to make the run from one station to another, crossings and junctions, maximum and minimum speed. The distances given are not real, but virtual distances. It is evident that grades and curves diminish the speed of trains. This might be adjusted in time-tables by allowing more time; but it is customary to add such a number of kilometers to the real distance as the train could traverse under normal conditions during the time which is lost through curves or grades. This sum is known as the virtual distance, and is the distance given in time-tables. All passenger trains must contain at least 2 (first and second) classes of coaches. Whether or not third and fourth class coaches must be run depends upon circumstances. In South Germany the fast trains frequently run only first and second class coaches, while in North Germany they add third class also. The so-called Personenzüge always carry first, second, and third class passengers, and usually fourth as well. while fast trains do not carry fourth class. (Note.-Fast trains correspond to the American limited trains, and the passenger train, Personenzüge, to the ordinary American local passenger trains.) The heating and lighting of trains, their speed and manner of running, train police reglements, kinds of coaches and manner of forming trains, railroad clearing houses, and international train service, etc., are all treated in Prussian regulations.

How tariffs are fixed.-The great variety and number of conveyances undertaken by a railway makes it impossible to enter into a special contract with each individual applying for railway service. But even if this were possible, considering the public nature of transportation and the many public, as well as private, interests involved, legislatures have regarded it prejudicial to these interests to leave the adjustment of rates entirely in the hands of the undertakers and entirely removed from public inspection and influence. Experience has shown that it is the tendency of undertakers, not under direct control of disinterested authorities in whose power lies the "promotion of the general welfare," to yield to other great private interests and charge different rates for the transportation of the same quantity of goods when shipped by persons who stand in varying degrees of favor. The cautious German lawmakers had early surmised the evils of discrimination in rates, and the law of November 3, 1838, as well as the Federal Constitution, reserved to the Government all powers necessary for its prevention. Special reference is here made to articles 4, 45, and 46 of the Federal Constitution quoted above. They indicate in a general way the power of the National Government over all railways in the Empire. Paragraphs 26 to 40 of the Prussian law of 1838 deal with the power of the State over rates. The essential feature of these provisions, as modified by supplementary legislation and ministerial rescripts, as well as the provisions of the law of 1892 on the same subject, are indicated below.

The State, acting through the minister of public works, has the right, after the expiration of 3 years from the January 1st next following the opening of a railway, to approve (1) all tariff schedules (the 3-year limit is practically void because of the reservations the State makes in granting charters); (2) any proposed lowering, raising, or other changes in existing rates; (3) the establishment of freight tariff schedules, tariff instructions and regulations, exceptional (special) and differential rates. The degree in which the State has made use of these rights has varied with conditions. This applies only to primary railways. Secondary roads may, during the first 8 years of their existence, raise or lower rates at will, provided they do not go above a certain maximum, prescribed by the minister of public works for that period of time, and that their rates do not conflict with general tariff principles enforced on State lines. Before the passage of the law of July 28, 1892, railways of purely local significance enjoyed special privileges which are now defined for all classes of local roads. It must be recalled that prior to 1892 the law recognized only primary and secondary (Haupt- und Nebenbahnen) roads, and that these local roads (using local in the narrow sense) had no well-defined legal position. The law of 1892 makes the following provisions concerning rates on local railways: "That authority upon which the approval of the project devolves is required to make an agreement with the undertaker as to time-tables and rates; and the periods of time in which such agreements shall be subjected to revision, provided that the undertaker may be allowed to establish his own rates during the first 5 years, and that thereafter the State shall only fix maximum rates, in doing which due consideration shall be given to the financial interests of the road." The law gives the State this privilege, but does not make it a duty, and it is the policy of the State not to interfere with any arrangements the undertaker may see fit to make, provided he does not discriminate and does not do anything contrary to public interests. The law simply reserves to the State the right to act in behalf of the public. What Prussia reserved for herself in her laws, the Federal Government reserved to itself in

the Constitution. The latter also has the right to interfere in behalf of the general welfare, even if the several States had not reserved that right; and it is possible, too, that circumstances may arise in which the Federal authorities must overrule the State. As to military rates, the Constitution gives the Government the right to fix them (reduced at a uniform rate), but neglects to designate a particular authority. The "Reichsgesetz uber die Naturalleistungen fur die bewaffnete Macht im Frieden," of February 13, 1875, vests the power of fixing and revising military rates in times of peace exclusively in the Bundesrath. The Bundesrath has the same power in fixing and revising rates in times of war. In neither case is a hearing of the undertakers mandatory. Next, the relation of railways toward the post-office department may be mentioned. The railwaymail law now in force was passed on January 1, 1876, and consequently applies only to primary and secondary roads. But it was found necessary to exempt secondary roads from the provisions of this law and subordinate them to special legislation (May 24, 1879). The post-office department may cause the primary roads to meet the following conditions: (1) To transmit free of charge all letters, newspapers, money-including uncoined gold or silver, jewels, and precious stones without regard to weight-and all other mail packages weighing 10 kilograms and less. Also all railway-mail employees, going and returning. These provisions are limited only in case more than 1 car on every scheduled train is required for the transportation of the mail, in which case a nominal sum is paid by the post-office department to the railway undertaker, private or State. The post-office authorities are required also to send early notices of probable demands for additional cars. This is especially important during holiday seasons. duties of undertakers of secondary and of local railways are legally defined, that of the former in the regulations of 1879 and of the latter in the law of July 28, 1892. Because of the numerous conditions influencing the fixing of rates on these railways the schedules are much longer and involved than those of primary roads. Similar regulations have been made concerning telegraph and custom-house officials in their relation to the railways.

