Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 6, 1880

No. 270.
Mr. White to Mr. Evarts.

Legation of the United States,
Berlin, April 12, 1880. (Received April 30.)

No. 110.]

Sir: The subject of state railway management has attracted probably more attention in Germany within the last few years than any other, haying reference to purely internal administration. It is also naturally a subject which interests large numbers of thoughtful men in our own country; and this being the case, I have taken the liberty of sending a report made to me at my request by Dr. R. T. Ely, a fellow of Columbia College, New York, who for three years past has been making special studies in the principles of political economy as applied to the internal administration of Germany. Similar reports on other subjects have already been published by him, but it occurred to me to inclose this to the Department, that it may be within reach of any persons connected with our government who may wish a careful exhibit on the whole subject.

I have, &c.,

AND. D. WHITE.

a brief sketch of the railway history of germany.

introductory.

In some European countries railways were built according to a well-conceived plan to join and give a unity to the different parts of the state. This was the case in Belgium, where the government, early recognizing the importance of this new means of communication, decided, in 1834, to build a network of railways connecting the Scheldt with the Rhine and the Meuse. George Stephenson drew up the plan. Mechlin was the central point from which lines were to run in every direction. Work was immediately begun, and in 1835 the first Belgian railway was open for public use. The government continued the work until 1843, when 560 kilometers^* had been completed, and lines ran from Mechlin to Antwerp, to the French frontier via Brussels, to the Russian boundary, and to Ostend. The effect of these new highways connecting the north, and the south, the east and the west of the kingdom was wonderful. In 1830, when Belgium rebelled against Holland and gained its independence, it was inferior to the latter as regards means of communication, and as a natural consequence as regards commerce. When the projected railway lines were completed, Belgium left Holland far behind, notwithstanding the excellent harbors and numerous canals of the Dutch. The young dynasty, by the energy and insight with which it had availed itself of this new source of power, consolidated its kingdom, which was threatening to fall apart, more lastingly than any mere jealousy of Holland could have done.

The development of the railway system of Germany was quite different. When the first railway was built, and for a long time afterward, there was no Germany, in the sense in which we use that word to-day. The Germans themselves say of their country—to be sure, with some exaggeration—that it was then but a geographical expression. This Germany, however, included real states—Prussia, Bavaria, Würtemberg, Saxony, Hanover, and many others of less importance. Each of these had its own plan, or sometimes no plan, of railway building, and were as regardless of what the other German states were doing as they were of the railway policies of foreign countries. Till the time of the formation of the North German Confederation, we have, therefore, to examine the railway question solely in individual states; but its history since 1867 must be looked at from three points of view: first, from that of the individual states; secondly, from that of the federation, and then, later on, of the empire; thirdly, from that which results from the relation of the individual states to the imperial power. As the railway history of the German states, except Prussia, is comparatively simple, it may be examined incidentally in our sketch of the railway history of Prussia. We will, finally, devote a few words to the influence of the empire upon the railway problem.

prussia.

The first German railway was built in 1835. It extended from Nuremberg to Fürth, and had a length of 6 kilometers. It was built, owned, and worked by a joint-stock company, as was also the the second German railway, the Leipzig and Dresden, of which 15 kilometers were finished in 1837. The first of these two railways lay wholly in Bavaria, the second in Saxony. The first concessions granted to railway companies by Prussia bear the date of 1837, and we may properly consider her railway history as beginning in that year. As early as 1833, however, concessions were sought for in vain. The government was again petitioned in 1835 for concessions, but again refused to grant them, under the plea that time was necessary to investigate the significance of a concession in all its bearings. The time required for reflection was so long that in 1837 Germany still had only its 21 kilometers of railway, whereas England had already 184 miles (English), more than ten times as much; Belgium, small as the country is, had 142 kilometers in running order; and the United States 1,843 miles, or nearly 3,000 kilometers. But if the Germans are rarely ahead in the beginning, they are not so seldom the winners of the race: lacking the swiftness of the hare, they do not want the plodding perseverance of the tortoise.

Between the 21st of August and the 13th of November, 1837, concessions were granted for four short railways, viz, the Berlin and Potsdam, the Magdeburg and Leipzig, the Düsseldorf and Elberfeld, and a part of the Rhenish Railway. In the following year, when only-one of the above-mentioned railways (the Berlin and Potsdam, 26.4 kilometers) was finished, the celebrated law of November 3, 1838, was enacted. This law, which is still valid, except in so far as certain parts have been rendered of no effect by subsequent legislation, formed the basis of all later Prussian railway laws, and is in many respects a model.

Its main points are as follows:

§§ 1 to 5. Every company having the intention of building a railway must apply to the ministry of commerce for a concession. The application must contain an exact statement of the principal points through which the road is to pass, and of the capital stock to be divided into shares. It must be accompanied by a plan of the road, stating clearly the manner in which the road is to be built, the materials to be used, the wagons, coaches, locomotives to be employed, &c.

If no objections on the score of safety, public interest, &c., are found against the plan after it has been carefully examined, the concession is granted and a time is fixed within which it must be shown that shares have been taken to the full amount of the capital stock, and the shareholders have met and framed the statutes of the company. The statutes are not valid unless approved of by the government. All those who subscribe for shares are unconditionally responsible for 40 percent, of the full amount. If afterwards the regular payments for the remaining 60 per cent. cease, the company has the choice either to prosecute the subscribers and force them to fulfill their obligations or to release them from the same under loss of the 40 per cent. already paid in. No share may be given out before the full nominal value for which it reads has been paid.

§ 6. Additional shares may not be emitted without the consent of the government. No loan may be contracted without the approval of the ministry of commerce, which has the right to oblige the company to establish a satisfactory sinking fund for the payment of capital and interest.

§ 8. The company has the right of expropriating such property as is necessary to render the road capable of fulfilling its functions as a public highway.

This paragraph is of importance (1) because it establishes the character of railways as essentially public and not private undertakings; (2) because it justifies expropriation only upon grounds of public welfare.

§ 24. The company is obliged to keep the road and all appurtenances in a condition which insures, as far as possible, safety in the transport of goods and passengers.

§ 25. The company is responsible for all damage to persons and goods, unless it can prove that the damage was in no wise the fault of the company. The weight of proof, it will be observed, lies with the company. The dangers necessarily connected with railways do not free the company from this obligation.

§ 26. The railway tariff must be made known to the government and published. Changes in the tariff are not allowed to be made without notifying the government and the public. In case the change increases the rates, it must be published at least six weeks before it comes into effect. All parties are to be treated alike without partiality.

§ 27. The minister of commerce has the right to allow a second company to use any railway track which has been open three years. For this use the second company must indemnify the first. This provision, which it was thought would effectually protect the public against railway monopolies, has, for obvious reasons, never proved practical.

§ 33. When the profits of any railway exceed 10 per cent, of the capital invested the passenger and goods tariff must be reduced until the annual profits are no longer in excess of 10 per cent.

§ 36. Railways are obliged to carry all postal sendings and to transport postal wagons free of charge.

§§ 38 to 40. All railways must pay a tax in proportion to their receipts. The state is to use the income derived from this tax (1) as indemnification for the loss of the government occasioned by the railways—the government had formerly a monopoly of the transport of passengers in connection with the postal service—(2) for the amortization of the capital employed in building the railway tracks. When this capital is completely amortized in case of any railway track, the receipts derived from said railway track shall not exceed the sum necessary to keep the same in repair and the cost of its administration; that is, that railway track would, in this case, become government property and be administered like a highway, from which the government raises sufficient toll to pay for keeping it in repair and to meet the expenses of administration.

