Since concluding what we desired to say on the subject of controlling and regulating railroads and railroad corporations, our attention has been directed to a circular from The New York Nation, of July 27th, 1873, entitled: "The Railroad Discussion, and Common Sense." This singular article challenges attention. If it is put forth in the interest of railroad corporations, we can readily account for the views expressed, and the covert foreshadowing of national control of railroads; but if it be published and circulated in the interest of the people as The Nation would have us understand, it is not calculated to assist them in their efforts at reform, but on the contrary will tend to divide and distract their counsels, and delay the relief sought.

We copy the circular, that the reader may judge of its merits, and to give a more intelligent understanding of our remarks upon it:—

THE RAILROAD DISCUSSION AND COMMON SENSE—THE LATEST DEVICE FOR FIXING RATES OF TRANSPORTATION.

(From the Nation [N. Y.] of July 17.)

We have followed, and shall continue to follow, the "farmers' movement" with great interest, but it must be confessed that it seems at times of no little difficulty, owing to the very heterogeneous composition of the organizations which are carrying it on, and the wide diversity of their character and avowed aims. When Judge Lawrence was turned out of office in Illinois by the "Grangers," and Judge Craig put in his place, we took it for granted that they were going to deliver themselves from the tyranny of the railroads by putting judges on the bench pledged to interpret the state constitution in a particular way, or in other words, as one of the local papers put it, by showing that "the people" were superior to both laws and judges. It has, however, since been stoutly denied that this interference with the bench was anything more than a local accident, and we have been assured that the farmers seek changes of a much more legitimate character, and resting on more solid foundations than the creation of a subservient judiciary. The recent platforms have certainly had a much wider sweep than the earlier ones, and, unless language has been strangely abused in making them, embrace grave modifications in fiscal as well as in railroad legislation. But the question how to reduce the railroads to the condition of public highways, controllable by and existing solely or mainly for the convenience of the community, is still apparently as far from solution as ever. It is by no means surprising that this should be the case, but that it is the case we are forced to conclude by the extraordinary character of the latest plan propounded by the reformers, which has had sufficient plausibility to command the approval of so sober-minded a paper as the Chicago Tribune.

The farmers have been accused, partly in consequence of their escapade about the judges in Illinois, of seeking to rob the railroad companies of their lawful earnings by forcing them to carry on their business at a loss, under the operation of cast-iron rules, drawn up without reference to its peculiar nature. This was a charge of which the farmers soon began to see the gravity, and they accordingly now announce that they have no scheme of spoliation or confiscation in their minds, but that they have at last hit upon a mode of ascertaining what are "reasonable rates," which consists in discovering what was the amount of capital "actually invested in constructing and operating the roads," and treating a fair percentage of this as a proper return to the stockholders, and all charges which bring in more than this as "unreasonable," and therefore open to prohibition by the courts and state legislatures. Under this theory of railroad property, all stock which does not represent money actually invested is treated as "fictitious," and all attempts to earn dividends on such stock as attempts at extortion. For instance—to put a case of frequent occurrence—a corporation obtains a charter for a road which will cost two million dollars to build. It accordingly borrows the two millions on mortgage bonds, and constructs the road, while the members divide among themselves two millions of stock more, and they work the road so as to make it pay interest on the four millions. The farmers now say that no road shall be so worked as to pay interest on anything but the proceeds of the bonds, or, in other words, the actual cost of construction and equipment. This, stripped of details, is the new plan, as gravely propounded by the Chicago Tribune.

Now, if anybody will get up and propose a general railroad act of this nature, applicable to all roads hereafter to be built, we think we can promise that he will have the hearty support of everybody who has seriously reflected on the railroad problem. Forbid the construction of any road except with the proceeds of paid-up stock, and forbid any higher dividends than a certain fixed percentage on this amount, and we shall have a rule of which nobody can complain. We do not believe that a single mile of railroad would ever be constructed under such a rule in a new and thinly settled country like the west or south. Safe investments are not so scarce as to induce people to go into one of the most unsafe of investments, and one promising in most cases no return at all for several years, for the mere chance of seven or even ten per cent at the outside. But we should, nevertheless, be heartily glad to see the plan tried, and believe it would, by stopping railroad construction for the present, bring the western farmers to a healthier comprehension of their relations to the roads, and railroad companies to a healthier comprehension of their relations to the community, and might tend to a solution of the railroad problem, which would be both permanent and satisfactory.