The

Publicity of rates.-All railways-State or private, primary or secondary, or local-are required to publish their rates under the supervision of the same authorities which fix them. Such publication is required of all tariffs-passenger, freight, local, through rates. incidental fees, etc.-together with the rules and regulations governing their application and all changes that have been made in them. Tariff rates of all State roads are published in the Staats-und Reichsanzeiger, the official paper of the Government. However, no definite rules exist as to the particular form or place of publication. As a rule, all the important papers of the towns interested publish them; and, of course, they are required to be posted in all station houses and railway offices. Every advance in rates must be published, together with the old rates, at least six weeks before the same shall take effect. The instructions of the minister of public works for the practical application of the law of July 28, 1892, declare that local railways shall be required to publish their rates in a local paper to be designated in the charter.

Financial obligations.-The capital stock.-Section 1 of the law of 1838 provides that the sums of money required for the original investment (Anlagekapital) must be raised through the sale of stock. The amount of stock is fixed in the charter. Section 2 provides that no stock shall be issued until its full face value has been actually paid in. Partial payments are simply receipted. Every signer of stock is responsible for 40 per cent of its face value, even though he should transfer his stock to a third party. For the emission of additional stock and for the taking of loans, in which purchases on credit shall not be included, the approval of the minister of public works must first be obtained and a sinking fund established. Ministerial consent is also necessary for contracting floating debts. With issues of priority obligations and preferred stock it is different. These require special authority ("landesherrliche Genehmigung ") and official publication of the amount to be issued, rate of interest, purposes for which the money is to be expended, and the method of amortization. Since 1872 these powers are exercised by the minister of public works. Before that time special privileges of this kind were granted by the Government according to a law of June 17, 1833.

Appropriation of earnings.-By the law of March 16, 1867, all railway undertakers are under obligation to submit annually, not later than May 1, a full account of their receipts and expenditures, together with the necessary papers (bills, vouchers, etc), and by a court decision they are compelled to submit monthly reports if requested to do so. The law further provides that all taxes (Abgaben) shall be paid out of that part of the gross earnings over and above those parts employed in meeting the expenses for maintaining, managing, and running

the road. All sums paid into the renewal and reserve funds are to be considered part of the running expenses. The reserve fund has its origin in provisions of sections 29, 33, and 38 of the law of 1838, and is usually expressly provided for in the by-laws and charter of the company. The renewal fund was created later, but by rescripts of 1857 and 1858 it applies to all roads irrespective of the time during which they were built. It is kept distinct from the reserve fund: and, in case earnings are insufficient to meet the regular demands of both, the available earnings go to the former. The size of the renewal fund and its rate of increase depends much upon the character of the road, and is determined for each separately. The general nature of these funds being that of insurance, their accumulation becomes unnecessary in case of State roads; nor do the legal restrictions on the issue of stock apply to the latter. The various provisions for the distribution of dividends have in common the requirement that certain maximum portions of the gross earnings may be distributed as net profits. Such distribution is not obligatory. Paragraph 34 of the law of 1838 establishes normal formulæ for computing gains and for gathering necessary statistics. The most important legislation on the appropriation of earnings still in force is the "Gesetz, betreffend die Verwendung der Jahresüberschüsse der Verwaltung der Eisenbahnangelegenheiten" of March 27, 1882. It provides that the annual surplus shall be expended for the following purposes in the order given: (1) To pay the interest on the State railway debt; (2) to meet certain deficits in the State budget which would otherwise have to be met with loans, not to exceed 2,200,000 M annually; (3) to pay off the bonded indebtedness.

Taxation.-Law of November 3, 1838.-By section 38 of the law of November 3, 1838, railways are under obligation to pay taxes in proportion to the total capital stock, less the expense of maintenance and operation and the annual contribution to the reserve fund. Railways are exempted from the tax on industries (Gewerbesteuer). The succeeding paragraph provides that this tax shall be paid into the State treasury as a compensation for expenses incurred by the Government on account of the roads and for the amortization of the original stock. After such amortization, the undertaker may be bound to arrangements of such a nature that the receipts ("Ertrag der Bahngelder") shall not exceed the cost of managing and operating the road. These provisions of the fundamental railway law were followed by important supplementary legislation.

