It is impossible to estimate with any degree of accuracy 'he amount of the burden upon the industry of this country by fraud: ulent building contracts, but it is safely assumed to be enormous.

5. Fraudulent purchase of lines.

Kindred to the corrupt letting of contracts is the wrong of purchasing lines already owned, at prices far above their real value, the excess being divided secretly between the “ring ” managers of the two companies. Transactions of this sort are usually managed with such adroitness that detection is difficult, if not impossible; but the cases are neither few nor far to seek in which the evidence is convincing that the terms conceded by purchasers must be accounted for either on the ground of dishonesty or lack of judgment.

6. Misappropriation of land grants.

The American government is the only one that has adopted the policy of making donations of the public lands of the country to aid in the construction of internal improvements, looking at the industrial progress of the nation.

In view of the newness of the country, the deficiency of cash capital for the construction of expensive works, and the extent and variety of its material resources, which must otherwise long remain undeveloped, this policy may have appeared at the time to be a wise one; indeed, it has promoted the industrial prosperity of the nation.

In the case of the trans-continental railways, the Union and the Central, already in use, and the Northern and Southern, now in construction—there was still another motive that influenced the government to bestow the immense grants they have received. The rebellion had taught us the danger of disintegration. The Atlantic and Pacific States were so removed that there was danger of an early political falling apart; there was need, therefore, that these great divisions of our common country be brought into closer rela. tions. This was the argument.

Unhappily, experience has shown that there is another side to this question of government aid in the construction of railways-that land grants, how much soever needed for the encouragement of improvements in the interest of industry and commerce, have by no means been an unmixed good—that, in view of the corruptions engendered, and the public demoralization they have produced, it is quite doubtful whether they have not been a curse rather than a benefit.

In the act of conferring lands upon the Illinois Central Railroad Company, the State of Illinois made an honorable exception to the general rule, requiring, as a condition of receiving a grant, that the company should annually pay into the public treasury seven per cent. of its gross earnings, a sum now amounting, we believe, to something over three quarters of a million of dollars. So far as we know, this act of a provident Legislature stands conspicuous as being the only instance in which the interests of the public, in grants made to the States to aid in the construction of railways, have been carefully protected.

The lands granted to Iowa and Minnesota, as well as to Missouri, Kansas, and Nebraska, have been given to the roads in those States, without other condition than the construction of the roads within a given date.

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The result has been that the company managers have, in many cases, so planned the disposal of them as to promote their own personal, rather than public ends. In some instances, where it was : possible to raise the funds for construction without making the lands the basis of securities, the roads have been built at a heavy sacrifice in the way of discounts, to be subsequently paid by the industry of the country, and the lands have been wholly or almost entirely appropriated to the private use of the builders.

So far as we have learned, the lands granted to Iowa have only in a small degree lessened to the public the cost of the roads in aid of whose construction they were given.

The people of Minnesota have hardly been more fortunate. Their land grants for the construction of railroads amounted to 9,965,500 acres. We do not find, either, that the State attempted to protect the rights of the people in reference to these lands, or that railroad companies upon whom they were conferred have so used them as to reduce the cost of the roads.

By the report of the Commissioner of the General Land Office for 1873, the total quantity of land received from grants to aid railroads in Wisconsin, was 3,412,358 21-100 acres. The value placed by the United States upon the alternate even sections being $2 50 per acre, that is the minimum given at which these lands can be estimated, but it is believed that the actual value of these lands should not be placed at less than double that sum, or a total of $17,061,791 05, and it will probably very much exceed this amount.

These grants of land were placed at the disposal of the State, with a view to the reduction of the absolute cost of railroads to the people, and thus encourage their construction. Such being the case, it would seem that an essential condition on which the lands were donated would require the exercise of a supervisory care over the manner of their application, on the part of the State, in order to be certain that they were not diverted from the objects intended, and the interests of the people neglected. By a singular oversight; no such provision seems ever to have been adopted. The grants were handed over to the several companies on the simple condition that their respective roads should be constructed.