But the application of any such rule now to roads already in operation would be spoliation pure and simple—spoliation as flagrant as any ever proposed by Karl Marx or Ben. Butler; if any attempt were made to carry it out, it would produce perhaps the greatest financial crash ever witnessed. It has in the first place that leading characteristic of Ben. Butler's greenback scheme, that it would not only violate a tacit pledge made by the state to individuals, but it would deprive men of rewards already earned by running great risks. When a railroad constructed for two million dollars is made to earn interest on four millions, the case is precisely similar to that of a government which in a time of great danger and perplexity sells seven per cent bonds at fifty; and the present proposal of the farmers resembles Butler's plan of paying the bondholders in 1870 what they gave for their bonds in 1862. In fact, it is the old-fashioned game on a great scale of "Heads I win, tails you lose." The west has, during the past thirty years, wanted railroads, which there was a very small chance of making profitable for a long time. It encouraged eastern men and foreigners to make them in any way they pleased, running whatever risk there was, and pocketing whatever gain there might be, and they were made. The investment then was one of great danger and difficulty; to treat it now as one of no danger and no difficulty would, be simply swindling. The word is hard, but the times demand plain speech. This was perhaps a bad mode of securing lines of communication, but the laws allowed it and encouraged it, and the people applauded it, and it is now a contract as binding in morals as in law. It is open to us to turn over a new leaf, and permit no more roads to be made in that way, but it is not open to us to treat those who lent us their money as dupes. As there has been enough of this sharp practice already, more of it would seriously shake the foundations of social order.

In the second place, as regards the older roads, it is not possible for "the people" or anybody else to ascertain what is the exact amount on which, in abstract justice, the earnings ought to pay interest. The stock, whether "fictitious" or not, has in most cases passed out of the hands of the original holders. It has been sold and resold, in open market, under the most solemn guarantees known to civilized society, with the understanding that it represented the bona fide ownership of the roads, with all their earnings, possible as well as actual. The laws, the courts, and public opinion, assured to it this character without reservation or qualification. In this character it has passed into the hands of widows, orphans, and helpless people generally, of charitable corporations, of colleges, banks, and institutions of all kinds by which the affairs of the community are administered. To throw any doubt on its value now would be to cause an amount of misery and alarm which no thinking man could contemplate without a shudder. If the state wants to make the railroads common highways, it has the right to take them, but at their market value, paying the owners what other people would pay them, and not enquiring curiously and knavishly into the original cost. Between honest parties to a bargain, that, to use a homely phrase, is "Neither here or there." The people ought, undoubtedly, to have looked forward a little when they first began to grant charters; but not having done so, they ought not to now throw on others the whole damage done by their own laches.

Though last, not least, much of the outcry over the high rates charged by railroads is due to an immense but deeply seated popular delusion as to the value of railroad property. When one puts his newspaper aside, and sits down calmly to examine the receipts which the farmers are so anxious to have cut down, the proposal we are discussing assumes a somewhat ludicrous aspect. We have before us the last issue of "Poor's Railroad Manual," which certainly ought to be perfectly studied before the minds of the public are filled with wild and revolutionary notions about railroad property. There were in operation last year in the United States, 57,323 miles of railroad, the net earnings of which bore to the cost of the roads the relation of 5.20 per cent, and to the capital stock of 3.21. This means simply that the work of transportation in the United States is, on the average, already done at a loss to the owners of the lines, or, in other words, vastly more cheaply to the public than there is the least likelihood of its being done in any other way—an assertion which anybody may verify by examining the accounts of the New York state canals. Now, fancy anybody seriously proposing to capitalists to construct railroads, as most of the western railroads were constructed, through a howling wilderness, for the chance of five and a half per cent, whenever the earnings allowed it; and fancy what subjects for spoliation are presented by the bloated owners of railroad property who pocket on the average less than four per cent on the face value of their stock. Let us add, finally, that no corporation should be restricted by law to a certain rate of earnings, unless it contracts freely to do the work on those terms or has a minimum guaranteed to it by the state. In short, the railroad question, we would remind the Chicago Tribune, is not simply a question of dollars and cents. It is a question of morality in its highest and most important phases, and one the settlement of which must touch the security of all property, and affect the value of constitutions as safeguards of individual rights.

We have gone on for thirty years treating railroads as private property, and permitting and encouraging their construction by private enterprise. Out of this numerous abuses have grown up which ought to be remedied. The corporations have grown too powerful; their influence in politics is corrupting; the power of directors in the management is too great. For the reform of all this, careful legislation preceded by careful inquiry is necessary. The prohibition of special legislation would do much to abate the corruption. Some means ought also to be devised for protecting the minority of the stockholders against the despotic power, which in some cases amounts to virtual confiscation, of those holding a bare majority of the stock, or, in other words, of giving stockholders the means of actually superintending the management of their own property and defending themselves against "rings" and "raids." Moreover, the power of directors to do anything but work the road ought to be diminished. Their discretion as regards extensions, combinations, consolidations, leases, and purchases, ought to be greatly reduced, if not destroyed. This involves two things not easily supplied. One is wise legislation, and the other honest government inspection. How far we are from both is best shown by the Illinois attempt at reform, which consists at present in taking the working of the roads out of the hands of the exceedingly able body of trained business men who now have charge of it, and compelling them to use a crazy table of "rates" drawn up by a mob of excited and ignorant politicians. If we are not prepared for this, the alternative, and the only one, is the purchase of the railroads by the state, and their management by our Murphys and Caseys. We shall not argue against this at present, for obvious reasons. But this, whatever difficulties it may present, is the only honorable way of escaping the necessity of such reforms in the present system as we have indicated above. Whatever the evils of our railroad system, they are not to be met or removed by fraud.