§ 42. At the expiration of thirty years after the opening of any railway, the state has the right of purchasing it. In case the government and the railway can come to no other voluntary agreement, the company receives twenty-five times the average yearly amount of the dividends during the last five years.

§ 44. Before the expiration of thirty years after the opening of a railway, no concession may be granted to a parallel line.

This paragraph was repealed in 1867, by article 41 of the constitution of the North German Confederation. Finally the right is reserved of enacting such further laws as experience shall show to be necessary. Paragraph 33, which fixes the maximum of profits at 10 per cent., has never proved of practical value. Means have always been found of evading this provision of the law, as similar ones in Austria, England, and the United States have been evaded. Dividends of 20 per cent. have been declared in Prussia.

The statutes limit in some cases the number of votes allowed to any one shareholder, e. g., originally no shareholder of the Berlin, Potsdam and Magdeburg Railway was allowed more than twenty votes, although twenty votes represented a capital of only $15,000.

The functions which the above law accords to the minister of commerce have now fallen to the minister of public works, as the ministry of commerce has been recently divided into a ministry of commerce and a ministry of public works.

The law of November 3, 1838, presupposes a system of private railways. We might naturally expect that the prudence with which the Prussian Government weighs mew measures, would have led it to recognize the importance of railways; that this importance being recognized, it, ever jealous of its authority, would be unwilling to trust a rising power, destined soon to become tremendous in its might to private individuals. The wisest and most careful, however, did not have an adequate appreciation of the position which railways were soon to occupy in the world’s economy. But we find here as often elsewhere in political and economic science, an apparent anomaly. Private citizens and science have ever in Germany taken the initiative in urging the government to enlarge its sphere of action, so that it should include consistently all public highways, whether macademized or paved with iron rails. In Baden, Würtemberg, and Bavaria, all of which had a constitution, the railways were built and worked chiefly by the government from the beginning. In Prussia, then an absolute monarchy, the government took no active part in railway building and management, until she also became a constitutional monarchy. It has been hinted that large capitalists and members of the stock exchange, who naturally desired private railways, were able to exert a more effective influence upon the government, when it was obliged to render no account to parliamentary bodies. It may be doubted, however, that the capitalists at Berlin have ever had power enough to direct the policy of government, though it appears undoubted that their brothers at Paris played an important rôle in France in deciding the contest between the state and the private railway system, in favor of the latter. In Prussia, the difficulty which stood in the way of state railways was this: The government had promised to contract no loan without the consent of the estates of the monarchy, and this could not be obtained until they were organized in a parliament. The “constitutional question” yet unsettled, made a loan, the conditio sine qua non, in a state railway system impossible.

The first period of the railway history of Prussia is thus one in which only private railways were built. It extends to the adoption of the constitution in 1850. Private activity alone was soon found to be insufficient. The poorer parts of Prussia, the development of which was dependent upon better means of communication, wanted the requisite capital to build railways. After having consulted with committees appointed by the provincial assemblies, the government decided, in 1842, to assist in the development of the railway system of the country by means of aids, consisting chiefly of guarantees of interest. Certain sums were set apart from the regular income of the state for this purpose. The following railways were built between 1842 and 1847 in this manner: The Niederschlesisch-Märkische, from Berlin to Breslau, 385.2 kilometers (since purchased by the state); the upper Silesian (Oberschlesische), from Breslau to Myslowitz, 192.2 kilometers; the Cologne and Minden, 269.9 kilometers (bought by the state December, 1879); the Posen and Stargard, 170.5 kilometers (forms now a a part of the Upper Silesian Railway); and the railway between Elberfeld and Dortmund, 58.3 kilometers (forms now a part of the Bergisch-Markische Railway).

At the beginning of the year 1850, the close of the first period of the railway history of Prussia according to our division, there existed in that country 2,700 kilometers of railway. The crisis of 1846–’47, and the political events of 1848, hindered the development of the railway net in Prussia. The returns from railway enterprises were not so large as had been expected, and several newly-formed companies were on the point of dissolution.

The Prussian Government desired to have a railway built, running from Berlin in a northeasterly direction to the Russian frontier. Although particular stress was laid upon such a railway, both on economic and military grounds, no private capitalists were ready “to undertake it, even with the assistance which the state offered. The government decided, therefore, to build a road from Berlin to Eydtkuhnen, via Konigsberg (“6.3 kilometers). It was called the Prussian Eastern Railway (Preussisclie Ostbahn), and was opened to traffic, piece-meal, between 1851 and 1867. This railway marks the beginning of a second era in the Prussian railway system, during which nearly all the Prussian state railways were begun.

The leading railway man in this second period, which lasted till 1859, was the minister of commerce, von der Heydt, after whom the government railway policy at this time is called the “von Heydt’sche Eisenbahnpolitik.”

The principal state railways built during this period are the following: the West-phalian Railway (Ham m-Paderborn-War burg, 130.6 kilometers, since largely extended); the Saarbrück Railway, from the Bavarian frontier at Mitt el-Bexbach to that of Lorraine at Forbach, 31.6 kilometers.

The Niederschlesisch-Märkische, nearly 400 kilometers, was bought by the state. The government concluded contracts with the Bergisch-Märkische, the Upper Silesian, and the Cologne and Crefeld Railway Companies, according to which these railways still remaining private property passed into state management. While in 1850 the state neither owned nor managed any railway, it worked nearly 2,500 kilometers of railway in 1859, of which about 1,300 kilometers were state property. Private companies worked 2,600 kilometers.

Von der Heydt was an opponent of private railway companies. His policy was an extension of the Prussian railway net by the state and a gradual but steady purchase of the private railways already existing. The law of November 3, 1838, mentions, as we have already seen, a tax which was to be employed in part to form a fund for the amortization of the capital stock represented by the railway tracks, after which a toll was to be levied for their use, in order to meet the costs of repairs and management; they were afterward to yield no profit on the capital invested. According to§ 6 of the law of 1853, the sinking-fund formed by the tax was to be used in purchasing railway shares, and the interest and dividends yielded by these shares to be employed in turn in purchasing new shares.

It is manifest that this plan would have led in no very long time to state ownership of all the railways. But§ 6 was made null and void by the law of May 21, 1859. This does not seem to have been brought about by unhappy experience, but appears rather to have been the effect of the political economic ideas and of the political events of the time. Besides, whatever evil consequences may be attached to private railways, were not so apparent then as now.^* The experience of Great Britain, e. g., is now a favorite argument against private railways; it was then, on the contrary, an encouragement to their friends.

The minister of commerce, Mr. von der Heydt, as the author of Zehn Jahre Preussisch-Deutscher Eisenbahnpolitik tells us, opposed strongly the abrogation of the law of 1853. He warned against dangers which might arise in the future, if Prussia, surrounded on all sides by states in possession of their railways, should be the only country in Central Europe, which did not own its iron-paved streets; nearly all the neighbors had systems which would lead finally to state railways. In reply, Deputy von Carlowitz referred to the example of England, “an example of great weight in such matters,” and Deputy Reichensperger added: “The isolation to which the minister refers is certainly no misfortune. It is, on the contrary, very attractive for me that Prussia should be in Germany a stronghold of freedom.” The minister was defeated and the government yielded the more readily, as it needed money for the war preparations of the spring of 1859. Thus ends the second period of the railway history of Prussia.

