As soon as the government changed its policy and denied exceptional rewards for exceptional risks virile Americans refused to assume these risks and internal improvements ceased. A distinction is drawn between pioneer capital and improvement capital.

The effect of this changed attitude toward internal improvement and business generally is exactly what every thoughtful person foresaw. No railroad construction worth mentioning has been begun in the last decade. A few unimportant extensions have been made. About five years ago, John D. Spreckels attempted the construction of a road from San Diego to the Imperial Valley, but a possible six percent return, if it proved a success, and total loss if it failed, did not prove inviting to capital. Facing disaster, he turned it over to one of the old established lines to be builded on the accumulated credit of that system.

The United States was never in such great need of additional transportation as during the last ten years and never before was so little done to supply it. James J. Hill, the great empire builder of the Northwest, used to furnish figures to prove that we must invest two billion dollars new capital per annum to keep pace with the development of the country. It did not require a sage or a seer to discern that if we multiplied production from farm and factory, mill and mine, indefinitely, and failed to provide transportation facilities, we would ultimately reach a time when crops would rot on the ground while those who had grown them would be freezing and coal miners starving. Truly, the American people are “kin-folks.”

For more than three years, liberty hung in the balance simply because the United States, with all her development, had failed to keep her transportation facilities abreast of her production.

We had no merchant marine and during the entire period of the war were dependent largely upon the Allies to transport our troops and our munitions. Adverse marine laws had been passed rendering it impossible to sail an American ship in deep sea transportation except at great loss even if the ship had cost nothing whatever. It became necessary for the government to take possession of the railroads in order to avoid the effect of statutes filled with restrictive and prohibitive provisions. If the railroads had been operated under private ownership as the government is now operating them, every railroad president in the United States would be in the penitentiary. The roads asked an increase of fifteen percent in freight rates, which raised a furore of objection from both shipper and public, and it was denied. Government control and operation resulted in a loss of seventy million dollars the first month. Then both freight and passenger rates were increased twenty-five percent, generally, and in many instances, one hundred percent, and no one murmured. And still the loss continues. It was four hundred million dollars the first year of government operation.

If someone should predict that the last railroad ever to be built in the United States of America, has been built, are you prepared to question its correctness? Will it be necessary to change our policy if more roads are to be builded?

Listen! Will you invest money in railroad construction, knowing that if it succeeds you will be allowed no more than six or eight percent on the money wisely spent, and that if, through misfortune or want of foresight, it fails, you will lose everything? The theory of public utility commissions generally, is that if money is unwisely invested it ought to be lost, and when it is wisely invested, it should earn about six percent.

Suppose you and I install a hydraulic power plant and build our dam according to plans and specifications prepared by a reputable engineer. Then a flood destroys it and demonstrates that the money was unwisely spent and, therefore, according to these commissions, should be lost. If the dam stands the strain, and if it was wisely placed, and if it be economically operated, we will be allowed six percent. Are you ready to join in an enterprise of this character? If you will not, who will?

Suppose a promoter presents to you an engineer’s report made from a preliminary survey of a railroad extending, let us say, from St. Louis, around through Arkansas and Texas to Galveston. I am informed that such a report exists, and that it shows that the road will go through the largest body of uncut white oak in the world, extensive pine forests, tap that belt of zinc ore extending south from Joplin, Missouri, make available large coal measures, iron deposits and agricultural areas now obtainable at less than twenty dollars per acre, but which with proper transportation facilities, and a progressive citizenship, would be worth two hundred dollars per acre. The engineer estimates that the road when completed will earn twenty percent on the cost of construction, and you are asked to buy some of the stock at par. The statutes of most states forbid the sale of even initial stock issues for less than par. How much of this stock will you take? Will your neighbors and friends want some? How much stock in an unbuilt railroad do you think can be sold at any price when good farm lands adjacent can be bought at twenty-five percent of par?

While the wisdom of the modern law-maker prohibits the sale of stock at less than par few if any statutes have been enacted, limiting the price at which bonds may be sold. Suppose you are offered bonds instead of stock. Possibly you can get the bonds at less than par. What will you pay, and how large a block do you desire? Remember, the road has not yet been built. The money must be placed in the bank to be used in construction and you must wait for your interest until the road has earned it. If you will not buy, will your neighbors?

