time a secondary consideration.

It was enough that in the then state of the market they would richly reward the existing proprietors; the future must shift for themselves.

I have said enough to have satisfied my readers that if the permanent interest of Companies was little consulted in those extensions, the benefit of the public was consulted still less. As many, if not most, of the Extensions and Branches were in themselves losing concerns, the loss fell on the trunk Lines, and hence, instead of lowering their fares with the increased productiveness of these last Lines, they in many instances increased them, in order to be enabled to continue their rates of dividend.

In all these operations Mr. Gladstone's maximum was no more thought of than if it had no existence. Companies laughed at the very idea of its being supposed that they should be unable to devise expedients for rendering all such provisions a mere nullity. In the infancy of Joint Stock Companies, Directors would sometimes, for the sake of patronage, lay out larger sums on repairs and alterations than they were justified in doing. But subsequent ingenuity has enabled Companies so far to improve on this practice as, by an abuse of the power to borrow given to them by parliament, to coin the credit they possess. One of the expedients to which some Companies have had recourse may be thus briefly described. A share is issued for a new project, say for £100, upon which £20 is paid, The Company, abusing their powers to borrow, raise the remaining £80, for which they charge say 5 per cent.; thus they pay £4, and receiving a dividend of 10 per cent. this added to the £4 constitutes a

very

dividend of 14 per cent. instead of the 10 per cent. to which Mr. Gladstone's Bill restricted them. We may truly say, that the existing race of Railway Directors have greatly improved upon their predecessors; and they were considered very clever in their day.

Thus we are going on in a ruinous circle. Parliament neglecting its paramount duty, suffered Railway Companies to obtain a concession in perpetuity of Lines without any security against excessive exactions. These Lines yielded revenues so much exceeding the ordinary returns of capital, that shares soon were at a large premium. Mr. Gladstone's Companies' Clauses Consolidation Bill authorized the issue of shares at par when at a premium in the market. This naturally inflamed speculation, and Directors extended their operations, in order by the issue of new shares at par, to realize large premiums. The sums derivable from this source led to investments in unprofitable undertakings, which in due time lessened the profits of Trunks, Branches, and Extensions, taken as a whole, and in spite of the increase of traffic on the Trunks diminished the rate of dividend; and this, with the suspicion of unfair practices resorted to, in order to prevent the truth from being known, has led to, perhaps, in some cases, an undue depreciation of Railway property. Had the legislature secured the public from undue exactions, the price of shares would not have risen to such an extravagant height; had it not authorized the issue of shares at par, when at a premium, by the sale of which enormous sums were realized, the judgment of Directors would not have been warped, and new schemes would not have been sanctioned by them

which did not promise to yield an adequate remuneration. The original disregard of the public interests has thus in due time come round to the Railway proprietors themselves.

The only defence which I have ever heard of the practice of throwing out Branches and Extensions, which would not have been made as independent concerns for the sake of the return they might yield on the capital invested in them, is,—that thus many places have had the benefit of Railway communication which otherwise would have been deprived of it. This may be true to some extent, and the Branch or Extension may have the effect of communicating an additional value to all the property through which it runs. In like manner, there can be no doubt that a canal cut through a district, of which the traffic would not yield an adequate return for the capital invested in it, might yet be of great benefit to the owners of property in that district. The Canal between Gravesend and Rochester, for instance, one of Major Dodd's grand schemes, however losing a concern it might prove to the shareholders, was of advantage to the marketgardeners of Higham, to whose doors it brought manure. A great nation may construct works from political motives, such as the canals in Canada; or from charitable motives, such as the Caledonian Canal, which, however magnificent in themselves, would not be undertaken as profitable investments of capital. But the only safe principle for our guidance in commercial undertakings is the return which they will yield. It is not for the interest of the community that capital should be invested where an adequate profit is not obtained. When once

we abandon the principle that capital shall be expended with a view to profitable returns, we are altogether at sea. We may cultivate Dartmoor, we may grow grapes in the Highlands of Scotland, if we are undeterred by the expense. Nay, Railways themselves furnish the best illustrations of the mischief of losing sight of profit, when embarking in undertakings; for to what do we owe the recent commercial panic, and the distress of the labouring classes from the loss of employment, but to the reckless manner in which Branches, Extensions, &c., were resolved on, chiefly, with a view to realize premiums by fresh issues of shares? A Railway Company has no right to say, “We will bring this or that district within the range of markets by means of capital raised on the credit of revenues, which beyond a certain amount do not belong to us, if the new undertakings will not of themselves prove a profitable investment." That the desire to pocket large sums by the issue of new shares at high premiums, may have had the effect of raising the rent-roll of many a landowner, and covering many a neglected spot with picturesque habitations, is quite possible; but still the question recurs-Would the undertaking of itself pay ? The adequacy of the return is the only criterion by which we can safely be guided in the employment of capital.

This test of the solidity of the various schemes will be afforded when the construction accounts are closed, and Directors have no longer any other source from which to pay dividends than bond fide revenue. Such a test, however, if we may judge from the spirit evinced by many Directors at their late half-yearly meetings, is one with

which they are by no means disposed to indulge the public.

The issue of new shares at par when the existing shares were at a premium, was first legalized by Clause 58 of the Companies' Clauses Consolidation Act, (8 Victoria, cap. 16.) There seems to be no reason for doubting that the practice before this enactment was not authorized by law. In the analogous case of forfeited shares in Joint Stock Companies, they were sold for the benefit of the Companies, and any profit derived from the sale was carried to the general account. By the 34th clause, however, of the 8 Victoria, cap. 16, the surplus of forfeited shares sold, after payment of arrears, interest, and expenses, must on demand be paid to the defaulter. The instances of forfeitures in Joint Stock Companies were rare, and never large in amount. It was only when new shares were issued for hundreds of thousands of pounds, that both law and custom were disregarded. The new practice had doubtless its origin in Acts of Parliament authorizing the raising additional capital to complete a line, where the estimated amount was found totally insufficient; and there were plausible reasons in its favour. It was maintained that those who had encountered the risk of an enterprise, when the public confidence in its final success had raised the shares to a premium before its completion, ought in justice to be allowed to divide among themselves the benefits derivable from the shares by which the additional capital necessary to finish the work could be obtained. But even this, the earliest form in which the abuse of issuing shares at par when they were at a pre

1