has his own brand competing with itself in the same market. It does not pay either firm to specially advocate the brand, because it has no monopoly of it.

A feature not touched upon yet is that of advances. When a farmer accepts a loan from one who should be his servant, the natural conditions are reversed. The real owner of the produce is the commission merchant who has made the advance, if it is a large one, and he will treat it as his own, so far as he chooses to do so. It will probably be loaded with an expense which will bring a profit to the commission merchant. If the final account does not show the advance repaid, the crop for the next year is "tied up," as all contracts for advances run in that way. The proper place for a farmer to borrow money is at his bank. If his credit is insufficient to effect that, he is farming on inadequate capital. In this case he must do the best he can, which is probably to go to the commission merchant. If compelled to borrow of your agent, frankly accept the situation, inform him fully of your affairs, pack your goods in the very best manner, seek to fully understand market conditions, and be satisfied with the result, whatever it is. Under such circumstances the commission merchant will be very likely to do his best for you, and these unnatural relations may continue pleasant for years. A farmer who is upright, frank, and prompt will be almost certainly met. in the same spirit by the commission merchant who has lent him money.

T

CHAPTER III.

THE FARMER AND THE RAILROADS.

HE measure of profit to be derived from a study of a

few problems in transportation will depend largely

upon the degree in which the reader succeeds in forgetting all that he has read upon the subject in the partisan press, and in banishing from his mind the prejudices arising from heated controversy. This will be quite difficult to readers in new and sparsely-settled districts, whose products must be transported over long lines of railroad constructed by speculative methods. Under such circumstances the owners of the roads will be engaged in constant struggles-usually unavailing to extort from an inadequate traffic a revenue to pay interest upon an inflated capitalization. The railroads thus situated will represent the dominant money power of the state, and the money force will be relentlessly applied to promote the ends of the management. The railroads will be constant applicants for legislative action or non-action, and what they seek will be sometimes proper and sometimes improper. In either case they will be in a very difficult position. To all Legislatures the people will send a certain number of members, who will not, if they can help it, permit any bill desired by any financial interest to become a law unless they themselves derive from it some personal profit. For this condition of affairs the people alone are to blame. The railroads have to deal with it. There is a widespread opinion that railroads desire to see corrupt men in Legislatures. This is not true. While I have no personal acquaintance with railroad political management, yet my opportunities for observation of other financial interests have been such as to warrant the unequivocal statement that all men who are in charge of great enterprises know it to be to their interest that Legislatures and municipal councils should be incorruptible.

Doubtless if the people are to elect corrupt men the corporations prefer those whom they can control most cheaply, and will endeavor to get them. In the newer states the corporations can not afford to openly advocate the election even of an honest man, for a certain portion of the public press is quite as corrupt as any Legislature, and, unless itself conciliated, will denounce any candidate believed to be favored by railroad interests, as "wearing the railroad collar." In matters of legislation, whether what may be desired by the railroads be proper or improper, to favor anything which is desired by "the railroads" is in some states quite sufficient to assure denunciation from a large portion of the press, and suspicion and discredit from the public. In the older and richer states, where other great financial interests compete with each other for the distrust of the public, the railroad issue is not so overpowering.

While fully recognizing the baleful influence which cor. ruption, engendered in railroad offices, has had upon our legislation, and whatever our familiarity with the disgraceful history of railroad management in America, no good whatever can come from indiscriminate attacks upon these indispensable instruments of civilization. What society has to do is to faithfully and impartially study facts and conditions, with the intent, whenever these shall be mastered, of deciding what is right and compelling obedience to it. Thus far, in the contest with railroads, while the farmers have been very active, they have been almost entirely uninformed, and consequently have as often been wrong as right in the subjects of detail over which contests have arisen.

The fact is that in nine cases out of ten the real interests of transportation companies are identical with those of the communities which they serve. This is probably true even as to the matter of freights and fares, in regard to which contests are continually occurring. It unfortunately happens, however, that railroad properties are not always managed in the interests of their real owners, and it is equally true that the most of the community has very little knowledge either of its own interests or those of transportation companies, and espe

cially of the enormous difficulties attending the reconciliation of the innumerable conflicts of interests between localities, each entitled to equal consideration, with which railroad managers are compelled to deal. Railroad questions are more often contests between the people of one locality and those of another, than between railroad owners and the people at large. The deciduous fruit-growers of California, finding it difficult to meet, in distant markets, the competition of those living nearer, demand from the company which receives their products, and which they think of as omnipotent in the matter, rates low enough to hold the market, whatever they may be, basing their demands on the contention that even. although the traffic may yield no profit, the local traffic which will arise in a prosperous community will fully make good the failure. Suppose this to be recognized by the California company, it is powerless to make a rate which is not satis factory to its connecting lines, who may be, and in fact are, interested in building up prosperous communities upon their own lines. The fruit-growers of Colorado, for example, are interested in having high rates on the California product, and the contest, up to a certain point, is between the fruit-growers of California and those of other states. This entire volume might easily be filled with compact statements of similar cases. They are constantly arising before the Inter-state Commerce Commission. The "railroad problem" in such a country as the United States is too complicated for even the strongest intellects to deal with in such a way as to do exact justice to all interests involved. To deal with it in a spirit of passion and vindictiveness, and without the light of all information which can be obtained and digested, is not only absurd but ruinous. We may recognize, with sorrow, that the history of our railroad development has been largely one of plunder, both of investors and of the public, and with satisfaction that the very magnitude of the business is at last compelling honesty and wise statesmanship to assert themselves, but neither of these considerations should be allowed to occupy our minds. The question is along what lines of public regulation can these enormous properties be best made to serve

the necessities of the public, while protecting honest investors from spoliation, and assuring them a just revenue from their investment. It will be possible, here, to consider but a very few even of the most important questions which must arise. As a preliminary to our study it is necessary to make a few statements of fact.

The nominal capital of a railroad company is represented by its outstanding stock and bonds. The bonds represent money which has been invested in the road, and in theory is a debt for whose payment the stockholders are responsible. In fact, it is a debt never intended to be paid, but forever to remain invested and earning interest. The stockholders control the property, so long as interest upon the bonds is met. The bondholders get their interest in full before stockholders receive anything. If default is made in interest upon bonds, the mortgage securing them is foreclosed, and the stockholders lose whatever investment they have made. While the above is true, in theory, in many cases, of late years, bondholders, by means of agreements which are made effective, are assured a certain representation in the directory of the road.

In 1896 the nominal capitalization of the railroads of the United States was $9,744,399,332, of which $5,226,527,269 was stock, and $4,517,872,063 was bonds. Upon stock to the amount of $3,667,503,194, or 70.17 per cent of the rated stock outstanding, no dividends whatever were paid, and, for the most part, probably, ought not to have been paid, as not representing actual investment, although to some extent actual investment is represented, even in this class of stock. On the remaining 29.83 per cent of the stock, dividends to the amount of $87,603,361 were paid, or 5.62 per cent on the par value of the dividend-paying stocks, the actual rates paid varying from one to ten per cent. The dividend-paying stocks are mainly in the old and thickly-settled parts of the country, and to a large extent, but not wholly, represent actual investment. The capital of a few railways in New England is entirely represented by stock, upon which large dividends are paid. The capital stock of some prosperous railroads has been "watered" by "stock dividends," until a small dividend on