arbitrary—according to Mr. Hudson's selection, if he would only agree to abide by it. If your present rates are robbing the people, low as they are very well, lower them still more, and rob your stockholders. It is evident that Mr. Hudson, for one, is no stockholder. But are not our stockholders parcel of the people? And so the old impossibility of finding standpoint—or rather, the necessity of shifting his point of view with each newspaper-clipping he pastes in his scrap-book-renders Mr. Hudson everywhere specious, inconsistent and absurd; which leads us up to the next chapter where we must consider the reason why railway stockholders are not to be considered along with or as well as other citizens of this republic, by Mr. Hudson.

CHAPTER VII.

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OF STOCK WATERING."

A RAILWAY stockholder, says Mr. Hudson, cannot really be robbed, you know, because his stock is "water"; since railway capitalization is largely fictitious. At any rate, this capitalization has so large a fictitious element in it, upon which it is forced to attempt the payment of dividends, that your stockholder is entitled to nobody's sympathy, if he receive no dividend whatever, for or on account of whatever money the original subscriber for the stock held by him put into the construction of the railway tracks, stations, fixtures, rolling stock or furniture of any sort. If you have any sympathy to give us-any tears to shed-give that sympathy to, shed those tears for, the shipper, who (as we have seen) is often forced to pay less to send his freight to California than to Pittsburg, and whose rates are lowered when his objective is Buffalo instead of Schenectady or Palatine Bridge. For, Mr. Hudson or anybody else to the contrary notwithstanding, this was the situation, and the exact situation, at the passage of the Interstate Commerce Law. The history of railways in the United States, as we have just seen, is the history

of the reduction of railway tariffs, and when these tariffs had reached their lowest, there and then steps in the government to regulate and control them. Of course, how much lower these tariffs might have gone, or how much less the long-suffering shipper might have been compelled to pay for freightage, nobody can conjecture. Judging, however, the future by the past, the next change of tariffs, like the last, would have followed the still downward tendency. But let us look into this "water," this alleged or fiat capital, which Mr. Hudson prefers to call "The Fictitious Element in Railway Policy," (Chapter Seven.)

Many a worthy cause and many a worthy man have been slain by an epigram. It was a happy coup d'esprit of Wall Street to call the increased capitalization by a corporation a "watering" of its stock; and the phrase has doubtless often done yeoman service in the transactions by which Wall Street lives and thrives. But the fact is that "stock watering" is A CRIME COMMITTED AGAINST and not A CRIME COMMITTED BY a railroad company. In other words, the old syllogism must be accepted very peremptorily here if we are to admit-because corporations sometimes do increase their capital on paper-that all railway companies are public enemies. Nobody can defend, and nobody ought to attempt to defend, the pouring of pure water into the capital stock of a corporation. But there are some four hundred railroad companies in these United States; and Mr. Hudson, to sustain the charge of universal watering against railway companies, instances two capital cases. One of these was one of the most flagrant cases on record (it would be difficult, indeed, to find one more flagrant). It dates back nearly twenty years; was first held up to public criticism by a gentlemen who, more than any other one man, is in receipt of Mr. Hudson's constant and most unqualified strictures everywhere else in Mr. Hudson's pages for his own career as a railroad president; moreover, this very case became the moving cause of legislation which forever prevented a repetition of the particular process by which this particular stock was "watered." As to the other case cited by Mr. Hudson, the watering," according to his own figures, amounted to one-third

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of its increased capital. But I doubt if any shipper of the line of that particular railroad, or any patron of the line who remembers its previous condition, will agree with Mr. Hudson that a betterment of one-third at least did not accrue at about the time of the "watering." Suppose a zigzag line of railways operated by half a dozen petty corporations, requiring endless delays, a change of cars for passengers and breakings of freight bulk between two of the most important terminals in the country-metamorphosed into a system of four through tracks to conserve the safety of life and property by separating freight and passenger service. Suppose the improvement marked by increased prosperity, not only of the line but of the territory it traversed-would there have been no betterment to capitalize, or would the capitalizing of this betterment be "water"? Would stockholders, in such a case, be apt to object to the company borrowing money to make their own stock more valuable? And which is Mr. Hudson's public just now, the public along the line of this improved railway, and who pay its tariffs s; or the entire continent from Sandy Hook to the Golden Gate, from Canada to the Gulf of Mexico, for whom Mr. Hudson assumes to take up his parable? Another curious fact which Mr. Hudson may not be aware of (or if aware of, which he has inadvertently omitted to clip and paste in just here), is the fact that up to Feb 4th 1887, these two selected corporations were members of the same pool, serving respective but almost parallel territory at rates at least thirty-three per cent lower than at the dates at which their recapitalization occurred. Mr. Hudson's platitudes against "stock-watering," so long as he confines himself to platitudes and truisms merely, are perfectly safe. But when, in 1886-7, he prints the newspaperclippings of 1869-70, and moralizes therefrom, he can hardly complain if his public demur, not only to his antique instances, but to his general safety as a guide in the complicated questions. with which he assumes to deal. I mention these two examples (which are now ancient history) not to suggest an excuse for them, but as showing how entirely superfluous Mr. Hudson's employment of them is; and how as a matter of fact the wrong, so

