REDEMPTION OF THE RAILWAY SYSTEM.
CATCHING a hint from the humour of the day in the City, and from Mr. Spackman, "the great commercial organ" proposes to re- fer" all the railways of the country to a Parliamentary Commission —we will not say of bankruptcy.' And this significant proposal is soberly made respecting property estimated as worth some hun- dreds of millions! The substantial property—that is, the works already completed—was estimated two years ago to be worth about 200,000,0004 nearly that sum having been actually invested. It is now so greatly depreciated in market value, that its owners, we are told, have lost altogether 100,000,000/. Besides the extant property, there is also an immense prospective property of works to be completed. The total amount of money nominally raised or called up at the end of 1847 was 166,938,0001.; the amount of calls at the end, of September 1848, 28,878,0001.; there are in respect of railways projected but not completed, liabilities to the extent of 131,000,0001.; total, 326,000,0001. But, monetarily speaking, in- asmuch as the property already to a certain extent consolidated has undergone such serious depreciation, it appears virtually im- possible to realize the prospective property represented by those further liabilities. Broadly stated, the actual position of railway property may be put in this form. The public has invested 200,000,0001. in railways: through the depreciation of the pro- perty, it could at this moment realize only 100,000,000L: it has therefore lost 100,000,000/. And as it is liable to be called upon for the remaining 130,000,0001. on account of works whose forced production would depreciate the existing property perhaps to the whole extent of the present value without attaining any substantive value of its own, the railway-investing public is liable to undergo a forced loss amounting to the residue of the sum. In short, the railway-investing public, which could now pay 10s. in the pound, may be forced into such an extension of its business as would disable it from paying anything in the pound. But even that disastrous statement does not represent the whole influence of the evil : inasmuch as some of the funds have a real basis which give a colourable value to the whole, that im- mense mass of so-called " property " is not purely flgmentary ; some of it is genuine property, some of it partakes of the bubble nature ; the line of demarcation between the two being totally confused by amalgamations, extensions, purchases, transfers, alterations, loans, and by that mystification of accounts between directors and shareholders which throws so much perplexity and obscurity over the whole subject. It is impossible, however, that this large amount of funded property, whatever portion of it be real or figmentary, can exist in the market, to be elevated or de- preciated, without exercising a serious influence over the other species of property in the market. As we have seen the imaginary prosperity of railways excite a gigantic spirit of gambling in the pnbhc, so now the depreciation of railway property provokes the correlative spirit of reckless despair, and any sacrifice is suggested to get out of the scrape. Thus the great commercial journal hints at .a sweeping act of bankruptcy, which would be almost national in its scope ; and the great railway financier, Mr. Spackman, pro- Er, in this terrible crisis of railway property, a wholesale aban- nent of "the undertakings,"—meaning future works. These are both very natural suggestions; but not, as it appears to us, very prudent with reference to panic, and not meriting so much con- fidence as if they had been deduced by strict analysis from the nature and circumstances of railway property.
While Mr. Spackman seems to impute the disastrous condition of railway affairs to the unchecked power of directors, the Times ascribes it to the general gambling spirit, and to the adverse years —"the three years of famine and straitness and distrust "—a de- ficiency of that food "which is the fuel of life and of labour "; for railways, we are told, "are bread, meat, and clothing, piled in embankments or buried in hills." We do not find in this descrip- tion that distinctness which enables us to understand practically either the nature of the property or the causes of the difficulty.
In order to a clear comprehension of the case, railway property mist be considered in two relations. There is the immense mass of money property funded in the shares, constituting a sort of public stock ; and there is also the substantial property consisting of the actual works and their appurtenances. By the accidents of our commercial system, the monetary relation of the property has been erected into a sort of substantive property of itself; an aggregate abstraction considered irrespectively of the tangible materials. The trade in shares is a trade in commercial probabi- lities, and has its own fluctuations independently of the incidents of the real iron and earthen railways. In this abstract creation, after the merits or demerits of particular undertakings have been reduced to a relative money value, the original and tangible works are lost sight of : prospective and imaginary property be- comes confused with extant and tangible property. Speculative views of ultimate gain or loss in the particular undertakings con- tribute to the fluctuations of the shares ; but the whole aggregate mass of stock is liable to fluctuations produced by speculative ten- dencies in the money-market at large. The railways that have been made in 1848 and have existed, exist now; and on the whole it may be said that they are worth to this commercial country as much now as they were then. Essentially no very great change has taken place in the use or worth of that property ; the depre- ciation is not a diminished sense of worth or utility, but is an imaginary lass, mainly produced by the abstract nature of the aggregate funded stock of railway property at large. As great part of the material property represented by that stock was ima- ginary, so the loss is in great part imaginary. But there is this peculiarity incident to the trade in those idealisms called
shares," that both the prosperity and the adversity, however imaginary in their nature, are disastrously real in their detrimen- tal results.