The third period may be considered as extending from 1859 until the formation of the North German Confederation. This periodis marked by no fixed and determined railway policy on the part of the government. Prussia, fully occupied with the game which was being played, for the hegemony of Germany, had little time to attend to matters of less importance. The state railways increased some 500 kilometers, the railways under government management over 700 kilometers, the private railways about 1,000 kilometers. Thus, at the close of 1866, there were in Prussia 1,500 kilometers of private railways under state management, 1,800 kilometers owned by the state, together 3,300 kilometers understate management, and 3,600 kilometers of private railways under the management of private companies.

The fourth and last period of their history extends from 1866 up to the present time. The railways in the provinces, annexed after the war of 1866, were for the most part state railways; those of the former kingdom of Hanover were exclusively so. Hanover had 822.3 kilometers of railway at the close of 1866. The length of the state railways in all the annexed provinces amounted to 1,344 kilometers in 1869. The railways of the annexed provinces (formerly states) passed into possession of Prussia in 1868. At the end of 1867, the length of the railways owned by Prussia was less than 2,000 kilometers; at the close of the year 1868, it amounted to 3,250 kilometers; at the close of 1867 the state worked 3,400 kilometers; at the close of 1888, 4,900 kilometers of railway. Private companies owned and worked at the end of 1868, 5,000 kilometers of railway.

The annexations of 1866 virtually decided the railway question for Prussia in favor of state railways. Nevertheless, from 1868 to 1872 private railways gained on state railways. In the beginning of 1873 private companies managed 7,000 kilometers, the state only 5,750 kilometers. A wild speculation followed the Franco-Prussian (German) war. The principle of private competition gained ground. In the opinion of the multitude every new railway was a necessary blessing. But the winter of 1872–’73 brought a change. In the Prussian Parliament, Dr. Lasker entered the lists in favor of state railways, and combated so vigorously and successfully for his cause that the part he then took in the contest will always form a noteworthy epoch in the development of German railways. He began by making serious charges against government, in particular against the minister of commerce, in matters of railway concessions. Early in the session the government demanded of the Parliament a credit of 360,000,000 marks; 150,000,000 for a road from Berlin to Wetzlar, the remainder for other railway undertakings, for rolling stock, &e. The object was to connect the eastern and western parts of the monarchy by state railways. It was during the first reading of the bill that Lasker made his memorable speech of January 14, 1873. He asserted boldly that in matters of concession the point chiefly considered by the minister of commerce, Count Itzenplitz, was not the interests of the people and the state, but personal favor or personal ill-will, that Dr. Strousberg, e. g., was always granted the desired concession; that concessions had been granted to a high official and to members of prominent families, who from the outset had no intention of building railways; that these parties had derived profit by trading with the concessions (so-called Gründergewissen.)

The minister of commerce made an ill showing in his defense. The minister president Count Roon, addressed a letter under date of January 31, 1873, to the president of the House of Deputies. He defended the above mentioned official and attacked Lasker. The letter was read in the house February 7, but the utterances against Lasker were at once taken back. Deputy Lasker used this opportunity to continue his exposures, and produced such substantial proof of his statements that Count Roon, astonished at what had been going forward, withdrew the letter in toto, and promised to assist in every possible way in clearing up the “sad affair.” A royal message, February 14, moved that a special commission be appointed to investigate the matter and to discover “what principles have been employed in granting railway concessions, and the abuses which have grown up in connection with the exploitation (ausantzung) of these concessions, in order that it may be seen (a) whether and in how far the existing laws and the rules of administration are fitted to secure the fulfillment of the intentions of government in granting the concessions and to protect the public against deceits and damages; (b) what changes in the existing legislation and administration are necessary to put a stop to the abuses which have crept in.”

The commission of investigation held fifty-six sittings; the report was contained in three different manuscripts, embracing together 1,000 large quarto pages. The official documents of the ministry of commerce were examined carefully, numberless witnesses were heard, railway experts questioned, &c. The ability and thoroughness with which this so-called Lasker commission conducted the investigation have gained for it celebrity. The most noteworthy parts of the summing up of the report are as follows:

“An exclusive system of state railways is not at present realizable, but economic considerations favor sucb a system as the final goal to be striven for.” “Railways are public highways, means of favoring traffic, resembling in essence and purpose other highways. The only means of justifying the government in relinquishing railways to private industry and speculation is the stringent financial necessity of the time.” “It appears desirable to transfer to the empire a controlling power over all German railways.”

During the proceedings of the commission, it appeared, as the official account has it, that the personal honor of Count Itzenplitz was affected; accordingly he resigned, and Dr. Achenbach was appointed in his place minister of commerce. The bill for a credit of 360,000,000 marks was passed under “his advocacy with a large majority, showing clearly in which direction the sympathy of the house leaned in the struggle between the two systems, private and state railways. No event of special note concerning the railway question took place in the Prussian Parliament after this until the spring of 1876; when, to the surprise of many, the government brought in a bill proposing to authorize the government, in case it should desire to do so, to sell all the Prussian state railways to the empire.

The object of this bill was to give the empire a powerful influence in the development of German railways, and also to render it easier for the imperial railway office (Reichseisenbahnamt), which had been created in 1873, to exercise a control over the German railways within the limits of the railway functions ascribed to the empire by the Imperial constitution.

The opposition against the bill was not strong, either in the upper or lower house. It was defended chiefly by Bismarck, Lasker, * * * Hammacher, and Lowe. Bismarck’s arguments in his speech of April 26, 1876, were essentially as follows:

“The imperial constitution attributes to the empire the duty of a general supervision over all German railways, a certain control over tariffs, &c. An imperial railway office has been called into existence with the view of carrying out the provisions of the constitution. The experience of the office has manifested, however, the impotence of the empire, and the strength of the separate states. The imperial railway office has become a council which gives good advice, and prefaces its requests with ‘if you please.’ It writes a great deal and makes much ado, but no one heeds its behests. I had hoped for an imperial railway law before this, but the opposition of the states, not only that of Saxony, but also that of Prussia, has proved too strong. The fact is, that the royal Prussian ministry of commerce has a much greater influence upon the formation and development of the German railway system than the imperial ministry, notwithstanding the provisions of the constitution to the contrary. The rights of the empire are theoretical, those of Prussia are backed by a strong railway net, the influence of which is felt in all Germany. As imperial chancellor, it is my duty to contend against this state of affairs, to see that all parts of the constitution, even the railway articles, become realities, to fight against the development of Prussia, at the cost of the empire. * * *

“We have in Germany, I believe, sixty-three railway provinces—that is saying perhaps too little, they are more independent than provinces; I should rather say railway territories—of which forty perhaps are in Prussia. Each one of these sovereign territories is fully provided with the feudal rights of the dark ages, the right of staple, the right of levying tolls and taxes on commerce for the benefit of its own private purse; yes, even with the right of carrying on feuds and railway wars, as suits its good pleasure, like the old feudal lords. We see to-day railway directors waging battles, not for the benefit of the railways or shareholders, but as a sort of noble sport. This condition of affairs does not correspond to the ideal of the imperial constitution. Even Prussia has not a railway power strong enough to carry out this ideal within its own boundaries. I think the state should have its own line between all principal points. * * * I do not regard financial competition as the raison d’être of railways. It were foolish to say the state should derive no financial benefit from this property.