First. The Nation says that it has "followed the 'farmers' movement' with great interest, and with no little difficulty, owing to the heterogeneous composition of the organizations which are carrying it on, and the wide diversity of their character and avowed aims." The thought suggested is, that because the farmers are not united in their views relative to the best means to effect reform, because of the heterogeniety of their composition, the author of the circular could not understand their objects and aims. Unity of thought and action is rarely found in any body of men, even when few in number, during the discussion of ends sought to be obtained. Such unity cannot be expected in the first stages of the organization, and discussions of plans for future action. When the people living in various parts of the country, in different states, with diverse interests, but all having in view the accomplishment of a common end, attempt to unite their efforts, it would be too much to expect that they would harmonize at the outset in their views, or that they would not commit some errors. The "farmers' movement" is in its incipiency; it maybe said to be now only preparing for action, and it is yet too soon to look for united effort. The first assertion of the circular is only a covert thrust at the "farmers' movement"—an attempt to impress upon the public mind the belief that it is the effort of an irresponsible mob or rabble to defy law and override the rights of other classes, and especially of railroad corporations. Hence The Nation is desirous of talking "common sense," and in its opening discloses its "common sense" to be a plea in behalf of railroad corporations.

Second. The circular casts odium on the efforts now being made to correct the abuses practiced by railroad corporations, by the use of the following language; "When Judge Lawrence was turned out of office in Illinois by the Grangers, and Judge Craig was put in his place, we took it for granted that they were going to deliver themselves from the tyranny of railroads by putting judges on the bench pledged to interpret the state constitution in a particular way, or, in other words, as a local paper has it, by showing that 'the people were superior to both laws and judges.'" Is it true that "Judge Lawrence was turned out of office?" He was a candidate for re-election, but a majority of the people voted for another man. Judge Craig was elected to office in the constitutional method, and took the seat formerly occupied by Judge Lawrence. The people did not "turn him out," but in the legal method, when his term had expired, elected another man. But, says the circular, "we took it for granted that they (the Grangers) were going to deliver themselves," etc. There were no other judges to be elected, and there was nothing in the election of Craig that would warrant The Nation in arriving at the conclusion that control of the state was to be taken, and judges elected pledged to decide constitutional questions in a particular way. The idea is put prominently forth that the people who are attempting reform are a heterogeneous, irresponsible, body of men—a mob, who, by the mere strength of numbers, are going to overturn all law, pack the courts, and rule as mere caprice should dictate. This was taken for granted, because the people had elected one judge whom they believed was in sympathy with them. By the same rule we are warranted in assuming that the appointment of two judges in sympathy with the railroad interest of the county will revolutionize this whole government, and that all judges to be hereafter appointed will be pledged to decide all constitutional questions in favor of railroads. The author of this circular, however, is forced to admit that he was mistaken in his conclusions, and that the farmers "seek changes of a more legitimate character, and resting on a more solid formation than the creation of a subservient judiciary." While the people of the whole country knew and fully understood that the objects the farmers were seeking to accomplish were relief from the oppressions and extortions practiced by railroad companies; while the agricultural, political, and religious press of the land had been discussing the various propositions, and conventions of farmers and mechanics were meeting, and platforms and principles were being published, and the Patrons of Husbandry were discussing at public meetings and in the newspapers the best means for adoption, the author of this circular, who is now coming to the front as the champion of railroad corporations, or of the people, or of both, and is scattering his circular throughout the land, had heard nothing of the movement, and took it for granted that all that was sought by the "Grangers" was to elect "judges pledged to decide constitutional questions in a particular way;" and it required the "recent platforms" to admonish him that the Grangers looked to a reform of the abuses connected with the railroads and finances of the country.

With the new light our author received from the "platforms," he hastens to illuminate the public mind on this "vexed" railroad question. Having now mastered the situation, the writer takes it for granted that the all-important question is, "How to reduce railroads to the condition of public highways, controllable and existing solely or mainly for the convenience of the community," and concludes that the question is "as far from solution as ever."

It matters little whether railroads are considered "public highways" or private property. The name by which they are known will not make any difference. The real question is, how to make them subserve the objects for which they were intended, and at the same time afford a fair remuneration to the persons owning them. Some of the courts have already decided that the railroads of the country are public highways; but such decisions afford no relief. The Nation does not give us its opinion, nor does it seem to be aware that the supreme court of the United States has decided that railroads are public highways.

