taken as an index of the measure of the success of the railway. Even before the experiments of October, 1829, to find the best engine for use on the line, the railway shares had been selling at a premium; but after that time their value rose very rapidly, until, within a month after the success of the locomotive engine had been demonstrated the shares were selling at £175 when the original value was only £1001. So great was the demand for these shares, and so highly were they valued, that it was difficult to procure them on any terms. By 1832 the value of the shares had risen 100 per cent.2, and by 1836 almost 200 per cent.3, above their original value. All the important railways that were taken up immediately after 1830 put forth the success of the Liverpool and Manchester Railway as an attestation and guarantee of the success of their own enterprises.

But we must follow the finances of this company a little farther if we would obtain a correct idea as to its operations. Let it be said, first of all, that by its Act the company was limited in the payment of dividends to a maximum of ten per cent. a year; and it was the only railway company that was restricted in this way. As we have seen, the company early paid the full amount of the dividend that was allowed and continued to pay this for many years. When the company sought authority from Parliament to construct the road it was declared that £510,000 would be ample for all purposes; and according to their Act of incorporation the capital was fixed at that amount. But it would appear that this amount proved insufficient to complete the road and its equipment, and by the Acts of 1829 and 1830 the company was allowed to increase its capital by the issuance of shares to the amount of £127,500 and £159,375 respectively, all of which was said to have

of the above receipts of 1831 with those of the year 1836, showing that the dividend in the latter year was ten per cent. In 1834 it was paying nine per cent. (Proceedings of the Great Western Railway Company, p. 52), and in 1842 it was paying ten per cent. (Railways: Their Uses and Management, p. 7).

1 The Liverpool Times, Nov. 24, 1829, p. 376, informs us that before these experiments the shares were selling for £118 each, but at this date they were now selling for £75 premium, and could scarcely be had even at that price.

2 Proceedings of the Great Western Railway Company, p. 52; also evidence on the London and Birmingham Railway Bill, 1832, testimony of Henry Booth. The shares in 1831 were selling for £196 (Remarks upon Pamphlet by Investigator on the Proposed Birmingham and London Railway, p. 4; 'Collection of Prospectuses, etc.,' p. 65).

3 Gentleman's Magazine, 1836, vi, p. 421. The Liverpool and Manchester shares, the par value of which was £100, were selling in 1836 for £280.

4 See prospectuses of the Birmingham and Liverpool, London and Birmingham, and Great Western railways.

5 See the company's prospectus, as given in Booth's history of the railway.

been expended and yet the works were not completed. Under subsequent Acts, they were allowed to raise by sale of shares or to obtain on loan a further sum amounting to £427,500, thus bringing the total capital up to £1,224,375, of which the share capital was £808,025 and the loan capital £416,3501. In 1837 the company presented a bill to Parliament, stating that although the above amount had been spent "on or about the undertaking," its works had not yet been completed; and accordingly it was desired to obtain authority to borrow an additional sum of £400,000, which, if authorized, would raise the capital to £1,624,375. This extra amount was to be asked as a loan from the Government, that is, from the Exchequer Loan Commissioners, and in case the Government advanced the money it was to have the prior claim upon the revenues of the company2. In the six years up to 1837, the company had paid in dividends £442,504. 7s. 6d.; but during the same time the amount obtained on loan and by the sale of shares was much in excess of this amount, and, therefore, the company would seem to be obtaining money from others to pay dividends, while all the time becoming more embarrassed3. But when seen in another light, these several accessions to capital presented facts which led to an entirely different conclusion. Their expenditure upon additional works was said to have brought additional revenue; so that after paying the interest on these increasing amounts obtained from creditors the company was still able to pay the maximum dividend of ten per cent." Instead, therefore, of the company becoming more hopelessly embarrassed financially, it was ostensibly getting upon a more secure foundation. We prefer to think that this was the explanation of the above-mentioned great increase of capital. But there is another way in which it can be, and was, accounted for, namely, as a device for overcoming the restriction of their profits to ten per cent. It was held by some that if Parliament had rigidly enforced this provision of the Act and steadfastly refused to allow the distribution of additional profits under any other guise, the company would have been compelled time and again to reduce the fares and charges to the public; but since this provision was not enforced the railway company, under the semblance of increasing the "public accommodation," created a pretext for the issuance of new shares, and thus extra profits were divided out in 1 These facts appear in the Bill presented to Parliament in 1837, asking for further authority (The Times, May 9, 1837, p. 6, letter from "T. G."), and are confirmed by W. S. Moorsom, C.E., in ibid., May 23, 1837, p. 6.