“The profits which states derive from their railways are really a tax which they impose upon the circulation of goods. This taxation should not be oppressive, and should be financially just. But profits, as I have said, are not the raison d’être of railways. * * *

“The non-Prussian German railways which are private property—there are few of them—will probably be purchased in a short time by the states within the bounds of which they lie. The non-Prussian state railways are in excellent hands. They serve chiefly the public interests of traffic, of commerce, of the circulation and transport of commodities and passengers; besides, as a secondary consideration, they aid the public treasury, and, in all events, promote only public interests. It is the misfortune of private railways that a privilege granted by the state, and a privilege which could not be made use of without the help of the state—we may say, a monopoly granted by the government—should be legally exploited in behalf of private interests and private pockets. * * *

“The railway question could he solved in Prussia by the state’s purchasing private railways, building new ones, and creating an independent railway ministry.^* This would be simple, but we belong also to the union of the empire and are subject to the imperial constitution. It is our duty to strive first to increase the power of the empire and not that of Prussia, the strongest state in the union. We do not desire to increase still further the preponderance of Prussia. We offer the economic power of the railways to the empire. The imperial constitution can, in my opinion, be realized only in this way. * * *

“If the empire does not accept our oiler, this morning-present (Morgengabe), which Prussia brings, we in Prussia can make further arrangement for consolidating and extending our railway possessions. * * *

“The shareholders will be glad to exchange their shares for state bonds with a fixed and sure income. As regards the directors of the private railways, it will be difficult to offer them an equivalent for the brilliant positions they now occupy, especially for their soverign rights, in railway matters. * * * I hope, gentlemen, that you will support this bill, in order that we may thus take the first step on the way leading to a goal which will not be attained in my lifetime—I may, indeed, say, in our lifetime; but, if the devolopment be slow, if it must be fought out in hard battles, let us not be discouraged. Was anything great ever attained without fighting for it? However long and severe the battles may be, with the consciousness of contending for the right, we will pass forward, unterrified, unwearied, because a true idea, having once taken possession of public opinion, will not disappear until it is realized; until, in this case, the imperial constitution, as whose representative I stand before you, becomes, even as regards its railway articles, a truth.”

The bill was accepted in both houses of the Parliament with large majorities^† and became the law of June 4, 1876.

The purport of the law was to transfer not simply all Prussian railways but also all railway rights and obligations of Prussia to the empire, which was to extend and consolidate the Prussian railways. With a view to meeting the opposition which the law was sure to encounter outside of Prussia, Bismarck warned the other states in his speech, that, in case the empire should not be favorably disposed toward the project, Prussia would extend her state railway system, and thus increase her preponderating influence over the smaller and middle states. This threat did not produce the desired effect, for the reason that the German states feared the empire more than Prussia. In the papers at this time there was much talk about the empire’s buying up all the railways in Germany by means of an expropriation law. Now the right of any individual state to expropriate its railways is undoubted.

Inasmuch as the railways owe their very existence to an expropriation law made in public interest, it is extremely illogical to suppose a second expropriation law could not expropriate the railways in public interest. An expropriation law is a two-edged sword, which can operate as well one way as the other. But the matter in the case of the empire was quite different. The German states had granted the necessary expropriation laws and had been competent in railway matters, except in so far as the imperial constitution had conveyed certain rights, which we will consider hereafter, to the empire; these rights did not include the expropriation of the railways of the separate states. Bismarck in the speech from which we have quoted expressly repudiated the thought of extending the competency of the empire so far. It is, to be sure, impossible to prove that high officials never planned anything of the kind, for experience has already demonstrated that the imperial constitution is something very elastic, but there seems to have been no evidence to support the prevailing apprehensions. The German middle states, nevertheless, became much alarmed and prepared to resist even the transfer of the Prussian railways to the empire.

The “state rights” people, as we would call them, had been more than once frightened by Bismarck’s railway policy. The law, to which the imperial railway office owes its existence, was passed with great difficulty in the federal council, which contains representatives of the governments of the separate states, although it encountered no serious opposition in the Reichstag, consisting of representatives of the people. The German sovereigns objected to the bill, as they feared losing another piece of their declining power. Bismarck called, however, a special evening meeting of the federal council and persuaded the representatives of most of the governments—as he knows so well how to “persuade”—that it was after all for their interests to vote “aye.” The two grand duchies of Mecklenberg and the Kingdom of Würtemberg voted “nay.” If so much opposition was manifested against the creation of a central railway office provided with limited powers to carry out rights already granted to the empire, it may be easily imagined how the states felt about so appreciable an increase of imperial power in railway matters, as proposed by the law of June 4, 1876.

Bavaria took the lead in the opposition. In reply to an interpellation, the Bavarian minister, von Pfretzschner, declared emphatically that he would, if necessary, exhaust all the resources in his power to maintain the integrity of the railway rights of Bavaria, and also that the Bavarian Government would use all means granted by the constitution to prevent a centralization of non-Bavarian railways in the hands of the empire.

All the Bavarian railways (4,225 kilometers), with the exception of those in the Palatinate (585 kilometers), are state railways, and the feeeling of the government was undoubtedly more sensitive than if they had been private property.

The Kingdom of Saxony followed the example set by Bavaria. In fact Saxony has ever had a doubtful reputation among the high imperial officials on account of its advocacy of state rights, or of its particularism, as the Germans say; in English, state-individualism would be, perhaps, a better expression.

Before the bill had been presented to the Prussian Parliament, Herr Adler proposed in the Saxon house of deputies the following resolution:

“The house of deputies urges the Saxon Government (1) to refuse its assent to any proposals addressed to the federal council, aiming at an acquisition of all or a part of the German railways by the empire; (2) in case no such proposal is addressed to the federal council to present to the Imperial chancellor its grave doubts about the advisability of a purchase of the German railways on the part of the empire.”

The second clause carries the principle that an ounce of prevention is worth a pound of cure somewhat far. If the boy does what is forbidden, he is to be severely punished; if he does not, he is likewise to be flogged, lest he should upon some future occasion do the naughty deed. It serves to throw a deal of light on German politics, and to show the fear with which the other German states watch Prussia and the empire.

The resolution was adopted with an almost unanimous vote in both houses.

Saxony began at once buying up private railways. The Leipzig and Dresden was first purchased, and soon after various smaller railways were added to the state railway net. On the 1st of July, 1876, the so-called “mixed system,” i. e., a system composed in part of government and in part of private railways, had practically ceased. Saxony has since then bought the most of what remained. Only 43.86 kilometers of railway were owned and managed by private parties at the close of the year 1878; whereas the state owned 1,901.65 kilometers and rented 92.30 kilometers, working altogether 1,993.95 kilometers.

Several different motives appear to have actuated the government in completing so rapidly the state railway system: (1) the general tendency towards state railways; (2) the desire to increase the influence of Saxony in the empire whenever railways were concerned; and (3) to prevent the empire from buying them. At any rate, the government was so eager in its desire to purchase the Leipzig and Dresden Railway as to accede to demands on the part of the company which it had shortly before refused to grant.

The opposition against the project of transferring the Prussian railways to the empire manifested itself similarly in Würtemberg, where the railways have been state property from the beginning. The feeling of the government and the legislative body was not, however, common to all classes. The commercial union assembled in Ulm expressed itself favorably disposed towards the idea of the empire’s owning the railways. Less anxiety was manifested about the plan in other German states; but the opposition was too strong. The offer of Prussia has never been presented to the Reichstag, and things remain in statu quo as far as the law of June 4, 1876, is concerned.

