of municipalities. It is equally certain, however, that in view of the conservatism of American legislative bodies on the subject of municipal debts, the special dispensations given to districts who borrow money for public improvements are not likely to be abused. In nearly all cases, these special assessment bonds are sold to obtain money for public improvements which will greatly increase the value of the property affected. A final argument in their favor is that this property is specifically liable for the repayment of the bonds. We may conclude, therefore, that in the bonds of tax districts there is offered to the investor an obligation which combines the advantages of high yield and good security, security which is, on the whole, better than can be furnished him by most private corporations. With the continued development of the newer sections of the United States, these tax-district bonds will come upon the market in increasing volume. A study of the advantages which they offer will repay the investor who wishes to combine security and high return.

IX

THE AMERICAN RAILWAY INDUSTRY

GREATEST of all sources of investment is the American Railway. For forty years the transportation companies of the United States have poured into the world's investment-market a flood of securities. The savings of Europe and America have found their largest single outlet in railway stocks and bonds. The volume of railway securities now outstanding presents a vast total. Of railway stocks there were outstanding at the close of 1911, $8,582,000,000; of railway bonds, $10,091,000,000. This sum is more than twice the national debts of the entire civilized world. It is the largest single contribution to the world's savings. If we except the value of land, it exceeds, in size and value, all other forms of investment in the United States combined.

Of recent years, railway investments have declined in favor. Other bonds and stocks have entered the competition. Public hostility has been aroused against the railways. They have been subjected to severe regulation, denied the right

to advance their rates, in many cases forced to reduce them. Long enjoying a monopoly of the investment market, railway directors have hesitated to meet the demand for high-interest bonds. They have halted and hesitated, postponing the inevitable surrender to the demand for securities paying more than four per cent.

We have here an explanation of the decreasing output of railway securities in recent years, and this, in turn, explains the slow progress of railway construction during the same period. Observe the figures. From 1880 to 1890 our railway mileage increased from 93,262 to 166,703; from 1890 to 1900, although this was a period of panic and depression, drought and scanty harvests, the growth in mileage was 166,703 to 194,262. From 1900 to 1910, however, a period of enormous growth in other lines of business, the railway system increased 48,845 miles. In 1911 only 3,465 miles were constructed.

This small growth in mileage does not mean that American railroads are standing still. During the last decade they have spent, measured by the increase in their liabilities, $6,719,000,000 upon the properties. The expenditure has, however, been rather devoted to improving facilities than to building new lines. Immense tunnels, the Pennsylvania

and New York Central in New York, the Northwestern in Chicago; costly projects of electrification, such as that carried through by the New Haven and Hartford; replacement of wooden by steel equipment, and large additions to equipment, have engaged the capital available for railroad construction.

In five years, from 1903 to 1907, 14,424 locomotives and 536,942 freight and passenger cars were put into service. Each year's additions, moreover, are of larger locomotives, and cars of greater cost and capacity. Vast sums have also been spent on the purchase of costly city real estate required for larger terminal yards. Track elevation, installation of block-signals, reduction of grades, and elimination of curves, have all taken substantial shares of railway funds.

The American railway industry, considering its size, and the large number of companies operatingit, is the soundest and strongest business in the world. Observe, first, the size of the plant and personnel: mileage, 359,000; cars, 2,408,589; locomotives, 65,310; employees, 1,699,420. Over 10,000,000 Americans draw their living from the railroads.

The business which is conducted by this great organization is worthy of it. In 1912 American railroads transported 1,817,562,049 tons of freight

and 1,019,658,605 passengers. Expressed on a mileage basis, these figures are even more striking. Over every mile of American railroad in 1910 were carried 1,071,086 tons of freight and 138,169 passengers. This immense business was done, moreover, at a very moderate cost to the shipper and passenger, a fact proven by an average freight rate of .748 cents per ton per mile and a passenger rate of 2.22 cents per passenger per mile. No other industry, moreover, performs its service or furnishes its goods at so small a margin of profit. In the opinion of the best informed railway men, the passenger business is operated without profit; and out of the three-fourths of a cent received for each ton carried one mile, it is a safe estimate that not more than one-fourth of a cent represents profit.

In spite of these small profits on each unit of business handled, the railway industry is highly profitable, owing to the great volume of the traffic. For the year ending December 31, 1911, the total profits of 246,655 miles of railroad operated were $1,085,951,595, or, deducting taxes, $972,237,934. The railway industry, on a gross business of about three billion dollars ($2,848,468,965), makes a profit of nearly one billion dollars. A business which can show one dollar in three as profit over