The deficiency of food is unquestionably a cause of adversity; but it is too sweeping a cause to be applied specifically to rail- ways. There can be no doubt that if a certain proportion of the industry of a country be not applied directly, or by no very circuit- ous course, to the production of food, the prosperity which seems to exist in great industrial activity is delusive. High wages will be met by dear bread, and the prosperous labourer will find that money cannot save him from starving ; a discovery that in itself causes panic, and at once converts the hollow prosperity to open ruin. It might have been as well if this test had been applied to the expediency of constructing certain lines or not. Such as were immediately operative in supplying facilities demanded by trade come within the category of productive works, and have not conduced to the disaster which is now indiscriminately imputed to railway speculation. Other works, though bearing the form of faci- lity, being redundant, are sterile ; the money invested in them is sunk and lost ; and what is worse, the industry devoted to them is starved, returning upon the country, at the end of the job, in the shape of hungry pauperism. But the same strictures are to be pass- ed on overtrading in cotton, in Birmingham ware, oron any other application of industry which violates the due proportion of labour devoted to food and to other kinds of produce. These general strictures, however, on causes of adversity which are common to other large branches of national industry as well as to railway undertakings, do not lead us to the specific causes of railway difficulty, nor suggest the appropriate cure. We must take the railway system as it stands, with its defects and its resources as they actually exist ; and then the inquiry which might very properly he carried on by a Parliamentary Commis- sion, would draw from the real facts the nature of the measures that are desirable. Such an inquiry, we believe, would elicit these facts among others. Growing up haphazard, unguided by prin- ciple or controlled by any common authority, the railway system has spread itself over the country without any accurate relation to the wants of particular districts, especially without regard to due proportion between the amount of accommodation afforded and the amount required. Divided between several authorities, with conflicting views if not antagonist interests, the whole rail- way system is a chaos of cross-purposes, very partially reconciled by coalitions. It displays no progressive growth ; but while it is imperfect as a whole, it shows redundant development in parts. The nature and scale of railway companies sets them in a great degree above the ordinary influence of that competition which is recommended by economists as conducing to the interest of the public ; but a larger kind of competition, an attempt, as it were, to grasp the territorial preoccupancy of immense districts, has had an active influence in directing the formation of railways. This is essentially the case in extension lines and branches : some are demanded by traffic, others have been made by companies lest the offer to make them should call into existence some rival com- pany; and there are cases in which it may be said that duplicate lines have been produced by the force of a blind competition for the favour of the Legislature. Many of these extension lines do not "pay,"—that is they not only make no adequate return upon the money, sunk, but cause additional current expenses with- out return and it is notorious that in that manner the dividends of some of? the best lines have melted away.
The proposal to suspend all works, too much like the suggestion of panic, is also the manifest suggester of panic. The railway system at large might be seriously injured by the step. The iron lines might not be shaken or damaged ; but the commercial shock would occasion that frantic transfer of property which sweeps ruin over so many families. Injury instead of benefit must be inflicted wholesale by any measure which, being whole- sale, is also indiscriminate. From the nature of the evil we find that the thing wanted is, to introduce intelligence and common purpose into the railway system ; the enforcement of some test which shall discriminate between what is profitable and what is profitless. Independently of State management, as the term has been used, it is evident that there might be some consolidation of the railway system, facilitated by the intervention of the State, without surrendering the property or the business of railways to the administration of -the State. Without venturing into the region of scheme-making, it is quite possible to imagine a central board composed of members elected by the railway companies according to their interests, but regulated by a distinct law, and governed probably by an official head. Such a board might introduce into the working of the existing lines that harmony which should da- velop the largest amount of traffic and of revenue with the least waste of resources. It would be able to determine which are the lines that it is desirable to complete for the development of traffic and the increase of revenue.; which are those lines, suggested by competition or thrown out haphazard in the mere energy of spe- culation, that are not demanded by the existing business of the country, and therefore not likely to augment the revenue. We only mention such a department to show that the main object is practicable. But in whatever way such a purpose is to be ef- fected, the method must be to educe the measures of cure from the realities of the case—to remedy the evils of blind speculation by the introduction of a discriminating and overruling intelli- gence and to counteract the effects of waste by eliminating the profitless from the profitable.
The funded part of the railway system will follow the fortunes of that substantial part to which it is parasitical : let railways be conducted without waste and with the largest amount of profit, and the value of the shares will become obvious and steady. This branch of the public funds will be castigated by the exor- cism of its imaginary portion ; and instead of being the immense depository of panic' disordering the commercial world, it may be turned into a great balance-wheel for the smooth working of our vast money machinery.
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