Law of May 30, 1853.-This law has reference only to railways owned by stock companies. Under its provisions the first tax was levied in 1854 on the net proceeds of the year 1853. The taxable net proceeds are defined as that sum which remains for distribution on the capital stock after deducting from the gross receipts the cost of administration, maintenance, and operation, the necessary contribution to the reserve fund, and the sums required for the payment of interest and loans. Capital, on which a fixed rate of interest is paid without being entitled to dividends, even if raised by means of preferred stock, shall not be included in the capital stock, but it shall be considered equivalent to loans. The rate of taxation is fixed at one-fortieth of the net proceeds, not exceeding 4 per cent of the capital stock. For net proceeds exceeding 4 per cent of the capital stock the following shall be provided:

From 4 to (inclusive) 5 per cent, one-twentieth; from 5 to (inclusive) 6 per cent, one-tenth; from 6 per cent and over, two-tenths; in addition to the one-fortieth on all net proceeds up to 4 per cent. To illustrate: Take capital stock to the amount of $10,000, the net proceeds of which equal the sums given in Column I, then the amount of the tax equals the sums in Column II, and the sums remaining for distribution among the stockholderss are given in Column III.

The law further provides that all railways which are under statutory obligations to pay certain sums to the Government are subject to this tax for all sums (net) in excess of the amount paid to the Government. All railways upon which the State guaranteed interest are exempt from taxation during years in which the State advanced money by virtue of such agreement. All moneys realized through the collection of these taxes shall be employed by the State in purchasing railway stock, and all interest and dividends accruing to stock thus purchased shall be used for the same purpose; nor shall any such (purchased) stock be again put upon the market. The provisions of this law are general except as modified by special contracts with the State.

Law of May 21, 1859.-This law repeals the provisions of sections 39 and 40 of the law of 1838 and section 6 of the law of 1853 so far as they prescribe the utilization of the funds raised by taxation. It orders all receipts of such taxes henceforth to flow into the general State treasury, and consequently it dissolves the amortization fund.

Law of March 16, 1867.-The law of 1853 applied directly to railways owned by stock companies. The law of 1867 applies to all railways" not in the possession of the State or of domestic railway stock companies." It provides that the possessors shall be responsible for the payment of the tax. The rate of taxation is identical with that given in the law of 1853, but it defines the taxable net proceeds differently. It deducts from the gross receipts the cost of operating, maintaining, and managing the road, contributions to the reserve and renewal funds, but makes no allowance for sums disbursed out of the reserve fund. It states expressly that these sums shall be deducted from the gross receipts, while the law of 1853 does not say from what the sums named shall be deducted. The law of 1867 states that "the taxable net proceeds constitute that portion of the gross earnings which remains after deducting the expenses of maintenance, operation, and administration." This latter definition is law at present. As has been stated before, all railways are required to submit authentic reports, on the basis of which the authorities fix the taxable proceeds and publish it in the Reichsanzeiger. For State railways the excess of receipts over expenditures, after deducting 3 per cent interest, is determined by the minister of public works and likewise published in the Reichsanzeiger. The law of 1867 also defines original stock (Anlagekapital) as that sum which has been expended usefully in the construction and equipment of the road, including rolling stock. Five per cent interest is allowed (ì. e., it is included in the Anlagekapital) on all sums expended before the opening of the road, provided no unnecessary delays have been made. If railway undertakers fail to submit reports, the authorities fix the amount of capital stock which shall be taken as the basis of taxation. It must be borne in mind that the rate of taxation depends upon what per cent the net proceeds are of the capital stock, and that the larger the capital stock the lower the rate of taxation, other things being equal. Money expended for renewals and extensions shall be included in the capital stock only so far as these have been caused by extraordinary circumstances and have not been taken out of the reserve and renewal funds. Several railways in possession of the same person are taxed as a unit. In case of parts of roads owned by foreigners, i. e., not Prussians, the capital represented by such parts shall be determined by the authorities, if the same has not been fixed in the charter.

Law of July 27, 1885 (Nothkommunalsteuergesetz).This was an attempt to regulate the parish income tax. The law provides that railways and other industries listed in Section I shall pay a tax to the parish (Kommunalabgaben) in proportion to the amount of their income in that parish. This applies alike to private and to State railways. The tax is payable in that parish in which the railway has its seat of management, a station, workshops, or any other plant. The net proceeds, as defined by the laws of 1853 and 1867, shall be taken as the basis for taxation of private roads. For State roads, the excess of receipts over expenditures, plus 3 per cent interest on the capital stock (or consols), is to be used. They are taxed as a unit, and the total of the taxable income is fixed annually and published by the minister of public works. A noticeable feature of this law is that the parish into which certain railway earnings happen to flow is entitled to a proportional share of the total income of that place. Thus a station located in a parish which has done little service to the road may have a comparatively large income, on a share of all of which it has a legal claim. It should be noticed also that local railways (section 40 of the law of July 28, 1892), not being railways in the sense of the law of 1838, are not liable for the payment of the tax provided for in the law of 1885. They are subject to the tax on trades (Gewerbesteuer), of June 24, 1891, from which railways subject to the laws of 1853 and 1867 are exempt.