2 The Times, May 9, 1837, p. 6, letter of "T. G."

3 Ibid., May 9, 1837, p. 6. This was the contention of "T. G."

♦ Ibid., May 23, 1837, p. 6, letter of W. S. Moorsom giving quotations from the company's semi-annual financial statements.

the form of new stock1. If this were the explanation of the great increase of capital from time to time, the road must have been sufficiently profitable to pay at least forty to fifty per cent. It seems to be more consonant with the facts to accept the first solution of this problem; for if the company's business were so flourishing that surplus profits could be divided out in this way, there would have been no need of applying to Parliament for a Government loan. And yet, in the face of these facts, several persons, by their publications, attempted to prove to the public that this railway was nothing but an unprofitable speculation2.

We have now brought our subject down to the time of the initiation of the modern railway; but in order that we may consider in detail the effect of this new means of transportation we must see it in a more advanced stage of development, for it is impossible to form any correct estimate of its value and influence from a single example apart from a system. It will, therefore, be necessary for us to outline the history of railways to about the middle of the century in order to see the forces which were at work throughout this early period when the railway was attaining a position of importance as a public carrier.

During the third decade, when the railway had not yet demonstrated its great superiority, but was in the tentative evolutionary stage, and when the locomotive engine was still in the experimental period of its development, there was uncertainty and instability of the public mind concerning the utility of this newcomer in the field of transportation. Some expected that the railway would only add another means of conveyance to those already existing, in the same way as the introduction of canals had done sixty years before, but that every facility given to the carriage of materials, while adding to the general carrying trade, would cause no injury to canal property. It seems, however,

1 The Times, Oct. 1, 1846, p. 5, letter from "Cato."

2 Gordon, Treatise upon Elemental Locomotion, 2nd ed., p. 225 et seq.; Gordon, The Fitness of Turnpike Roads and Highways, p. 28; Cort, Railroad Impositions Detected, or Facts and Arguments to prove that the Liverpool and Manchester Railway has not paid One per cent. Nett Profit, etc. These based their opinion upon the probability that nothing had been set aside for depreciation. See also Remarks upon Pamphlet by Investigator on the Proposed Birmingham and London Railway, p. 4. Grahame, Treatise on Internal Intercourse and Communication (1834), p. 159, in summing up his statistics and arguments regarding the Liverpool and Manchester Railway, said: "No one, who fairly considers these results, but must acknowledge that the whole is a failure, at least, as presently conducted. The expenses are so enormous, as completely to absorb every advantage of speed, and each year these expenses increase." He would have the road open to all, so that, upon payment of the tolls, anyone could use the road as freely as they did the turnpikes. 3 Manchester Gazette, Jan. 15, 1825, p. 3, editorial comment.

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that there were few who regarded railways in this way. Many people foresaw in them very decided advantages, and, while fairly assured in their own minds that a new era was dawning in the transport service, they had not yet received complete proof that its successful establishment was at hand. But whatever were the prospects of the railways, whether favourable or unfavourable, there was a large amount of capital in the country seeking investment and this superabundance of capital introduced the rage for speculation1, in which the railways shared. The years 1825 and 1826 seem to have been the climax of this speculative fever. All kinds of projects were promoted by men who were eager to take advantage of the circumstances of the time to reap large returns from credulous and unsophisticated prospective investors. Men were induced to believe that they had only to embark in one of these schemes to ensure themselves a life of affluence and ease; labour and care were to be at an end and the golden harvest would soon appear. In February, 1825, there were at least five railway companies and thirty dock companies, loan companies, insurance companies, and other kinds of undertaking, that were being floated. Railways were being planned to connect the most important mercantile and manufacturing towns in the kingdom, and the success of the Stockton and Darlington line gave added impetus to this movement3, notwithstanding the secret opposition which was very active on behalf of interested bodies for their own private good. This fever was instituted mostly for purely speculative purposes, in order that projectors and their attorneys and other assistants might profit to a large extent through trafficking in shares. The latter were brought into the market at a premium and pushed to as high a price as possible; then they were unloaded upon unsuspecting and unfortunate individuals who were duped and left stranded "after the waters of delusion had ebbed away5." Of the great number of these schemes that were brought forward, but few ever came to completion; of the others, no vestige remained except in the disaster which