Prussia has given warning and is continuing to extend and consolidate her railway system. Up to the year 1876 the Prussian railways under private management had always exceeded those worked by the state. In 1863 the length of the private railways exceeded that of the state railways only by 100 kilometers, but in 1876 by 2,000 kilometers.

The development of the private railways reached its climax in the latter year, whereas the state has steadily continued to build, buy, and lease railways. In July, 1879, there were altogether 19,750 kilometers of railway in Prussia, of which 10,000? kilometers were worked by the state and 9,750 kilometers by private companies. Of the 10,000 kilometers worked by the state, 6,000 were state property. If before there could have been any doubt as to the ultimate triumph of the pure and unmixed state railway system, so well in Germany as in Prussia, it has been rendered impossible by the late session of the Prussian Parliament. On the 29th of October, 1879, two bills were laid before that body by the minister of public works, Maybach, and the minister of finance, Bitter. The first “concerned the acquisition by the state of railways owned and worked by several private companies.” These were the lines of (1), the Berlin and Stettin Company, 955.59 kilometers; (2), of the Magdeburg and Halberstadt Company, 1,010.73 kilometers; (3), of the Hanover and Altenbeeken Company, 270.41 kilometers; (4), of the Cologne and Minden Company, 1,145.60 kilometers. The total length of railway which it was proposed to purchase was 3,382.33 kilometers, about one-third of the railways still remaining under private management.

The bill was accepted with a vote of 228 ayes to 155 nays.

The following brief description of the above-mentioned lines will manifest their importance in perfecting the state railway system.

The Berlin and Stettin Railway connects Berlin with Stettin and the Prussian Eastern Railway, which is state property. The state thus obtains possession and management of all the lines along the Baltic from Konigsberg to Stralsund. This is an important military consideration. The Stettin harbor is the most important port on the Baltic, which renders the railway of importance commercially and lends the state no inconsiderable power in regulating railway tariff. It fills an important gap in the state railway system, as it connects the state railways in the northeastern part of the monarchy with those in the southwestern—the Prussian Eastern and Niederschlesisch-Märkische Railways with the Berlin and Dresden and Berlin and Wetzlar.

The termini of the principal lines are Berlin, Stettin, Danzig, Augermünde and Stralsund.

The lines of the Magdeburg and Halberstadt Railway Company connect the eastern state railways with those in the western and northwestern parts of the kingdom, viz, the Hanoverian and Westphalian state railways, by a state railway. The Niederschlesisch-Märkische from the southeast is continued in a northwesterly direction to the two chief harbors of Hamburg and Bremen, which, with the other importing harbors on the North Sea (Harburg, Bremerhafen, and Geesternünde), are thus connected directly with Berlin by means of state railways. The termini of the principal lines are Magdeburg-Leipzig, Magdeburg-Halberstadt, Halle-Vienenburg, Berlin-Lehrte, Stendal-Uelzen-Langwedel, and Magdeburg-Wittenberge.

The purchase of the Hanover and Altenbeeken Railway was an almost necessary consequence of the purchase of the lines of the Magdeburg and Halberstadt Company, inasmuch as the latter company worked the lines of the former on permanent lease. This railway rounds out and completes the state railway net in that part of Germany. The Westphalian state railways from Oberhausen via Dortmund to Altenbeeken are thus continued towards the northeast to Hanover; the Hanover state railway from Rheine to Löhne, and from Bremen via Wunstorf to Hildesheim, is continued via Vienenburg and Aschersleben to Halle and Leipzig. The termini of the road are, as its name indicates, Hanover and Altenbeeken.

One point connected with the purchase of the Magdeburg-Halberstadt and the Hanover-Altenbeeken railways was not mentioned in the papers presented to the landtag by the government, though it has been discussed by the newspapers. The future of the Duchy of Brunswick, as is well known, is uncertain. The present duke has no direct heirs, the nearest being the son of the late king of Hanover, Duke of Cumberland and pretend ant to the throne. It is altogether improbable that Prussia will ever consent to the Duke of Cumberland’s becoming Duke of Brunswick; certain that she will not, unless he renounces all claims to the crown of Hanover, and this he does not appear disposed to do. Besides this, the majority of the citizens of the duchy are said to be opposed to the succession of the house of Hanover, while the present duke and a part of his people protest vehemently against being swallowed up by Prussia. Although the duke is old, matters are still, as far as is known, as unsettled as ever.

Now it will be seen by a glance at an atlas, that the above-mentioned purchases put Prussia in possession of railways leading into Brunswick from every side. She is thus enabled, in case of any future difficulty, to be at hand almost on a moment’s notice.

The lines of the Cologne and Minden Company connect the Hanoverian and Westphalian state railways with Cologne and give the state a second connection with Holland, i. e., via Arnheim. The connection already in possession of the state was via Salzbergen. This is deserving of notice in connection with the rumors and uncertainty about the succession of the Dutch throne. Harburg, a terminus of the Hanoverian Railway, is connected with Hamburg by a state railway.

The termini of the principal lines of the Cologne and Minden are Cologne Minden, Deutz-Giessen, and Venlo-Hamburg.

The second bill presented to the landtag October 29 concerned the extension of the state railway system, and the participation of the state in several private railway undertakings. As accepted by the parliament, the government is authorized to build the following railways:

		Marks.
(1.)	A railway from Erfurt to Grimmenthal and Ritschenhausen, at a cost of	27,250,000
(2.)	A railway from Güldenboden to Mohrungen, at a cost of	2,730,000
And from Mohrungen to Allenstein, at a cost of		2,454,000
(3.)	A railway from Marienburg, via Marienwerder and Grandenz to Thorn, with a branch to Culen, at a cost of	9,250,000
(4.)	A railway from Schneidemühl to Deutsch-Crone, at a cost of	706,000
(5.)	A railway from Herchberg to Schmiedeberg, at a cost of	571,000
(6.)	A railway from Walburg to Gross-Almerode, at a cost of	687,000
(7.)	A railway from Emden via Norden to the frontier of Oldenburg in the direction of Jever, with a branch from Georgsheil to Aurich, at a cost of	4,000,000
(8.)	A railway from Neil to Praben, at a cost of	821,000
(9.)	A railway from Wengerohr to Berncastel, at a cost of	950,000
	Total	49,420,350

The total length of these proposed railways is 484 kilometers.

No. 1, the railway from Erfurt to Grimmenthal and Ritschenhausen is built as a continuation of the line Magdeburg and Erfurt—not yet entirely completed—and consequently of the Magdeburg and Halberstadt Railway. The Prussian state railway system is thus continued through the Thuringian forest and connected with the Bavarian state railways. It is to be noticed that this railway passes through three states outside of Prussia, Saxe-Meiningen, Saxe-Coburg-Gotha and Schwarzburg-Son-dershausen. It is calculated that it will compete with the state railways of the monarchy of Saxony for traffic to the western part of Bavaria. Thus is Prussia making her influence as a railway power felt all through Germany. The length of this railway is to be 86 kilometers.

The other eight undertakings are railways of secondary importance (secundärbahnen) built with the intention of opening up and developing parts of Prussia not yet provided with satisfactory means of transport. The places directly benefited by these local railways pay for the right of way and otherwise contribute towards defraying the costs of their construction.

The government is also authorized to assist the following railway undertakings in the eastern and northern parts of the monarchy by the purchase of shares to the amount of 2,288,000 marks.

