Produced by Cornell University, Joshua Hutchinson, Thomas
Hutchinson and PG Distributed Proofreaders
The condition of our railways, and their financial prospects, shouldinterest all of us. It has become a common remark, that railways havebenefited everybody but their projectors. There is a strong doubt in theminds of many intelligent persons, whether any railways have actuallypaid a return on the capital invested in them. It is believed that one oftwo results inevitably takes place: in the one case, there is not businessenough to earn a dividend; in the other, although the apparent net earningsare large enough to pay from six to eight per cent. on the cost, yet in afew years it is discovered that the machine has been wearing itself out sofast that the cost of renewal has absorbed more than the earnings, and thedeficiency has been made up by creating new capital or running in debt, tosupply the place of what has been worn out and destroyed. The IllinoisCentral has been pointed out as an example of the first kind; the New-YorkCentral, of the second; while the New-York and Erie is a melancholyinstance of a railway which, never having enough legitimate business of itsown, has worn itself out in carrying at unremunerative rates whatever itcould steal from its neighbors. The general opinion of the community, afterthe crash of 1857, was, that all our railways approximated more or lessclosely to these unhappy conditions, and it was merely a question of timeas to their final bankruptcy and ruin. Even now, when they have recoveredthemselves considerably, and are paying dividends again, capitalists arevery shy of them.
It is our belief, contrary to the current opinion, that during the nextdecade such a change will have taken place in the condition of ourrailways, that we shall see them averaging eight to ten per cent, dividendson their legitimate cost. We propose in the present article to give thereasons which have led us to this conclusion.
The causes to which may be traced the languishing condition of our railwaysmay be stated as follows:—Financial mismanagement; imperfect construction;and want of individual responsibility in their operation.
The financial mismanagement of our railways has arisen from precisely theopposite cause to that which has made British railways cost from two tothree times as much as they should have done. Their excess of cost wasowing to their having too much money; ours to our having too little. Theywere robbed right and left for Parliamentary expenses, land-damages,etc. The Great Northern, from London to York, three hundred and fourteenmiles, expended five millions of dollars in getting its charter.Mr. E. Stephenson says that the cost of land and compensation on Britishrailways has averaged forty-three thousand dollars per mile, or as much asthe total cost of the railways of Massachusetts.
American railway-companies have never been troubled with too much money.They have usually commenced with a great desire for economy, selecting a"cheap" engineer, and getting a low estimate of the probable cost. Aportion of the amount is subscribed for in stock, and the next thing is torun in debt. "First mortgage bonds" are issued and sold. The proceeds areexpended, and the road is not half done. Another issue is sold at a greatdiscount, and yet another, if possible. As the road approaches completion,the desperate Directors raise money by th