In the case of the grant of 600,000 acres received by the Chicago and Northwestern Railway Company, to aid in the construction of that part of its road extending from Fond du Lac to the Michigan State line, taking the appraisal of that company itself for the first two hundred and forty sections ($12 per acre), and estimating the value of the balance at only $5 per acre, we have a valuation sufficient to yield almost $35,000 per mile for the whole distance to which the grant applies. When we consider that this company applied for and received still further aid from municipal corporations on the line of the road, it would seem as though, at least, the ordinary precaution of seeing that this munificent grant had not been needlessly mismanaged would have been taken by the State, especially as section thirty of the act making the grant contains the admonitory provision, “that the said lands hereby granted to said State, shall be subject to the the disposal of the legislature thereof, for the purposes aforesaid, and no other.”

This subject is of special interest at this time in view of the judicial dicision lately rendered in Illinois, in which it is laid down as a rule “that directors of railroad companies were not absolute in their

powers; that they were but trustees to manage the estate of stockholders, and could no more abuse their trust, or waste and squander the property of the stockholder than could any trustee or executor, or other person charged with a fiduciary duty.'

The lands are received by the State as a trust, and are confided to the company to carry it into operation. The State, therefore, is re

, sponsible to the people for the faithful application of the trust.

The State provides, that while the lands are under its care, no part of the same shall be depredated upon, and that they shall be preserved intact for the purposes for which they were donated. It would seem still more necessary that the duty so assumed should be supplemented by a careful supervision of the same after the disposal of the grant, and until the final application of the proceeds therefrom is made, adequate security should be required for such faithful application. Indeed, in the spirit of the decision above referred to, if there should appear a reasonable apprehension that the lands donated had been diverted, wasted, or squandered, it may well be considered if it be not the further duty of the State to require such equitable adjustment thereof as a judicial investigation should determine.

CHAPTER XXIII.

MANAGEMENT OF RAILROADS IN OPERATION.

MANAGEMENT OF RAILROADS IN OPERATION-RAILROADS As MERCHANTS–RINGS

AMERICAN GENIUS DISPLAYED IN STOCK WATERING --UNSKILLFUL MANAGEMENT -EXCESSIVE CHARGES--RAILROAD SIDE OF THE QUESTION—BENEFITS ConFERRED--PUBLIC CHARACTER OF RAILWAYS ESTABLISHED -NECESSITY OF CONTROL AND CONSEQUENT Right OF SUPERVISION-INTERESTS OF CAPITAL REQUIRE CONTROL - INSECURITY OF RAILROAD INVESTMENTS - How CONTROL MAY BE EXERCISED--FAULTY LEGISLATION—SUMMARY OF CONCLUSIONS--OHIO COMMISSIONERS ON RAILROAD RATES.

Two things have tended to confuse the ideas of farmers on the railroad question, viz., a lack of knowledge of the modes in which such vast business enterprises are conducted, and the crude and often conflicting treatment of the subject by the press. Politicians have found the agitation of this subject profitable for their own purposes, and, between the intemperate denunciations of “Grangers run wild,” and the still more unfair treatment of the farmers' movement against monopolies, by a few Eastern journals, hundreds of readers have been trying to find the medial line of truth. To all such we especially

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commend the summing up of the Wisconsin Commissioners' report:

It were well did the evil of mismanagement confine itself to the period of construction. On the contrary, however, it is well understood by all those who are familiar with the management of railroads that there are many ways in which officers can, if so inclined, accumulate fortunes without using capital of their own, and wholly at the cost of the stockholders. Among them is the use of company funds for the handling of grain and produce ; paying therefor a price enough higher than unaided buyers can afford to pay, to give them the command of the market, and shipping the same over their own lines free of charge, or at nominal charges. Another is, to arrange with buyers privately to carry their shipments at a price next to nothing-dividing the profits.