Third. The Nation says that "The farmers have been accused partly because of their escapade about the judges of Illinois, of seeking to rob the railroad companies of their lawful earnings, by forcing them to carry on their business at a loss, under the operation of cast-iron rules, drawn up without reference to its peculiar nature; that the farmers virtually acknowledged this charge when they saw its gravity, and that they accordingly now announce that they have no scheme of spoliation or confiscation in their minds, but have at last hit upon a mode of ascertaining what are 'reasonable rates,' which consists in discovering what was the amount of capital invested in constructing and operating the roads, and treating a fair per cent on this as a proper return to the stockholders, and all charges which bring in more than this as 'unreasonable,' and therefore open to prohibition by the courts and state legislatures." The Nation admits that this rule applied to companies hereafter organized, and roads hereafter built, would be just, and assures us that everybody would approve of such a law. Let the road be built with the proceeds of paid-up stock, and restricted to a fair per cent dividend on such paid stock, and The Nation will approve. To verify its hearty indorsement of this plan, it tells us in the next sentence that it does "not believe that a single mile of railroad would ever be constructed under such a rule in a new and thinly-settled country like the west and south." It would be glad to see it tried, believing "it would stop building railroads for the present, bring western farmers to a healthier comprehension of their relation to the roads, and railroad companies to a healthier comprehension of their relation to the community, and might tend to a solution of the railroad problem which would be both permanent and satisfactory." It gives as a reason why no roads would be built, that capitalists would not invest their money on unsafe security, or where the return would be uncertain. The logical deduction is, that if railroad companies are limited in the amount of their stock to the actual cost of the roads, no money can be obtained to build them; but if the company is allowed to add fictitious stock—to "water" it at pleasure, then capital can be had.

We do not discover the force of this reasoning. Railroads are usually constructed with borrowed capital. The capitalist loaning his money loans it on what he believes to be advantageous terms and good security. If a road cost $2,000,000, and is built with borrowed capital, we cannot readily see how the security is improved by issuing to the stockholders certificates for $2,000,000 of stock, no part of which has been paid. True, it may have the effect to place the road in the hands of men who are experienced in operating roads, capitalizing their earnings and watering stocks, borrowing money on bonds, and loading the road with a burden that can only be supported by extortion; but it does not increase the value of the security held by the lender, nor does it enhance the value of the road. The less burden in the way of debts there is resting on a road, the more valuable are its stock and bonds. We confess we cannot discover the strength of The Nation's argument. It seems to take it for granted that railroads can only be constructed by the class of men who now monopolize the business; in other words, that the class of unscrupulous men who have reduced the organizing of railroad companies and the manner of obtaining capital for the construction of roads to a system, are the only men who can undertake any railroad enterprise. It looks upon the south and west as destitute of men competent to organize a railroad company, or to procure means for the construction of railroads, or to construct them when the capital has been obtained. It regards the home construction of railroads in these sections as out of the question. It concludes that the method now adopted for procuring capital and constructing railroads is the only one that can be adopted. It forgets that in purer and simpler times railroads were built and owned by the parties living along their lines; that the process of adding large amounts of stock by watering was not then discovered, and that without these fictitious additions fair returns were made for the amounts invested. After all, railroads are only built when and where the business of the country requires them, save where large bounties are paid. In the west and south, where the business of certain localities and districts require a railroad, it will be built, even if the legislature should require the owners and stockholders to become so far honest as to limit their stock to the actual cost of the road, and to compel stockholders to pay up before obtaining certificates for their stock. It does not require these professional men to organize and control railroad companies, or the roads after construction.

But for the interference of rings formed to prevent such a consummation, any company of men who desire a railroad in their locality, by pursuing an honest course, could organize a company and build their road. If the amount of stock necessary to build the road was in good faith subscribed, and the same was being paid up as the construction of the road progressed, any reasonable amount of money could be obtained by such company by making an honest showing to capitalists. The demand for railroads would be as regularly supplied, as for any other article of necessity. The laws of trade would regulate their construction. In all such cases capitalists would have the best of security, and the roads would pay fair dividends on paid-up capital and interest on the sum borrowed for legitimate purposes. But if there were no legitimate call for the road, if it were intended as a fraud, by a set of educated sharpers who desired to receive large dividends on stock not paid up, or to borrow money by the sale of bonds in an amount double the cost or value of the road when completed, then it could not be built under the new rules and The Nation's prediction would be verified. Any legitimate business not "cornered" or controlled by combinations or rings can be successfully prosecuted, and to say, as does The Nation in substance, that if railroad companies are forbidden to act dishonestly and corruptly, no more railroads will be constructed, is an admission that the whole system is a fraud, and is a strong argument in favor of immediate, prompt, and efficient action on the part of state legislatures and of the courts. If men must become dishonest in order to build and operate railroads successfully, the whole system is rotten and should be destroyed, and an honest plan substituted.