(1.) A railway from Alt-Damm to Colberg, 121 kilometers.

(2.) A railway from Stargard to Cüstrun, 95.8 kilometers.

(3.) A railway from Neustadt to Oldenburg (in Schleswig-Holstein), 21.5 kilometers.

These are also local railways and built from the same motives as the other eight.

The government has, during the last session of Parliament, been authorized to purchase three private railways and a part of a state railway, besides those already mentioned. The three private railways are:

(1.) The Homburg.

(2.) The Berlin, Potsdam and Magdeburg.

(3.) The Rhenish (Rheinische).

The state railway is the Main-Weser, of which the Prussian Government has been authorized to purchase the part situated in the Grand Duchy of Hesse. This railway runs from Cassel to Frankfort-on-the-Main via Marburg and Giessen. Its total length is 198.79 kilometers; 133.84 kilometers are in Prussia and owned by the state; the 64.95 kilometers in Hesse, and owned by that state, are to be purchased by Prussia, according to contract between the two governments, ratified by the parliamentary bodies of both states, at a cost of 17,250,000 marks. The government is also authorized to build a short branch railway from Cölbe to Laasphe, at a cost of 1,600,000 marks.

The Homburg railway extends from Frankfort-on-the-Main to Homburg and has a length of 18.1 kilometers. The price agreed to be paid was 1,800,000 marks.

The Berlin, Potsdam and Magdeburg Railway has a length of 269.36 kilometers. The state obtains possession by this purchase of the shortest route to Magdeburg, the most important city of the province of Saxony, to the Hartz and to Brunswick. It comes also into possession of one-half of the shares of the former Brunswick state railway, which have a nominal value of 18,000,000 marks.

The length of the Rhenish Railway is 1,348.64 kilometers. The Rhenish and Berlin, Pottsdam and Magdeburg were two of the most important private railways remaining after the purchase of the first group of four by the law of December 20, 1879 (bill of October 29), and embrace considerably over one-fourth of the railways then remaining under private management. The lines of the Rhenish Railway Company extend from Cologne to Coblentz, Tréves, Aix-la-Chapelle, Düsseldorf, Herbesthal, Bingen, Zevenaar, Crefeld, Dortmund; in fact, to all places of importance in the Rhine Province. They extend to the mining district of the Ruhr and have great importance in that industrial region. In three places they touch the Dutch frontier at Zevenaar, Nijmegen, and Venlo. Germany can therefore pour troops into Holland at five different points on state railways, if she should ever find it necessary to do so. The Rhenish Railway touches the Belgic frontier at Verviers.

The Prussian railway minister becomes thus director-in-chief of some 15,000 kilometers of railway, or three-fourths of all Prussian railways. It was intended to present a bill to the landtag, authorizing the government to purchase one of the most important private railways still remaining, the Berlin-Anhaltische (Berlin, Halle and Leipzig), hut a satisfactory contract could not he concluded. This company, will, however, soon share the fate of the Rhenish Railway Company. Prussia is now so powerful in railroads and Mayhach so skillful a manager, that no Prussian railroad can withstand the government. In fact, before the government entered into negotiations with the railways last year, they were given to understand that it was for their own interest not to make exorbitant demands, as the government in that case would apply to them that “competition principle” which they praised so much.

To prevent an abuse of the immense power of the minister of public works or railway minister, as he is also called, the Landtag made its acceptance of the railway bills dependent upon certain conditions or guarantees. Other guarantees were added to prevent the government from using the railway earnings to meet general government expenses without the consent of Parliament, since that would, of course, make the budget-rights of that body of no avail.

The principal points of the guarantees are as follows:

I. All profits derived from state railways are to be used (1) in meeting obligations arising out of contracts already concluded with private railway companies, or out of any contracts to be concluded in future; (2) to pay the interest on the railway debt; (3) the maximum sum which may be taken from railway earnings to meet a deficit in the state’s budget is 2,200,000 marks. This can happen only in case a loan would otherwise have to be contracted to meet the deficit; (4) a further surplus is to be used in forming a reserve fund of one per cent, of the railway debt. The object of this is to prevent perturbations in the budget. One per cent, of the railway debt is twice as large as the perturbations in the railway profits are likely to be in one year as compared with another. This reserve fund is to be used when necessary, i. e., when the receipts from the railways in any year are not large enough for that purpose to pay the interest on the railway debt. Any surplus above one per cent. is to be used in amortization of the railway debt up to one-half per cent, of said railway debt; any further surplus is also to be used in amortization of the railway debt, unless Parliament consents to its being employed otherwise.

II. For the purpose of making the above reckonings the railway debt is fixed at 1,396,000,000 marks, and the interest at 59,800,000 marks per annum.

The above sum is the entire debt of Prussia on April 1, 1880, according to the budget of 1880–’81. It is, too, the capital value of the Prussian state railways as near as can be calculated. The idea is to show that the state debt of Prussia is covered by her railways.

Every increase of the state debt consequent on the conclusion of contracts before April 1, 1880, for the purchase of private railways is also to be added to the railway debt.

III. The minister of public works presents to the Landtag every year the normal passenger and goods tariff.

IV. A state railway council and provincial railway councils (Landeseisenbahnrath and Bezirkselsenbahnräthe) are to be formed by the representatives of the interests of agriculture, manufacturing industry and commerce, and by railway experts (Spezial-sachverständige.)

These councils are to meet at least once every three months and are to be heard on all important railway matters. Their powers are only advisory.

According to I (4) it would take two hundred years to pay off the railway debt, supposing that the one-half per cent, per annum was always on hand, which is by no means certain. Other provision is made, however, for a yearly amortization of the public debt, which, according to the guarantee is solely railway debt, to the amount of over 12,000,000 marks per annum, about one per cent, of the debt, as fixed by the budget for April, 1880. This debt does not include the money to be paid for the eight railways, which the government was empowered to purchase during the last session of the landtag that must be added to the railway debt. These railways, it is to be noticed, do not become at once state property in the strict sense of that word. The government is obliged to allow the shareholders at least a year to exchange their shares for state consols; they receive in the mean time an annual payment from the government equal to the income from the consols they are ultimately to obtain.

For the shares and obligations of the first group of four private railways, the Berlin and Stettin, the Magdeburg and Halberstadt, the Hanover and Altenbeeken, and Cologne and Minden, the state is to give consols to the amount of 1,092,781,400 marks, bearing a yearly interest of 45,998,778.5 marks. These four purchases will, therefore, nearly double the state debt. The state property increases, however, in proportion. The Rhenish and Berlin-Potsdam and Magdeburg railways cost the state 717,342,900 marks, on which the yearly interest is 30,211,612 marks. The railroad operations of the winter will cost Prussia over 1,800,000,000; and, when completed, she will have a state debt of considerably over 3,000,000,000 of marks. Two years ago, April 1, 1878, the debt amounted to less than 1,100,000,000.

One item in the contracts, as peculiarly characteristic of German ways, is worthy of notice. Provision is made for the directors and other officials who lose their places on account of the transfer of private railways to the state; so the employés of the Berlin and Stettin, the Magdeburg and Halberstadt, the Hanover and Altenbeeken, and the Cologne and Minden are to receive the handsome sum of 3,908,000 marks. This goes chiefly to the directors—the “deposed princes,” as they have been called.

