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than a higher rate of interest for the money which he locks up in railroads. In selecting his investments he desires, as a matter of course, to evade the consequences of this systematic reduction of interest as far as practicable. The economies which are rendered possible by judicious combination will probably go far towards effecting this object. He will of course have a preference towards those examples of combination which are least liable to speculative control, or to legislative or official interference with competent private management, and which exhibit, in the most effective form, an adequate and permanent representation of legitimate subsisting interests.

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CHAPTER V.

POOLS.

Our observer will certainly be struck by the importance attaching to the "Pool" in connection with various aspects of investment. Concerning its moral status and its relative necessity or expediency, he will find abundant information in current text-books. The question in which he is directly interested is rather whether the creation of a pool is calculated permanently to solve apparently insuperable difficulties arising between competing railroads of which he holds, or is disposed to acquire, the securities; or whether the mere existence of a pool contains for him adequate reason for alarm or distrust. As in practical business the word is used in a variety of senses, it will be proper to note that the following observations relate not to any speculative or "blind" pool. The objections to which this form of the thing is liable are of that general kind which apply to all forms of speculative control. The pool referred to is simply the expression of a serious necessity which attends the development of railroad enterprise, and may be regarded as a sort of convenient half-way house between internecine competition on the one hand, and wholesale combination on the other. Perhaps the most striking illustrations connected with the subject may be found in the well-known "Granger" cases, and the experience of the railroads affected by them.

A period occurred in the history of America when the

universal cry was "Go West." Prophets of this doctrine took little pains to determine how far west the energetic fortune-seeker should go, or under what conditions as to personal aptitude and accumulated savings he might fairly count on a successful career. As the wave of emigration crept steadily westward, and many pioneers attained substantial success, it seems to have been taken for granted that the farther west a man went the better results would he obtain, and the shorter would be his route to fortune. In the case of the miner, this forecast was often justified. But in the case of the agriculturist serious disappointment was in store. In early days there was an old-fashioned idea that it would not pay to raise agricultural produce beyond a certain distance from a market. This wellfounded notion was apparently discredited by a period of reckless activity in railroad construction. Intending farmers settled in districts notoriously deficient in facilities of transportation, apparently forgetful of the obvious certainty that no future railroad would permanently consent to carry their produce to market at a loss. It gradually became apparent that, if the farmer could not obtain transportation at an extraordinarily low rate, his produce would not be worth the cost of transportation, and he would eventually go to ruin. But the construction and operation of a railroad postulates fixed charges. An existing railroad could not honestly be required to carry his produce to market at a loss; and, in face of extraordinarily low rates, railroads in the future would not be built in his district. Under such conditions, it was natural that grave issues should arise between the farmers who desired to get a living, and the railroads which were built for the purpose of making money. The latter had a right to urge that their charters were in fact contracts;

that they had locked up vast sums of money as a consideration for being permitted to run their business in their own way, subject to the fair interpretation of the law of the land; that their charters formed part of that law, and that it would be a monstrous injustice to deprive them of a large and permanent investment by ex post facto confiscatory legislation.

The farmers on the other hand contended, roughly and in effect, that the regulative power inherent in a State entitled its Executive not merely to prohibit abuse or to redress established grievances, but practically to assume the administrative functions of railroad management, such as the framing of rates, adjustment of the difficult problems of competition, and in some instances even limitation of dividends on stock. Every producer, they contended, should be placed on precisely the same footing as regards facilities and cost of transportation, whether he lived far from or near to competitive points, and whether the freight which he shipped was large in quantity and certain in point of delivery, or whether it was small in quantity and so irregular in point of delivery as to greatly multiply the expense and trouble of the transporting company.

The truth would seem to be that it is no part of the proper functions of a railroad to review and correct, at its own expense, the errors in judgment committed by those settlers who selected for themselves spheres of industrial activity ill-adapted to accomplish the purposes of their selectors. Let us suppose that A. has located his farm, flour mill, or lumber mill with genuine insight into the physical conditions which, in the natural growth of the country, tend to ensure success-(e. g.), his enterprise is located within measurable distance of water transporta

tion. It is also near a railroad junction, which promises to become a competitive point of substantial importance. He is plainly entitled to the credit of his forecast—that the conditions of transportation will be permanently favourable to his enterprise, and to the benefits derivable therefrom. Let us suppose that B. has selected a site for his farm or mill very remote from water carriage and from a competitive railroad point. It is possible that a branch railroad may be built sufficiently near to give him a modest chance of limited railroad facilities. But to induce a constructing company to build such a branch line is by no means easy. Perhaps the free grant of the right of way, and of a block of land amply sufficient for depôt accommodation wherever a depôt may be required, a subsidy or subscription from villages or small towns on the route, and, lastly, a high rate for passengers and freight, may induce a speculative or sanguine company to build the branch or extension under consideration. It is probably constructed with reluctance, and its operation is attended with loss. After it is built, but emphatically not before, B. discovers that A., with the advantages of proximity to water carriage and a competitive point, can reach a market on better terms than he (B.) can; and he taxes railroads generally with unjust discrimination. In other words, he would like the railroad to shoulder the unfortunate results of his defective judgment. It is impossible to convince him that A. is well placed, because he correctly interpreted the situation, and that he (B.) is ill placed, simply because he failed to do so. Why should a railroad company be expected to compensate out of its own pocket any difference in point of business capacity that may exist between A. and B.? If a railroad be not bound to do so, it follows, as a logical consequence, that it is no part

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