Law of July 14, 1893.-This is an important date in the history of Prussian financial legislation. Three different laws on finance received the royal signature on that day. They were, "Gesetz wegen Aufhebung direkter Staatssteuern,'

"Ergänzungssteuergesetz,"-a tax on all mobilia, except household goods, and immobilia, minus the debts on the same-and" Kommunalabgabengesetz." The last law empowers parishes to levy direct and indirect taxes, and to exact services and payinents in kind according to the provisions of the law. So far as it deals with railways it will be discussed here. All of these laws went into effect April 1, 1895, with the exception of one provision about the distribution of railway taxes among certain classes of parishes.

The same as under the law of 1885, State railways are considered as a single unit of taxation. Together with private roads, they are taxed in the parishes in which there are stations, shops, offices, etc., but not in parishes in which there are only watchmen's huts and tracks. Stock companies which receive a fixed rent for roads owned by them, but operated by the State, are not considered possessors of the road, and hence not subject to this tax. While all railways are taxable under this law, local railways, not being "railways," are not affected by it. The taxable income of State roads and of roads operated by the State is the excess of receipts over expenditures, plus 34 per cent of the invested capital (Anlage- beziehungsweise Erwerbskapital), according to official statistics. The taxable income thus determined is to be fixed and published annually. The taxable income of private roads is determined according to the laws of 1853 and 1867, only that moneys expended in the liquidation of debts, and interest on the same, shall be regarded as expenses under the law of 1867. The law of 1885 gave parishes a claim on railway incomes according to the receipts (net) of the road in that parish. The law of 1893 entitles parishes to such moneys in proportion to the sums expended for salaries and wages in the respective parishes on the basis of a 3-years' average. In the computation only one-half of the salaries of administrative officials and two-thirds of the wages of shop and linemen are included. Prussian railway administration.-The writer discussed this subject in an article published in the Annals of the American Academy of Political and Social Science, for November, 1897, a part of which is here reproduced. The system is to-day what it was then, and minor changes which may have been introduced since that time do not affect the general system. Prussia has made her railways a success. Discriminations are unknown. The special rates," which are published, together with the reasons for which they were established, like regular rates, are open to everybody, During the fiscal year ending March 30, 1900, Prussia expended nearly $25,000,000 in extending her secondary system, and about one-fifteenth as much for primary roads; and, notwithstanding this great extension of less profitable lines, her railways yielded a net profit of about $140,000,000.

The Prussian railway administration was reorganized on April 1, 1895. Previous to that time there had existed two distinct official bodies, or resorts," immediately below the minister of public works. The latter was then, and is now, the executive head of the railway administration, and the two bodies subordinated to him were known as Eisenbahndirektionen and Eisenbahnbetriebsämter, respectively, the one having direct charge of the operation of the railways and the other performing purely administrative functions. Of the Direktionen there were 11, and of the Betriebsämter 75. The functions of both of these have now been consolidated in the royal State railway directories, of which 20 have been created, with their seats at Altona, Berlin, Breslau, Bromberg, Cassel, Cologne, Danzig, Elberfeld, Erfurt, Essen, Frankfurt a. M., Halle a. S., Hannover, Kattowitz, Königsberg, Magdeburg, Münster, Posen, St. Johann-Saarbrücken and Stettin. Each directory is composed of a president, appointed by the King, and the requisite number of associates, two of whom, an Ober-Regierungsrath and an Ober-Baurath, may act as substitutes of the president under the direction of the minister. Each directory has complete administrative control over all the railways within its limits, although the subordinate civil administrative organs of the State, such as the Oberpräsident, Regierungspräsident and Landrath have certain powers in the granting of concessions, police regulations, etc. The directory decides all cases arising out of the action of special and of subordinate branches of the administration; and, representing the central administration, it may acquire rights and assume responsibilities in its behalf. The directories may be characterized as general administrative organs, one of whose great functions is the proper coordination of all the parts of the railway system.

Below and subordinated to them are special administrative organs, upon whom falls the duty of local adaptation and supervision. There are 6 classes of these local offices, and their names indicate in a general way their functions: operating, machine, traffic, shop, telegraph, and building offices or Inspektionen, as they are called. Shortly before the new system went into operation the minister of public works issued special business directions for each class of offices. The contents of