Practices like these are believed to be common, and help to account for the rapidity with which railway officials sometimes grow rich on moderate salaries. They also suggest the reason why railroads are sometimes made to facilitate the commercial growth and prosperity of one town or village to the great disadvantage, perhaps total ruin, of another. If private speculations on the part of railway managers are not discovered in all such cases, it is more than likely, because pains have been taken to conceal them.

The same sort of evils appear in another guise, and on a larger scale, where a private inside “ring" is formed for the purchase of lands, mines, docks, and harbors, and the sale of them for a large advance to the company the “ ring" officially represents. The stockholders are duly advised of the great importance of the property to the future of the road, while congratulating them on the very favorable terms on which it was purchased, and there the matter ends.

But the giant evil under the head of dishonest management is undue inflation of stock. A fraudulent contract, the building and buying in of roads to be foisted upon the company managed, as well as the building up and killing out of cities and villages, usually require time, skill in manæuvering, and careful concealment of the operator's hand.

hand. Not with stock watering. Here the cardinal qualities are, daring and deafness to the protestation of justice. The law is silent, and up to a certain limit the public must have transportation, no matter what the cost. This practice is probably confined to no one country, but it is doubtful, perhaps, whether any other railway managers in the world have a genius for it equal to the American. For illustration of the magnificant scale on which it is sometimes conducted, we have but to look at a single through line from Chicago to New York—the line formed by the Lake Shore and Michigan Southern, the New York Central and Hudson River Railways, whose total waterings within the past few years are alleged to exceed in amount $80,000,000. The interest on this sum at eight per cent is $6,400,000. And since the tariffs on these several roads gauged to yield that per cent. on nominal capital, it is manifest that this one through line of railways is annually laying this enormous tax of over $6,000 000 upon the earnings of those who support it, in order that the holders of the stock may reap an annual dividend of some sixteen per cent. on the real cost.

If this be the tribute paid by the west on one line of railway, with a mileage less than one-seventieth of that of the United States, what must be the burden imposed by this cause upon the industry of the whole country?

Not w little of the poverty of which some railway companies complain, and not a little of the ill-feeling here and there manifested towards them, is due to the want of skill and good judgment in conducting their practical affairs. In too many instances they appear to act on the theory that the railway company is alike superior to the will of the State, and independent of popular favor; and naturally enough, in such cases, this view of the matter enters into the understanding of all subordinate officers and employes.

The subject of unjust discriminations has been already alluded to. Such discriminations are not always made, however, in the interest of managers, or the friends of managers. Sometimes they have origin in the false impression that they are essential to the business prosperity of the company. A prominent shipper is supposed to be able and fully disposed to advance the interest of the company in some manner, and is thought, on this account, to be entitled to special favors.

Another evil of practical railway management, and a crying one in this country, is inefficiency. No one who has traveled extensively upon European railways, can have failed to note that a certain slackness is too common with us in every department of the service.

The system of book-keeping is rarely such that the general agent, the chief-engineer, the superintendent, or the general manager can report, under three months time, the exact amount and kind of business done, the cost to the company of operating any one division of its road, or the average cost per passenger or ton of freight per mile, or the cost per train-mile. Scarcely anything is done with that scrupulous precision, efficiency, and thoroughness so much more common in Europe, and so very essential to economy, comfort, and security elsewhere.

Unjust charges for transportation are commonly denounced, because just here is the point of universal and painful contrast between the public and the corporationsAnd yet, in most cases, they are only the immediate result of the more primary evils already noticed. They are the symptoms in many cases, rather than the disease. Considered as an evil in themselves, they are hard to deal with, for the reason that, beyond the rather uncertain limit, it is quite impossible for any one not possessed of the data for a nice mathematical calculation to say whether this tariff or that is excessive.

If, in the absence of such data, the attempt is made to determine the question by a comparison of the tariffs of different roads, such method is likely to be found unsatisfactory, owing to the great number of modifying circumstances that require to be taken into the account. But leaving out of yiew causes and particulars, it is unquestionable that the public in almost every State have had to pay more for transportation than should have been necessary; certainly more than was compatible with the welfare of the industrial classes.