1 Brit. Mus. 08,235. f. 77, 'Observations on the Comparative Merits of Inland Navigations and Railroads,' pp. 8, 10.

2 County Chronicle and Weekly Advertiser, Feb. 1, 1825, p. 2, gives a list of thirtyfive such companies then afloat.

3 The London Magazine, 1, N.S. (1825), p. 33, on Railways;" Grinling, The History of the Great Northern Railway, p. 1. Among these railways may be mentioned the London and Birmingham, the Great Northern from London to Cambridge, and the Liverpool and Birmingham. Aris's Birmingham Gazette for the year 1825 (note, for example, the issue of Jan. 31, 1825) shows a great many projects for railroads that were then occupying public attention.

4 The Times, July 17, 1832, p. 3, statement of Lord Wharncliffe; Mudge, Observations on Railways, p. 35.

5 Investigator, Beware the Bubbles, p. 10; Mudge, op. cit., p. 35.

overtook those who had been deceived by the wiles of the mercenary speculators. How much capital was lost from legitimate productive industry we have no means of ascertaining; but if we were to receive the statements of contemporaries1, and then make much allowance for exaggeration, we should still be required to believe that this panic assumed proportions of considerable magnitude. Fortunately, however, only a few of these projects which were brought forward were authorized by Act of Parliament to proceed to execution, for most of them were ventures of such a nature that their success could not be definitely foretold. But when the success of the Stockton and Darlington was assured the year 1826 saw the authorization of eighteen new railways, among them the Liverpool and Manchester.

Following the policy that had been pursued with great benefit to the country for three-quarters of a century, in allowing private enterprise to develop and manage inland communication, the Legislature considered each of the schemes brought forward according to its own merits; and for each one that met with approval a private Act was passed, which contained the entire statutory provisions applicable to the undertaking.

After the utility of the locomotive had been shown on the Stockton and Darlington line, and especially after the results of the trials of the locomotives on the Liverpool and Manchester, in the autumn of the year 1829, had been made known, interest was aroused anew in the prospects of railways. The vast range of possibility which opened up when it was seen that locomotive engines could travel at rates of speed from twenty-five to thirty miles an hour, seemed to fire the imagination of many. By this means, places then considerable distances apart would be brought very close to one another; the capitals of Scotland and Ireland would be within twenty-four hours' journey of London; facility in the communication of intelligence would enable the people in all corners of three kingdoms to keep in direct touch with the measures

1 Investigator, Beware the Bubbles, p. 1, speaks of the "uncontrollable exercise of the spirit of speculation, which, in 1825 and 1826, brought about so fatal a crisis, involved so many in ruin," etc.; and again (p. 10) he refers to the "melancholy wrecks of men of important station." In Felix Farley's Bristol Journal, Oct. 5, 1833, p. 2, a letter from John Weedon speaks of the "rash and improvident speculations which led to the frightful commercial catastrophe of 1826." Mudge, Observations on Railways, p. 35, deplores allowing the "delusive and ruinous speculations" of 1825 to go on unchecked, and says that this "injury to the wealth and prosperity of the country" was felt for nearly ten years.

2 On the details of this panic, see Francis, History of the English Railway. Jeaffreson, Life of Robert Stephenson, 1, pp. 272 et seq., shows the difference between the railway crises of 1825 and 1836 and the railway mania of 1844-6.