Fourth. But says The Nation: "The application of any such rule to roads already in operation, would be spoliation, pure and simple. * * * * It would not only violate a tacit pledge made by the state to individuals, but would deprive men of rewards already earned by running great risks." This is the old argument in favor of railroad companies, but with this difference: It makes the state a party to the dishonest practices of men who have enriched themselves at the expense of the public, and those to whom they have sold their bonds. We venture the assertion that, with few exceptions, all railroads in the United States that have been honestly and prudently managed have earned a fair per cent on the capital actually expended in building, equipping, and operating them, and that a scale of tariffs greatly less than the rates now charged would, as a rule, afford fair dividends on the actual cost of the roads. No instances can be shown, where the states, in granting charters to railroad companies, directly or in the passage of general incorporation statutes, have given to the companies the right to commit frauds upon the parties with whom they deal by using their credit to build their roads, and without payment of their subscriptions issue to themselves certificates as for paid-up stock. In all cases, individual stockholders are made liable for the debts to the amount of their stock. In contemplation of law the stock is paid up, and the roads are constructed by using the capital derived from this source. The stock is supposed to amount to as much as the cost of the road. The state, in giving the company a corporate or artificial being, enters into no agreement, express or implied, to make good the contract of the company, or to be responsible for their misconduct, further than to exercise such control over them as to prevent or reform abuses, by compelling them to act honestly—being the same control exercised over all other persons within its jurisdiction. The creditors of railroad corporations have no stronger claim on the state in case of the non-fulfillment of contracts by railroad companies, or in cases of fraudulent and dishonest practices, than have the creditors of individuals. If a man worth $2,000 represents himself to be worth $4,000, knowing that his representations are false, and obtains credit upon his property for twice its real value, he violates the law, can be punished criminally, and is also responsible in a civil action; but his creditor has no claim upon the state for payment of the sum loaned or credit given on those representations. Is the claim different when a railroad corporation is the party obtaining the credit? Is the state under any greater obligations in one case than in the other? But The Nation says the custom of doing business on this plan has obtained and been in use for thirty years, and from this draws an argument in favor of its legitimacy. Does this fact make it honest? or change the relation of the state to these corporations? A man has followed horse-stealing for thirty years, and is at last detected; he has been in the habit of selling his stolen horses to innocent parties; they have been reclaimed by the owners; can the purchasers, because this thief has so long followed his pursuit, claim compensation from the state? A man obtains goods under false pretenses, and before the owner can reclaim them, sells them to a third party; can the person defrauded claim compensation from the state? We cannot discover the distinction between the cases stated and that of railroad companies, who by falsely pretending that they have paid up their capital stock, obtain money on their bonds for an amount greater than the value of their entire roads. They all commit crimes for which they are liable to be punished, and all are liable in law to make good their contracts; but in neither case is there any pecuniary liability imposed upon the state or the public. Nor would the application of the rule to railroad companies already in existence, who have built their roads, be "spoliation pure and simple." It never can be wrong to compel men to do right. If railroad companies, by arbitrarily increasing their capital stock, and issuing certificates therefor without payment of any part of it, as is the general rule among them, are receiving dividends on such stock, justice to the public demands that the state legislatures should compel them to purge their stock, and at once cancel all such spurious and illegitimate issues. The duty the state government owes to the public demands this, that the oppressions under which the people suffer may be prevented in the future. But "it would deprive men of rewards already earned by running great risks." What these "great risks" are, is not readily seen. They certainly have not risked their money; they built their roads on borrowed capital, and have declared dividends to themselves on stock they have never paid. They extort from the public, in charges for transportation, money sufficient to pay the interest on the money borrowed for building their roads, and to pay dividends on their stock that has not cost them anything, and if they have run any risks they are the same that all men, who violate the law, have ventured upon. The pecuniary risks are all taken by the parties from whom they borrow.

The Nation says that the west during thirty years has wanted railroads, and that there was small chance of making them profitable for a long time. That "it encouraged eastern men and foreigners to make them in any way they pleased, running whatever risks existed, and pocketing whatever gain there might be—and they were made." The people of the west have vivid recollections of the manner in which the means were raised to make their railroads. They took large amounts of stock, and voted large amounts of local aid for which they were to receive stock and dividends. After contributing sufficient to pay at least one-half of the entire cost of their roads, their eastern friends mortgaged their roads and sold them out, and the "people of the west" got neither stock nor dividends, but they are to-day paying taxes to discharge debts contracted by them in building their roads after having been swindled by their eastern friends out of values, amounting in Iowa alone, to not less than $4,000,000. The Nation further says that "the investment then was one of great danger and difficulty; to treat it now as one of no difficulty and no danger, would be simple swindling." This journal evidently knew but little of the real facts in the case, or it would not have made this assertion. But if we admit that the undertaking was both dangerous and difficult, does that exempt from all responsibility the adventurers who came west and fattened off of the simplicity of the people? Does it absolve them from the effects of their dishonest acts? Are the states pledged to make good the dishonest contracts of these adventurers because of the danger or difficulty they run?

