STATE RAILWAYS.

New Zealand Mail, Issue 28, 5 August 1871, Page 12

STATE RAILWAYS.

The impolicy and danger of the practice which has grown up in the United States of fostering large private railway corporations have been recently forcibly insisted upon in the “ North American Review.” The interests of shareholders in such gigantic corporations are not always in harmony with their inteiests, when considered simply as citizens of a free commonwealth. The prosperity of the company is of more consequence to them than the prosperity of the state. There is no harm done when the interests of the two are the same ; but- it often happens that they are not common, but conflicting. We had an illustration of the fact here, in the case of the New Zealand Bank Corporation, when the “ Public Debts Bill” was before Parliament. It was then bioadly stated that there was a power behind the treasury, more powerful, than the Government itself. The Erie Railway Company is a still stronger case in point. It is worth knowing, as a proof of the paying character of American railways, that only 1 0 per cent, of theii average gross earnings are consumed in their working expenses and in replacing their machinerv. The remaining 30 per cent, of the 400 millions of gross revenue is the amount leceived by the companies in the shape of remuneration for the capital and risk involved in the construction and management of the system. Thus, as the “Reviewer” points out, certain individuals, who are responsible to no authority, and peitain to no government, who look solely to the interests of an immediate constituency, yearly levy on the American people a tax exceeding 100 million of dollars, as a remuneration for their capital and labor ; which tax, assessed and levied by themselves, more than equals one-third of the expenses of the United States Government. It is found that there is no use in stipulating, as was done in the earlier charters, that whenever the dividends exceeded a certain percentage on the capital, the charges for passengers and freight should be reduced ; nor in exacting” as in England, that dividends on all railway stock should be limited to 10 per cent per annum ; as, by means of “ stock watering,” such stipulations and enactments are completely defeated. An instance is given in the “ Review” of a railroad in the West, the value of which is estimated at over 18 millon dollars, towards the construction and equipment of which the shareholders

only contributed in cash two million dollars; whilst their cost, land, and other contributions, amounted only to four million dollars. The difference between this sum and the capital stock is made up of dividends which were paid in stock, interest on stock paid instock, premium on stock allowed to stockowners at the time of consolidation, which was paid in stock, and a balance of stock still held by the trustees. From this single instance, it will be seen how a railway, representing 18 million dollars in cost of construction and equipment, only required a paid up capital to start it of four million dollars ; whilst one half of this was made up in land, town lots, bonds, bills, notes, and labor upon the road. Such facts as these explain how it is that so many railways have been made in America, by showing at what a small original outlay most of them have been started.

The true system is to make all railways State property, as in Belgium. In that country, as we are informed by Mr Elston, the railways belong to the State. They have been constructed and equipped in a thoroughly substantial manner, at a cost slightly in excess of £20,000 per mile. Yet, at this cost, the net receipts have not only provided for payment of interest on the railway loan of eleven millions sterling, but have sufficed for cancelling debentures to the extent of one-fourth the whole capital. This process is now steadily going on, and promises, at no very distant period, to create a profitable source of revenue to the State. Mr Eldsdon pertinently asks, “ Cannot similar results be obtained in the colonies by adopting the system of railway construction to the character of the country, and the requirements of the traffic?” The making railways State property, it should be understood, does not prevent them frombeingconstructed, and even worked, by railway companies, or contractors; but' it insures to the public and the State a participation in the profits, as well as the risks of the works, together with advantages which could not otherwise be obtained, except by the establishment of competing lines, which would involve a needless waste of capital; or by the imposition of such stringent restrictions on the company as would tend to paralyze enterprise, increase the cost of construction, and defeat the object they were intended to secure.