It will help to solve these problems if you recognize early in your calculations that men with much money are not much bigger fools than we with little. If you and I will not invest in railroad construction under present conditions, men of means and experience will not, and the last railroad ever to be built beneath the Stars and Stripes is now in operation unless—unless!

During the half century and more of the unparalleled growth and development of the United States, bonds of unbuilt railroads were offered with fifty percent or more of stock as a bonus. The estimates indicated that the roads would earn not only interest on the bonds but dividends on the stock, and a portion of the unearned increment resulting from development was in this way awarded to those who took the risks. Investors were thus encouraged to expect reasonable returns, plus fifty percent or more of water. The promoters who had paid the expenses of preliminary surveys (often abandoned as worthless) also labored with hopes of great gain if they should discover a meritorious proposition. Those who bought and occupied the lands contiguous to new roads endured some hardships but took no risks and yet expected to add at least four hundred percent of water to their investments. They realized in most instances more than one thousand percent profit on the original cost.

Does anyone doubt that a return to the policy of apportioning unearned increment equitably among those who shall in any way contribute to the general result will revive internal improvements? No one asks, and no one would consent, that all the unearned increment should go to the stockholders of a railroad. Every one favors governmental supervision and control of rates. The point where a few diverge from the mass is in recommending that those whose vision and courage are solely responsible for development, shall have an equitable share of the unearned increment.

Lest I be misunderstood, I desire to state parenthetically that I have never owned a railroad bond or a share of railroad stock; and I have never promoted a railroad or been employed in any capacity by a railroad. Most of what little I now possess, I have made by watering the capitalization of real estate. Occasionally, in times past, when I have known of a railroad about to be constructed, and have recognized an opportunity to make a little money through another man’s vision, on another man’s courage and at the other man’s risk, I have purchased a little contiguous real estate, watered the capitalization from one hundred to one thousand percent, and then insisted that the road should haul me and my produce at cost plus six percent.

Does it occur to you that pioneer capital should be accorded pioneer rewards? Pioneer people make sacrifices, endure hardships, suffer privations; but in America they take no risks and their rewards have been certain and speedy. But their rewards would be neither certain nor speedy did not pioneer capital precede them, blaze the way and assume all risks. During the period when pioneer capital was liberally rewarded, development outstripped the imagination of men. It will do the same again if given like encouragement.

I assume that a return of six percent would be ample on capital, let us say, to construct an additional track for the Pennsylvania Railroad between New York and Philadelphia. That would be improvement capital. Would the same rate be satisfactory for money invested in an unbuilt road into an undeveloped country? To state the case is to state the argument, and yet no railroad commissioner has yet been created with both the wisdom and the courage to stand openly for a distinction between development capital and pioneer capital. Unless returns are permitted large enough to induce a reasonable man to take a risk none will take it, for the unreasonable man has no money to risk.

In a preceding paragraph I referred to the attempt of Mr. Spreckels to build a railroad across, or rather through, and much of the way under, the most barren succession of mountain peaks and defiles I have ever seen. An automobile road has been built at great expense across the mountain. Nine-tenths of the way not a green leaf or living thing—not even a bird or insect—will be seen.

Mr. Spreckels is a very wealthy man. He is supposed to own over fifty-one percent of the gas, electric light, street railways and ferries of San Diego. He does not, however, consume fifty-one percent of the food cooked by the gas he generates; he does not enjoy fifty-one percent of the light that illuminates that beautiful little city; he does not take fifty-one percent of the rides on street car or ferry; and not one percent of the unearned increment, the advance in the value of property occasioned by his public-spirited enterprises, inures to him. Having more money than he can use and more than his children can legitimately spend, why does he risk everything on a railroad involving an aggregate of more than twenty miles of tunnel through solid granite? I will tell you why.

For some reason, let us hope a sufficient reason, the All-wise Father has implanted in certain natures somewhat more than the average vision, somewhat more than the average courage, somewhat more than the average desire to achieve, and He seems to have ordained that these men shall be happy only when achieving. Service expresses the thought admirably when he put into the mouth of the returning Klondiker:

So it has ever been, and thus it is and ever will be. These daring, progressive souls risk their past, their present, their future and the future of their families, upon gigantic propositions, the consummation of which makes the appellation, “I am an American,” the proudest boast of man.