While the law should regulate the action of all railroad companies, would it be "simple swindling" for the legislature to compel these pioneer adventurers to purge their companies of fictitious or "watered" stock, or limit their rate of charges? We do not believe that the legislature ever intended to charter railroad companies to prey upon the people at pleasure and without restriction, nor is it true that any injustice would be done in compelling companies, whose roads are constructed, to reduce their stocks to the amounts actually invested in their roads, and to limit their rates of charges to a fair and reasonable compensation for the money so invested. Nor would it shake the foundations of social order to compel these men to act honestly.

But another difficulty is suggested in this circular. Our author says: "It is not possible for 'the people' or anybody else to ascertain the exact amount, on which, in abstract justice, the earnings ought to pay interest." True, it may be hard to ascertain what is the "exact" amount, but this fact presents no great difficulty. It is now known to nearly everybody about what railroads cost per mile. When a road that we know, in the nature of things, could not have cost more than $35,000 per mile, is by the "watering" process shown to have cost the sum of $75,000, it would not be difficult to approximate the amount of stock that should be cancelled; nor need the fact that the exact amount cannot be ascertained prevent legislative action. In all cases a large margin to cover any doubts might be allowed to the companies, and still great reductions could be made.

Fifth. The Nation, as it progresses, becomes more earnest. It takes up the oft repeated cry of "innocent purchasers," "widows and orphans," with their all invested in railroad stock. "Charitable corporations and banks" have invested in railroad stocks and "helpless people generally." It tells us that "this stock has been sold and resold, in open market, under the most solemn guarantees known to civilized society, with the understanding that it represents the bona fide ownership of the roads, with all their earnings, possible as well as actual. The laws, the courts, and public opinion, assured to it this character without reservation or qualification. * * * To throw any doubt on its value now would be to cause an amount of misery and alarm which no thinking man could contemplate without a shudder." That some parties would suffer financially by compelling railroad companies to reduce their stock to an honest standard cannot be denied, and in some cases it might work absolute financial ruin. But that any considerable amount of railroad stock is held and owned by poor people is rather improbable, and that "helpless people generally" deal in railroad stock is not true. That some purchases are made by innocent parties may also be true; yet in this day and age when the fact that at least one-half of all railroad stock is mere fiction and has no intrinsic value is known to the public generally, a third party must be "innocent" indeed to purchase it without knowing that its value is imaginary rather than real.

Most of the stocks and bonds of railroad companies are sold in Wall Street by the owners and managers, acting in their character of brokers and stock gamblers. The innocent third parties are generally the dupes of these brokers who are on the lookout for the unwary. These dupes are caught and stripped and turned loose without remorse, when the managers of the great railroad interests of the country are "loading or unloading," and no complaint is heard. The "innocents" are robbed without exciting a passing remark; but when an attempt is made to relieve the people from the onerous burdens imposed upon them, we hear on all sides the cry of "innocent purchasers!" and of the great wrongs about to be committed. They virtually admit their own dishonesty, but say in substance: "We have duped others and you must permit us to rob the people in order that 'innocent' third parties may not suffer." This is the pith of The Nation's argument. It goes further, and says: The law and the courts have sanctioned this dishonest course, and because of this, the same raid upon the rights of the people must be allowed to continue without interruption.

Neither the people nor the state are in any manner responsible for the acts of these railroad managers. All contracts for the sale of bonds or stocks are in the first instance made with the companies or their agents. They are responsible to the parties holding their bonds or stocks. Their roads are liable to their full value, and each stockholder is liable to the amount of stock he owns, and to that extent must make good the contracts made by the managers of the road. The purchaser had the means of knowing the value of the stock he purchased. If he suffer, his suffering is the result of the fraud of the directors of the road, and of his own negligence. None of these causes affect the right of the state to regulate the company, and to compel it to act honestly.

The cry of "innocent purchasers" will not avail. While the people can sympathize with those who are defrauded by the dishonest acts of the companies, and appreciate the helpless condition of widows and orphans who have lost by railroad rascality, the facts will demonstrate that they are few in number, unless we include among the "widows and orphans" Commodore Vanderbilt, Col. Tom. Scott, Daniel Drew, Jay Gould, and the Wall street brokers generally, who own and control most of the railroad stocks. If we admit all that is stated in the circular, the right of the people to be protected against the impositions and oppressions of the railroad companies remains unchanged, and the legislature, acting for the whole people, can control the management of the companies so far as it affects the public. If the doctrine advocated by the circular be true, railroad corporations are now able to defy the government and the people.

