to attach more importance to 
 a good income for the time present than to the prospect of a 
 good average result for the future. Administrative mea- 
 ' sures, which, though they may appear valuable to public in- 
 terests, do not seem to possess any direct present advantage 
 for the enterprise, and will first show it in the increased 
 profits in future years of operation, will find little sympathy 
 among private railroad administrations. In place of the 
 prodigal dividends based on false economy and the starving 
 of the roads, we have, with the state administration, 
 the general economical and the financial inter- 
 ests of the nation, and the latter is prepared, 
 in consequence of the immense resources of a 
 well-founded national credit at its command, to make even 
 momentary sacrifices and calculate on the future gain, find- 
 ing its natural limits in the possibility of covering the ex- 
 penses of a well-ordered national economy, including the in- 
 terest and sinking funds. Financial interests of this de- 
 scription are not likely to come into collision with the eco- 
 
62 
 
 nomical interests of the country, as long as these interests re- 
 main in accord with sound financial principles, and the source 
 of revenue rests upon sure foundations. The covering of the 
 current expenses of a state is the first and indispensable con- 
 sideration of a well-ordered fiscal policy, and the propriety 
 of restricting the financial objects of government operative 
 administrations to the amount of re venue necessary to meet 
 those necessities is just as evident. 
 
 The development of the railroad with regard both to the 
 technical and the administrative problems of operation — 
 in opposition to a widely spread notion — would not be in the 
 least retarded by the consolidation of the great railroads 
 into one united transportation establishment under govern- 
 ment direction. Such development is not so much dependent 
 on the rivalry among the different managements, but to a 
 great extent on the ambitious feeling of emulation existing 
 among the individuals working together in one management. 
 Any stagnation of this progress is not therefore to be feared 
 by the decrease in the number of administrations; on the 
 contrary, we shall rather find that, without considering the 
 incitement from outside interests, through an intelli- 
 gent co-operation of the government, through the en- 
 couragement proceeding from the leading authorities, 
 through the favorable acceptance and well planned 
 direction and union of individual efforts and ex- 
 periments, it will be found possible to effect a concen- 
 trated united working of all able and earnest forces, and 
 thereby induce a more rapid and successful development. 
 In all administrations whose highest utility can only be at- 
 tained by a unity of disposition, and whose total results de- 
 pend on the working together of a number of different 
 officials, according to the experience for instance of the post- 
 office and telegraph departments, progress and development 
 may be achieved to a much greater extent by the union and 
 organized direction, than by the disjointed emulation of 
 individual efforts. 
 
 THE OPPORTUNITY FOR ESTABLISHING THE STATE RAILROAD 
 
 SYSTEM. 
 
 Among all the forms in which the railroad is found in mod- 
 ern civilized nations, the pure state railroad system is there- 
 fore the only one that fulfils the requirements of the gov- 
 ernment railroad policy — uniform regulation within the state 
 boundaries and the advancement of the public interests con- 
 
63 
 
 cerned. Only in this form is possible an economical applica- 
 tion of the national capital, on which such great claims are 
 made to effect the construction and operation of railroads; 
 only in this form, moreover, can the direct and effectual 
 protection by the state of the public interests confided to 
 its care be realized; finally, only in this form do we find the 
 possibility of simple, cheap and rational rates for transpor- 
 tation, the certain prevention of injurious differential tariffs, 
 and a just, energetic and effective administration, attentive 
 to the best interest of the whole community. The state rail- 
 road system must therefore be regarded as the 
 ultimate form of development of the railroad. 
 How soon this last phase of railroad development 
 will occur in the different countries depends 
 on the characteristics of the country, the form of government,, 
 on the degree of necessity, and to a great extent on whether 
 the conditions preparatory to the concentration of the rail- 
 roads in government hands are more or less favorable. The 
 advantages of concentration are not everywhere equally im- 
 portant, nor are the disadvantages of division alike oppres- 
 sive, nor are the public interests everywhere endangered 
 to an equal extent by the private operation of railroads. In 
 Prussia we find united in a high degree the pre-requisites of 
 a great, united operating administration conducted by the 
 state. Its limited resources, its economical situation, which 
 demands a strict and careful application of the national cap- 
 ital, necessarily forces the development of the railroad sys- 
 tem, and under the present economical circumstances with 
 redoubled power, to the condition called for by the exigen- 
 cies and the conditions of development, the final energetic 
 accomplishment of which shall be assured by the present 
 measure. 
 
 For the accomplishment of the state railroad system in 
 Prussia, the present time also must be regarded as peculiarly 
 favorable, because the condition and prospects of the majority 
 of the home railroads make their acquisition by the state 
 appear desirable, while the favorable condition of the na- 
 tional credit furnishes the means for an arrangement advan- 
 tageous to both sides. The great fluctuations in the revenues 
 of the separate enterprises, such as have occurred from the 
 vicissitudes of operation during the last ten years, have 
 manifested the uncertain value of railroad shares to such an 
 extent, that the transformation of an uncertain and change- 
 able dividend into a settled and secured income from govern- 
 
64 
 
 ment, after the troubled experience of the recent past, will be 
 to a high degree welcome to most of the shareholders. While 
 hitherto the explanation of the decline of railroad receipts 
 is to be found chiefly in the excessive competition caused by 
 the establishment of new connecting lines, there must be 
 added for the future, besides this competition, the increased 
 power of the already extensive government railroad admin- 
 istration and the enhanced requirements of government su- 
 pervision, as dangerous to the private roads. Although the 
 government has hitherto spared the private roads from ex- 
 posure to the full power of the state railroad possessions,* 
 such a state of affairs cannot continue for long, especially if 
 the demands from antagonistic voices for the increase of the 
 revenue from the government railroads are acceded to. The at 
 tainment of an increase of profits by means of higher rates 
 which would also benefit the stockholders in private lines, 
 the directors of which would certainly immediately follow 
 suit, must be considered impossible. The performance as 
 well as the revenue of the existing government railroad 
 system could only be raised to the desired pitch by a rational 
 consolidation of its roads. Without this, the work hitherto ac- 
 complished remains incomplete and faulty in its plan and in 
 its effects on traffic and on the state treasury. To make an 
 end of the present untenable condition of affairs by vigor- 
 ous measures is a pressing interest of the state that has been 
 repeatedly ur^ed by the government. 
 
 In the negotiations concerning the acquisition of the pri- 
 vate railroads, it must be taken into consideration that in 
 the hands of the government the object bought, for various 
 reasons, increases to some extent in value. The state is 
 therefore in position to insure to the seller, in giving him his 
 previous income or even a little less, an emolument that he 
 will not be likely to undervalue, and this will be just and 
 reasonable to both parties. To what extent and by what 
 means the state will succeed, with due regard to reasonable- 
 ness and the government honor, in maintaining harmony 
 with the other party, will be shown by further statements. 
 
EAILKOAD GAZETTE PUBLICATIONS. 
 
 The Railroad Gazette, 73 Broadway, New York. 
 
 Railroad Gazette, published weekly ; the best railroad and gen- 
 eral engineering paper published in America. $4.20 per year. 
 Specimen copies free. Bound volumes, 1872 to 1879, inclu- 
 sive, one volume to each year, $6.00 each. 
 
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 engravings. Price, $2 . 50 . 
 
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 Road-Master's Assistant and Section-Master's Guide. By William 
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 Railway Revenue and its Collection. (Second edition revised and 
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 best binding, $2.75. 
 
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