The price paid for the railways seems to have been a fair one, but not too high. The shareholders exchange their shares for enough 4 per cent, consols to yield them the same income, or nearly the same, which they would in the immediate future have probably received from their shares. According to the law of 1838, the state was to give twenty-five times the average dividend of the last five years, when, after the expiration of thirty years from the date of concession, it forced a railway to sell.

The state has made a better bargain by a voluntary agreement with the railways. The sum prescribed by the law in case of forced sales would be too much, as the tendency of railway profits in Prussia is downward. The shareholders of the Rhenish Railway have received since 1860 an average annual dividend of 7½ per cent.; the dividends reached their maximum at 10 per cent; in 1871; since then they have gradually decreased to 7 per cent, in 18 and 1878.

The shareholders receive from the state a rente of 6½ per cent. until the society is dissolved, and then a corresponding amount of consols. The dividends of the Berlin, Potsdam and Magdeburg Railway on the other hand have averaged only a trifle over 3½ per cent, during the last five years, and the state gives 4 per cent.

The shareholders of the Berlin and Stettin received in 1878 a dividend of 3.65 per cent., but the average of the five years, 1874–1878, is a little over 7.70 per cent.; they receive from the state 4¾ per cent. The shares of the railways purchased by the state have risen much in price, however, owing to the superior security of state papers. A few months before the Prussian Parliament opened, in the fall of 1879, the shares of the Cologne and Minden were quoted at about par; in November they stood at 141. In the same manner those of the Rhenish Railway rose from 70 odd to over 90. The state has not, however, made a bad bargain.

The new state railways become feeders of the old. Much money will be saved that was formerly wasted in competition. Fewer buildings, railway stations, &c., are needed. Cars and locomotives can be used wherever they are most required, whereas much waste was occasioned formerly by running empty cars, which was rendered necessary by the different ownership. The whole administration is greatly simplified. The minister of public works reckons the yearly saving in the administration of the Berlin, Potsdam and Magdeburg Railway at 150,000 marks, which represents a capital of 3,750,000 marks; he reckons the yearly saving in administering and working the Berlin and Stettin, the Magdeburg and Halberstadt, the Hanover and Altenbeken, and the Cologne and Minden at 7,000,000 or 8,000,000 marks, representing a capital of 175,000,000 or 200,000,000 marks.

The credit of the state has so far not suffered by the railway operations of the government. The four per cent. Prussian consols are higher now than they were before those operations began. A short time since, they were above par.

I will endeavor to present in a few words the principal motives and considerations which have been influential in leading Prussia to her present railway policy.

economic considerations.

Railway building has called into existence a large industrial class, but the irregularity of railway undertakings is continually plunging those who are dependent upon them into distress. This is an important factor in modern “hard times.” Capital and labor are drawn from other employments to be afterwards condemned to long idleness. The injury caused to general prosperity is undoubtedly great. Agriculture especially has suffered in many places by the loss of laborers who were drawn away by a deceitful but enticing prospect of bettering their condition. The state alone can draw up a plan of railway building to extend through many years and to be executed gradually. The government does not need to restrict its undertakings’ in such a time as the present; on the contrary, a time of crisis is often the most favorable one for state enterprise. The government is able to secure money on favorable terms, and labor and materials are cheap.

The interests of the country, it is said, demand that railways which have taken the place, to a great extent, of ordinary highways, should be managed solely as public streets, in furthering commerce, agriculture, and industry. Railways must be managed as a unity; when one does not pay, the deficit can be made up out of a surplus from another railway. This is, at present, the case with the postal service in all civilized countries, and with the telegraph lines in the majority. The development and opening up of a country often render railways necessary, which will nevertheless not be “paying institutions,” in the ordinary sense of that term, or will not pay for a long series of years to come; such railways the state alone can construct.

Every time an unnecessary railroad is built, national capital is wasted. Hundreds of millions have been sunk in useless railway speculations in the United States which might have been employed otherwise to the benefit of the commonwealth in developing the resources of the country. The waste of capital and labor is not finished when the railway is constructed, and thousands of acres of land have forever been drawn away from the purposes of agriculture. Every time an unnecessary train is run, capital is wasted. But we might endure the loss occasioned by railway competition if it resulted in cheapening tariffs, if it were competition in the ordinary sense of that term, but experience has shown that railway competition usually injures the different railway companies, but does not benefit the public. In Germany the traffic is usually divided among the different companies, and in such a manner that the bulk of it passes over one route one month and another the second. In his celebrated work Englische Eisenbahn-politik (Leipzig 1874–’76) Professor Cohn has shown that in England a new railway between places already provided with one results almost invariably in an understanding between the companies and arise in the tariff.^* The end of railway competition is railway monopoly, and this is urged as a ground for state railways. In the first place, there will always be a great part of the country provided with only one railway, in which case there is a monopoly. It is absurd for the owners of a railway to say to farmers and country merchants, “If you don’t like our railway, build one for yourselves.” As matters are, people in and near towns through which only one railway passes are obliged to use that railway, and, unless protected by the government, are quite at its mercy.

The railway under one management seldom exceeded 150 or 200 kilometers in the early history of railway development; but, as railways were extended, the necessity of establishing through trains, of coming to an agreement about the tariff for passengers and goods on such trains, of making arrangements about common institutions and common interests, caused the difficulties connected with the harmonious action of a large number of working factors to become apparent. Experience has demonstrated that long routes and railway complexes can be worked so much more cheaply and efficiently, that short lines running parallel, managed by different companies, are unable to compete. The railway history of England and France is especially instructive. The six large private railway companies in France—(1) Nord, (2) Est, (3) Ouest, (4) Paris á Orléans, (5) Paris-Lyon Méditerranée, (6) Midi—have absorbed 48 different companies; the eleven chief railway companies in England—(1) London and Northwestern, (2) Great Western, (3) Northeastern, (4) Midland, (5) Great Eastern, (6) London and Southwestern, (7) Great Northern, (8) Lancashire and Yorkshire, (9) Manchester, Sheffield and Lincolnshire, (10) London, Brighton and South-coast, (11) Southeastern—262 companies.

Railway monopoly is not only a necessary but also a healthy growth, when railways are owned and managed in public interest, inasmuch as the public is far better and far more cheaply served than is otherwise possible. The benefit to be derived from a steady and simplified railway tariff is a further economic motive. In the “union of German railways” there are 63 local tariffs, numerous exceptions, and tariffs for special articles and goods (Einzeltarifsätze), 184 general tariffs, with 351 special tariffs for separate articles, and 199 general tariffs for traffic with foreign countries, and 314 special tariffs. This is, indeed, a confusion for the public and the railway companies themselves. The government and the best railway authorities advocate a unified railway tariff for the whole country, so simple that even a small business man shall be able to calculate the freight on goods from one place to another as easily as he now calculates on letters and other postal sendings. This rate must also be steady, so as to remove all uncertainty about the results of any given business transaction, so far as it is affected by freight charges. Changes should be made rarely and with previous warning. The present uncertainty and liability to change brings into legitimate business a gambling element similar to that caused by an irredeemable paper currency. The empire has introduced a so-called “natural tariff system” on its railways in Alsace-Lorraine with the best results. All goods are divided into two or three classes, according as they are sent as freight, express, in open or covered freight cars, and are then charged uniform rates, which depend upon weight and volume, at so much a kilometer, with a small fee additional for loading and unloading. The chambers of commerce in different cities of Alsace-Lorraine have expressed in warm terms their satisfaction with this system.