Sixth. The Nation, in its circular letter, says: "If the state wants to make the railroads common highways, it has the right to take them, but at their market value, paying the owners what other people would pay them, and not inquiring curiously and knavishly into their original cost. Between honest parties to a bargain, that, to use a common phrase, is neither here nor there." We get more light as we advance. As we understand the principles of our government, the states possess the right of eminent domain. But they have no power to buy and sell, like corporations or individuals. They may condemn private property for public use, if the public good requires it. The value of property for public use is ascertained in the manner prescribed by statute. The Nation is inconsistent. It says in one paragraph that the state has no lawful right to regulate railroads and restrict the action of railroad companies in the issuing of stock, etc., and then declares that the state can take the railroads from the companies should it desire to do so. But for cool assurance The Nation is entitled to the champion belt when it says the state must take the roads at their market value—at what other people would pay for them—without inquiring "curiously and knavishly" into the original cost! In other words, these corporations are so potent that should the state attempt to exercise its right of eminent domain, they can dictate the terms upon which they would be willing to surrender their roads to the public. The terms are that the state must pay the companies' value for all the watered stock with which they have loaded their roads, as well as for all the bonds the companies have sold, and do this without asking questions. If the people or the states should stop to inquire into their cost, they would be acting knavishly. True, the companies could not build their roads without special grants from state legislatures, but having obtained the privilege of locating their roads where they pleased, and having, by false pretences, obtained local aid and defrauded the people who helped to build the roads; having piled up their fictitious stock by the billion, and by onerous and dishonest charges reduced the farming population to poverty, their champion, The Nation, tells the states: "If you want the railroads, you can take them, but you must not be curious to know what they cost; this would be a knavish act; you can have them by paying the companies the full amount of money they claim to have invested, including fictitious and watered stock." This kind of impudence is sublime. The railroad companies, through this hired spokesman, propose to quit business provided the states will pay them just what they are pleased to call the value of their roads, and ask no questions. It is usual for the thief, when seeking immunity for his crimes, to propose to return a part of the stolen property, but these corporations, who have been robbing the states and the people for years, offer to close their career by forcing upon the parties robbed what is left of their booty, provided the states will pay to them not only the cost of the roads, but allow them par value for all their bogus or fictitious stock.

They propose to compel the states to adopt a new rule—the rule that governs operations in Wall street. They will "bull" their stock to the highest point, and force the states to purchase at these high figures. The Nation says that "The people ought undoubtedly to have looked forward a little when they first began to grant charters; but, not having done so, they ought not now throw on others the whole damage done by their own laches." The conclusion is that because they dealt with railroad companies as they deal with honest men, and did not provide in advance for the punishment of all conceivable dishonest practices on the part of the officers of the companies, therefore the people are the guilty parties and should reward the innocent railroad companies by paying them real dollars for the imaginary dollars they have added to their stock. The railroad companies took an undue advantage of the people, but that is "neither here nor there;" the companies must get from the states all that they please to demand for their roads. This is the "common sense" The Nation presents to the people.

The power of the states, under the constitution, to purchase, is not doubted by this advocate of the railroad interest, nor does he, in his "common sense," consider the immense tax that the purchase of the railroads would entail upon the people.

