return, but all will agree that the schedules of rates should be so arranged as to provide not only for revenue to meet necessary expenses of operation, but also a fair return upon the just value' of the property. Let us now examine the amounts expended for dividends and interest in order to discover, if possible, whether the investor now receives an inordinate return upon his capital. The table on pages 32 and 33 shows the amount of railway capital of each class in the United States, and in each group, on June 30, 1893, and the payments thereon during the year ending on that date: From this table it appears that the average highest and lowest percentage of return to each of the different classes of capital were as follows: It should also be observed that the amounts shown under the head of interest upon funded debt are considerably larger than those actually paid, for the reason that the Interstate Commerce Commission has seen fit to base its statements upon the amounts of interest accruing during each year instead of upon that actually paid, and as there was probably a default upon some portion of the interest due in each group, the actual amounts paid and the average rates must have been much lower than those shown. The table on pages 34 and 35 shows a classification of stock and funded debt, exclusive of equipment trust obligations, based upon the rate of dividend or interest paid, during the year ending June 30, 1893. * No dividends on preferred stock. From this table it is seen that 61.24 per cent of all railway stock and 14.39 per cent of the bonds representing funded debt paid neither dividends nor interest; that in one group 99.99 per cent of stock and 31.66 per cent of funded debt received no return; and that in the group where the business of transportation appears to have been conducted under the most favorable conditions, nearly one-quarter of the total stock was similarly portionless. Unless it can be shown that the present capitalization of the railway system of the United States is grossly excessive, these data are sufficient evidence that the return thereto is no more than is fair and reasonable, if, indeed, it is not far below what is just and proper. While the problem of the relation between the par value of railway capitalization and the just value of railway property is one of extreme difficulty and probably does not admit of detailed solution, the difficulties surrounding it are greatly enhanced and its conditions much obscured by the frequent confusion of just value with the amount of actual investment or original cost. Although it is certainly true that the $686,925,816 $17,268,147 2.51 $5,225,689,821 250,176,887 4.79 $611,610,171 7.989,508 1.31 public has no right to demand transportation at rates too low to afford a fair return upon the just value of railway property, there is no equitable basis for the contention that the railways are entitled to interest and dividends upon the original cost of their properties, no matter how much such cost may have been enhanced by profligate expenditure or corrupt misappropriation of funds, nor how much changed conditions may have caused subsequent depreciation of the property. It may, indeed, be true that the public interest will be well served when the circumstances and conditions of railway transportation shall have become so adjusted that the security of money invested in such property is absolute, but no such condition has been, as yet, attained, and until it is those who choose to adventure their capital in the construction of railways must do so with full acceptance of the risks and hazards involved. In estimating what constitutes a fair return upon their investment, allowance should, of course, be made for the possibility of total or partial loss of the principal; that such a loss is among the possibilities is the misfortune of the investor; that it must be compensated • Accrued. |