We should not pass over, in this connection, the agitation of Herr F. Perrot, who imagines himself a second Rowland Hill. He advocates the application of the penny postal system to railway passenger and goods traffic. He would retain in Prussia three classes of passenger coaches, with a fare of 6 marks for the first class, 1 mark for the second, ½ for the third, regardless of distance. His ideas are to be found in “die Anwendung des Penny-Porto-Systems auf den Eisenbahntarif und das Packet-Porto” (Rostock, 1872).

Formerly Perrot’s reform projects attracted considerable attention; but at present they seem to have been “tabled” as impracticable. It is doubtful if the reduction would increase the traffic so much as Perrot expects. In traveling, whether for business or pleasure, the railway fare is usually the smallest part of the expense.

The lack of time is the great obstacle with most people to increasing the number of their exeursions by rail, and that would not be affected by Perrot’s reform. For the transport of goods his reform is certainly more practical. Many goods cannot be transported at above a certain low cost. In goods traffic the tariff is of chief moment. For goods Perrot proposes for Prussia three rates. He divides the kingdom into three zones, starting from any given railway station as a center. The first zone or circle is drawn with a radius of 150 kilometers, the second with a radius of 325 kilometers, the third with a radius greater than 325 kilometers. The tariff inside of zone number one is 15 marks per wagon or car; inside of zone number two, 24 marks per car; inside of number three, 36 marks per car.

To compete with foreign countries, a reduction of railway tariffs is likely to be necessary in the future. On this account, as well as on account of the military interests of the land, the railway policy of foreign countries has had weight in determining that of Prussia. Both economic and military considerations have forced Prussia to purchase her railways or to be situated disadvantageously compared with other German states and foreign countries. Nearly all German railways, outside of Prussia, are owned by the different German states within the boundaries of which they lie. The state railways have been managed by the different German governments, as it appears, to general satisfaction and in the interest of the public. I may mention particularly Baden and Würtemberg. The principle of treating railways like other public highways has assisted greatly in the development of those states. The railways in each state have been managed as a unity, so that a deficit in one place could be provided for by a surplus in another. Roads which private capitalists would not have built, but which were of importance to the country as a whole, have been constructed and worked. In both of these states the government took the railways into its own hand from the beginning. Baden began its state railway system in 1838, Würtemberg in 1842.

We see thus that state railways are no new experiment in Germany, but one which has been tried for over forty years. In July, 1879, in all Germany, outside of Prussia, there were but 2,000 kilometers of private railway.

The railway policy of France has been followed with attention in Prussia. Prussia cannot afford to lose ground relatively to France in any source of power. As is well known, no French railway has a concession of over ninety years, and at the expiration of their concessions all French railways fall to the state without compensation. The method of concession adopted by France would put her in possession of all French railways by the middle of the next century, without cost to the state. But the French are to a great extent dissatisfied with their private railways, and desire the state to buy the rights of the companies at once. Among Frenchmen who favor an immediate introduction of an exclusive state railway system may be mentioned Wilson, Waddington, and, above all, de Freycinet. A state railway net has already been formed in France, and is rapidly increasing.

The railway question is being decided in favor of state railways in Holland, Austria-Hungary, Roumania, and Italy. In fact, Russia, Turkey, and Spain are the only important countries on the continent which have not already made important progress in the direction of the “Verstaatlichung” of the railways, and of late even Russia has manifested an intention of following the railway policy of Western Europe. We can therefore conclude that in a near future the railways of Europe, like other highways, will be public property. It is probable that the discontent in England will finally lead her to follow the example of the rest of Europe, and buy up the railways, as she has already the telegraph. It is an almost necessary development. As I have said, commercial as well as military rivalry leads to it. If the French state owned its railways, free from debt, it could injure most seriously German industry and commerce, provided that the German railways were private property; the French railways would not be under the necessity of yielding a profit, nay, they could be run at a loss temporarily or even permanently; other highways are a continual source of expense.

The Belgian state railways have drawn away considerable traffic from the ports of the northwestern part of France by means of cheaper rates.

One of the French deputies referred some time since to the injury which would result to the industrial and commercial life of the nation if France had no control over railway tariffs, so as to enable Havre to compete with Antwerp, and Marseilles with the Italian ports.

The military significance of state railways is so obvious that it does not need to be dwelt upon at length. The minister of war and all military men agree in ascribing great weight to the acquisition of the railways by the state. I will mention only one point in this connection. It is possible to establish at the chief railway stations immense military storehouses, which would increase the present wonderful capability of Germany to make rapid military movements. As one of the Berlin papers expressed it, men will he enabled to march in at one end of the railway as civilians, and ride out at the other clad in uniform as soldiers.

In time of war, it is claimed, state possession of the railways will prove a benefit to commerce and railway traffic in general. Under the private railway system, freight sent to Frankfort-on-the-Main, e. g., via Anhaltische Balm, must wait, in case the government needs the railway for war purposes, until the government is done, or until the Anhaltische Company makes an agreement with another company for sending the goods by a different route.

This difficulty is at once avoided when the railways are state property, as the railway minister is then able to send goods and passengers by a route which may be open. Making contracts between railway companies is a clumsy affair, and requires considerable time; but freight sent at once, without any previous formalities, to Frankfort-on-the-Main, via Cologne, would not necessarily arrive much behind time.

But the motive above all others which seems to have led just at present to the energetic movement of the government in the Verstaatlichung of the railways, is, that it furnishes the government with the means of carrying into effect Bismarck’s recent protective policy (Zollpolitik). Private railways have been in the habit of favoring foreign countries by means of so-called “Differential-tarife,” that is to say, lower rates for foreign than for domestic goods.

The object of this was to avoid the loss of foreign traffic. A railway, the chief business of which, for example, has been to import goods from Belgium, is ready to make considerable concessions to the importers, rather than lose their business. The result is that the higher the protective and the finance duties on the frontier, the lower the railway freights on goods from abroad.

the empire.

It is a gross error to suppose that the empire or union owns the German railways, or has been buying them. The empire owns only the railways in Alsace-Lorraine (1,024 kilometers), which it bought with a part of the war indemnity paid by France to Germany. As we have already shown, these railways have been administered excellently. Bismarck has long cherished a plan for converting all German railways into imperial railways, so as to gain a counterpoise to the centrifugal forces tending to resolve the empire into its original elements.

The empire has, according to the constitution at present, only certain general powers of control, relating chiefly to the tariff, and to measures concerning the safety of the roads, uniform railway-police regulations, &c.

The efforts made to pass a general imperial railway law have failed. As we have seen, in 1876, a law was passed by the Prussian Parliament authorizing the government to sell its railways to the empire. Though the reistance of the separate states has, up to this time, prevented Bismarck from laying the law before the Reichstag, the law is still valid, and will be put into execution in the course of time; that is to say, the proposal of Prussia will be accepted by the federal council and imperial parliament. Prussia favors imperial railways, and her power as a railway owner is becoming irresistible in Germany.

RICHARD T. ELY

,
Late Fellow of Columbia College, New York City.

1. A kilometer is equal to nearly 3,281 American feet, or somewhat less than two-thirds of an Americam or English mile (5,280 feet).
2. No one denies that evils are necessarily connected with private railways. The only difficult question to decide is, whether, on the whole, a given country will fare better with state railways.
3. Such a ministry, or rather a ministry of public works, has existed since 1878.
4. Lower house 216 to 160; upper house 60 to 31.
5. The writer wishes it to be remembered that he is simply recording without criticism the arguments of others.