Seventh. The Nation says that "Much of the outcry over the high rates charged by railroads is due to an immense but deeply-seated popular delusion as to the value of railroad property." The reader is then referred to Poor's Railroad Manual for the value of railroad property, but The Nation fails to state that in this Manual the value of all railroads is given as furnished by the companies themselves; it includes all their watered stock and bonds with which the roads are "loaded," and does not purport to give the actual cost of any road. The book, too, is published in the interest of the companies, and for the purpose of inflating rather than giving the true value of the roads. From this Manual it appears that dividends do not average more than five per cent on the stock. When it is remembered that every dollar invested in railroads (taking all the roads in the United States) represents two additional dollars, or that by the increase of stock and issuing of bonds, the reported cost is three times the actual cost of the roads, a dividend of five per cent is equivalent to fifteen per cent on the actually paid-up honest capital, it would appear that The Nation, and not the people, is laboring under "a deep-seated delusion." The Nation is not informed upon the subject, or desires to present an unfair view of it. In the Manual to which reference is made, the New York organ will find the statement that railroads can afford to carry freights for one and one-fourth per cent per ton per mile. This is their own statement. What are their charges? Recently they have been reducing their rates. As published, old rates from New York to Chicago were one dollar per hundred-weight. This has been reduced to seventy-five cents by the managers of the Grand Trunk lines. By the new scale the rates charged are about double what the Manual fixes as "paying," and yet The Nation thinks that because the farmers desire lower rates, the question of reduction assumes a "somewhat ludicrous aspect." We are advised to examine Poor's Railroad Manual before we permit our minds to be filled with revolutionary notions about railroads. The farmer should presume that the advantage is all on his side when railroad companies charge him only seventy-five cents for carrying a bushel of wheat from Iowa to New York, and that at present rates railroad companies are making little or nothing, and are running great risks. These are proper deductions from the circular of The Nation. Having presented the whole case to its own satisfaction, it gives reign to fancy, and says: "Now fancy anybody seriously proposing to capitalists to construct railroads, as most of the western railroads were constructed, through a howling wilderness, for the chance of five and a half per cent whenever the earnings of the road allowed it; and fancy what subjects for spoliation are presented by these bloated owners of railroad property, who pocket on the average less than four per cent on the par value of their stock,"—to which we might add, "including more than one billion of dollars for which they never paid one cent." The fact that these self-denying railroad men are constantly extending their roads, buying and leasing all that they can get control of, for the purpose of more effectually controlling the government and enslaving the people, and are devoting all the earnings of their roads to these objects, are not deemed worthy of notice by this champion of the railroad interest. We know as a fact, that the leading and controlling railroad men are spending their whole energy and their money to this end. These men are fast consolidating the whole railroad interest. We also know, that companies that are content to divide their earnings, rather than extend their roads, make large dividends, and leave a surplus to be capitalized. The "common sense" of The Nation does not strike us with its intended force. The Nation evidently has but a limited knowledge of the west. The fancy sketch of self-denying railroad men constructing railroads "through a howling wilderness," is finely drawn; but it exists only in the mind of The Nation. If this writer had been speaking of the mountain gorges and desolate pine plains which vex and impoverish the Boston & Albany track from Albany to Worcester, he might be excused for his words; but the "howling wilderness" does not apply to the cultivated prairies, whose enterprising farmers helped to build the roads now so bitterly and justly complained of, and it describes the domain of no western road save where the companies obtained, through legislative and congressional aid, enough of the people's land to construct the roads.

Eighth. As a last point The Nation says, that "no corporation should be restricted by law to a certain rate of earnings unless it consents freely to do such work on those terms, or has a minimum guaranteed to it by the state." The state possesses no power to guarantee to any private corporation any rate of dividends; nor would it be just to compel the people to donate a part of their earnings to railroad companies, or to any other private parties. In our judgment, the state has the constitutional right to regulate and control all private corporations and, when the good of the public demands it, to restrict the rates charged by railroad companies for carrying freights and passengers. We admit that "the questions connected with the regulation of railroads are questions of morality, in their highest and most important phases, the settlement of which must touch the security of all property, and affect the value of constitutions as safeguards of individual rights." We go further, and say that in the management of railroads, and the favors shown to the companies, the constitutional rights of individuals have already been measurably destroyed, and that the most important question now is, How can those rights be restored and no injustice be done to railroad companies? These questions we have already discussed, and will only add that the sole remedy to be applied is legislative limitation and restriction. The abuses now practiced by railroad companies must be corrected. The legislatures have the power and it is their duty to restrict the scale of charges to such rates as will afford a fair remuneration to the companies on their investments, and at the same time protect the people from the extortions of soulless corporations. This power can be exercised over the companies now in being as well as over those to be hereafter organized.

We have devoted this chapter to an examination of the views of The Nation for the reason that, in the form of a circular, they have been widely distributed, and are designed to distract and divide those who are seeking relief from the oppressions of this railroad monopoly, and because the writer treats the "Farmers' Movement," the "Grangers," and "the people" with undisguised derision and contempt. The farmers are characterized as a mob of politicians—an irresponsible body—ignorant and careless of the rights of others, and represented as claiming a superiority to courts and laws. The idea that the people, farmers, or grangers have not sufficient knowledge to take the lead in any attempt to reform the abuses under which they suffer, is put prominently forth. The attempt at reform in Illinois is referred to in the following words, in speaking of the remedy for present abuses: "How far we are from both (i. e., ascertaining and applying the remedy) is best shown by the Illinois attempt at reform, which consists at present in taking the working of the roads out of the hands of the exceedingly able body of trained business men who have charge of it, and compelling them to use a crazy table of 'rates' drawn up by a mob of excited and ignorant politicians." The prevailing notion which has obtained in some parts of the country, that farmers and working men are not qualified to act in matters of a public nature, is reflected throughout the circular, and the rights and privileges of railroad corporations are spread before the reader in what is termed a "common sense" manner. The object of all this is apparent: It is to impress upon the public mind the idea that the people are not equal to the occasion, and that no reform can be effected.