far as the public is concerned, had been entirely neutralized by application of the pooling system. Other things being equal, there is no reason why a railroad should not capitalize its earnings by employing them for betterments, any more than that an individual should capitalize his by putting back his earnings into his business. Nor is it quite apparent that any moral dishonesty enters into the act of even capitalizing those betterments which Nature and the march of civilization bring, which I understand are called (just now) "the unearned increment." I do not remember that any company has so far been guilty of this particular sort of watering; but, had the early Dutch settlers of Manhattan Island built the present elevated railway, it is interesting to speculate what sin would have been committed against natural or moral law had their assigns in 1888 capitalized that structure, not at an approximate to its earning power at the date of its construction (in, say, 1666), but at a sum representative of its actual earning power in the later year. Neither am I aware by what mental processes one can insist on "unearned" increments at all, if by that popular term we mean the increase to one's property by the efforts or investments of one's neighbors. It is fashionable, I am aware, to say that if A's corner lot increases fifty per cent by reason of the purchase and improvement of adjoining lots by B, C, D, E, and F, that fifty percentage is A's unearned increment; but is A's foresight and shrewdness in investing in the corner lot aforesaid, when he might have placed his money elsewhere, to count for nothing? Are not brains a part of one's capital, and may not A's foresight and shrewdness have been and continued a considerable part of his capital or stock in trade or earning power? Assuming that Mr. Hudson does not contemplate the removal of cerebral inequality between man and man by due process of law, it might occur that, whereas the rest of the alphabet had no confidence in the future of-let us say, a certain B and C Railroad-A might foresee a Pacific Railway, or a commercial development, or the bankruptcy of a competing linewhich would make it valuable, and so might without sin buy up its stock at five cents on a dollar and in due time reap substantial

rewards. And supposing even that A, by the transaction (or even by recapitalizing this same B and C Railroad), was ultimately enabled to accumulate one of those enormous fortunes in which Mr. Hudson sees such peril to his republic, would even such a public calamity go to prove railways public enemies, or that any and all increase of capitalization was "stock-watering"? Doubtless improper practices will obtain with evil-minded men until the end of time. But if the enormous fortunes aforesaid have been accumulated by watering railway-stocks, then it instantly follows that they have not been accumulated by the management and operation of railways; and thus another of Mr. Hudson's charges falls to the ground. And the facts are within this statement. As a matter of fact these accumulators of mammoth fortunes were operators in Wall Street, who by accident become loaded with a favorite security, or with the debentures or stock of a single corporation, which necessitated (or at least suggested) their identification or assumption of the management, directorship, or presidency of this, that, or the other railway corporation. In not a single case have these fortunes arisen from the earning power of the road itself. If a certain railway corporation increases its stock without proportionately increasing its earning power, then the transaction is properly characterized as "stock-watering." But it does not make all railways enemies of the republic, nor in any way cause them to "dominate " the people who have granted them franchises for transportation purposes. It is from a prevalence of the very spirit which Mr. Hudson's volume, "The Railways and the Republic," labors vigorously and constantly to cultivate in this people, that railway-wrecking and stock-watering ever become possible. If Mr. Hudson honestly desires to make stock-watering impossible, let him advise his constituency to yield the railways such tariffs as they are obliged to demand, thus enabling them to meet their fixed charges and so keep out of the hands of "speculative directors," who will, from private greed, proceed to water their stocks. Here is a field wherein Mr. Hudson could write books to his heart's content, from a consistent, public spirited, and even contemporary standpoint, and

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